<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-75059
'40 Act File No. 811-3330
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No.29 X
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 X
NATIONWIDE VARIABLE ACCOUNT-II
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
One Nationwide Plaza, Columbus, Ohio 43215
(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 43215
(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 July 14, 1997 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. Registrant filed its Rule 24f-2 Notice for the fiscal
year ended December 31, 1996, on February 25, 1997.
================================================================================
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NATIONWIDE VARIABLE ACCOUNT-II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Page
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page........................................................................ 6
Item 2. Definitions....................................................................... 8
Item 3. Synopsis or Highlights............................................................ 18
Item 4. Condensed Financial Information................................................... 19
Item 5. General Description of Registrant, Depositor, and Portfolio Companies............. 28
Item 6. Deductions and Expenses........................................................... 29
Item 7. General Description of Variable Annuity Contracts................................. 32
Item 8. Annuity Period.................................................................... 40
Item 9. Death Benefit and Distributions................................................... 41
Item 10. Purchases and Contract Value...................................................... 31
Item 11. Redemptions....................................................................... 36
Item 12. Taxes............................................................................. 44
Item 13. Legal Proceedings................................................................. 54
Item 14. Table of Contents of the Statement of Additional Information...................... 54
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page........................................................................ 64
Item 16. Table of Contents................................................................. 64
Item 17. General Information and History................................................... 64
Item 18. Services.......................................................................... 64
Item 19. Purchase of Securities Being Offered.............................................. 64
Item 20. Underwriters...................................................................... 65
Item 21. Calculation of Performance Information............................................ 65
Item 22. Annuity Payments.................................................................. 69
Item 23. Financial Statements.............................................................. 70
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits................................................ 118
Item 25. Directors and Officers of the Depositor.......................................... 119
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant... 121
Item 27. Number of Contract Owners........................................................ 130
Item 28. Indemnification.................................................................. 130
Item 29. Principal Underwriter............................................................ 130
Item 30. Location of Accounts and Records................................................. 132
Item 31. Management Services.............................................................. 132
Item 32. Undertakings..................................................................... 132
</TABLE>
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SUPPLEMENT DATED JULY 14, 1997 TO
PROSPECTUS DATED MAY 1, 1997 FOR
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VARIABLE ACCOUNT-II
Effective July 14, 1997, this Supplement updates certain information contained
in your Prospectus. Please read it and keep it with your Prospectus for future
reference.
1. The underlying Mutual Fund options cited on page 1 of the Prospectus are
hereby amended to include the following Underlying Mutual Funds:
DREYFUS VARIABLE INVESTMENT FUND:
- Capital Appreciation Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III:
- Growth Opportunities Portfolio
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
- Emerging Markets Debt Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
- Oppenheimer Growth Fund
2. The expense table located on at pages 8 and 9 of the Prospectus is hereby
amended to include the following information:
<TABLE>
<CAPTION>
-----------------------------------------
Management Other Total Mutual
Fees Expenses Fund Expenses
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Variable Investment Fund - Capital 0.75% 0.09% 0.84%
Appreciation Portfolio
- ------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund III - 0.61% 0.16% 0.77%
Growth Opportunities Portfolio
- ------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - Emerging 0.80% 0.50% 1.30%
Markets Debt Portfolio
- ------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.75% 0.04% 0.79%
Growth Fund **
- ------------------------------------------------------------------------------------------------
</TABLE>
**Absent a voluntary one-time fee reimbursement, the Total Mutual Fund
Expenses would have been 0.81%.
3. The "Example" tables located at pages 10 and 11 of the Prospectus are
hereby amended to include the following information:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
If you surrender your If you do not If you annuitize your
Contract surrender your Contract
at the end of the Contract at the end of at the end of the
applicable the applicable time applicable
time period period time period
- -------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 Yrs. 5 Yrs. 10 Yrs.
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr.
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Variable
Investment Fund -
Capital Appreciation 93 116 149 261 23 71 122 261 * 71 122 261
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity Variable
Insurance Products
Fund III - Growth 92 114 145 254 22 69 118 254 * 69 118 254
Opportunities
Portfolio
- -------------------------------------------------------------------------------------------------
Morgan Stanley
Universal Funds, Inc.
- - Emerging Markets 98 131 173 309 28 86 146 309 * 86 146 309
Debt Portfolio
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable
Account Funds -
Oppenheimer Growth 93 115 146 256 23 70 119 256 * 70 119 256
Fund
- -------------------------------------------------------------------------------------------------
</TABLE>
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4. The section entitled "Condensed Financial Information" located at pages
13 through 21 of the Prospectus is hereby amended to include the
following footnote:
*Accumulation unit history value information is not yet available
for the Dreyfus Variable Investment Fund-Capital Appreciation
Portfolio, Fidelity Variable Insurance Products Fund III-Growth
Opportunities Portfolio, Morgan Stanley Universal Funds,
Inc.-Emerging Markets Debt Portfolio and the Oppenheimer Variable
Account Funds-Oppenheimer Growth Fund, as said underlying Mutual
Fund options were added effective July 14, 1997.
5. "Appendix B" located at pages 50 through 56 of the Prospectus is hereby
amended to include the following additional investment objective
information:
Dreyfus Variable Investment Fund
- Capital Appreciation Portfolio
Investment Objective: The Fund's primary investment objective is to
provide long-term capital growth consistent with the preservation
of capital; current income is a secondary investment objective.
This Fund invests primarily in the common stocks of domestic and
foreign issuers.
Fidelity Variable Insurance Products Fund III
The Fidelity Variable Insurance Products Fund III is an open-end,
diversified, management investment company organized as a
Massachusetts business trust on July 14, 1994. The Fund's name was
changed from Fidelity Advisor Annuity Fund to Variable Insurance
Products Fund III on December 30, 1996. The Fund shares are
purchased by insurance companies to fund benefits under variable
life insurance and annuity contracts. Fidelity Management &
Research Company ("FMR") is the Fund's manager.
- Growth Opportunities Portfolio
Investment Objective: To provide capital growth by investing
primarily in common stocks and securities convertible into common
stocks. The Fund, under normal conditions, will invest at least 65%
of its total assets in securities of companies that FMR believes
have long-term growth potential. Although the Fund invests
primarily in common stock and securities convertible into common
stock, it has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth. The
Fund may invest in foreign securities without limitation.
Morgan Stanley Universal Funds, Inc.
Morgan Stanley Universal Funds, Inc. (the "Fund") is a mutual fund
designed to provide investment vehicles for variable annuity
contracts and variable life insurance policies and for certain
tax-qualified investors. The Fund is an open-end management
investment company, or mutual fund. At present it offers 17
separate investment portfolios (each, a "Portfolio"), each with a
distinct investment objective.
- Emerging Markets Debt Portfolio
Investment Objective: The Fund seeks high total return by investing
primarily in dollar- and non-dollar denominated Fixed Income
Securities of government and private-sector issuers located in
emerging market countries, which securities provide a high level of
current income, while at the same time holding the potential for
capital appreciation if the perceived creditworthiness of the
issuer improves due to improving economic, financial, political,
social or other conditions in the country in which the issuer is
located.
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Oppenheimer Variable Account Funds
- Oppenheimer Growth Fund
Investment Objective: The Fund seeks to achieve capital
appreciation by investing in securities of well-known established
companies. In seeking its objective of capital appreciation, the
Fund will emphasize investments in securities of well-known and
established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (having
an operating history of at least five years including
predecessors). Current income is a secondary consideration in the
selection of the Fund's portfolio securities.
6. Effective July 14, 1997, the Strong Special Fund II, Inc. will change
its name to Strong Opportunity Fund II, Inc. Accordingly, as of the
effective date, any and all references to the Fund are hereby amended to
reflect this name change.
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<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT-II
The Individual Deferred Variable Annuity Contracts described in this
prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). Reference throughout the prospectus to such Contracts shall
also mean Certificates issued under Group Flexible Fund 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 to
individuals for use in retirement plans which may qualify for special federal
tax treatment under the Internal Revenue Code. Annuity payments under the
Contracts are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II
("Variable Account"), a separate account of Nationwide Life Insurance Company
(the "Company"). The Variable Account is divided into Sub-Accounts, each of
which invests in shares of one of the underlying Mutual Funds described below:
AVAILABLE FOR ALL CONTRACTS
American Century Variable Portfolios, Inc.,
an affiliate of American Century Companies, Inc.
American Century VP Balanced American Century VP Capital Appreciation
American Century VP International American Century VP Value
Dreyfus
Dreyfus Stock Index Fund Dreyfus Variable Investment Fund
Growth & Income Portfolio*
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
Van Eck Worldwide Insurance Trust
Worldwide Bond Fund Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Van Kampen American Capital Life Investment Trust
Real Estate Securities Fund
Warburg Pincus Trust
International Equity Portfolio Post-Venture Capital Portfolio
Small Company Growth Portfolio
* These Portfolios may invest in lower quality debt securities commonly referred
to as junk bonds.
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<PAGE> 7
AVAILABLE FOR ALL CONTRACTS
ISSUED ON OR AFTER MAY 1, 1987 AND BEFORE SEPTEMBER 1, 1989
American Variable Insurance Series
Growth Fund High-Yield Bond Fund U.S. Government/AAA-Rated Securities Fund
This prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide Variable Account-II before investing. You should read it and keep it
for future reference. A Statement of Additional Information dated May 1, 1997,
containing further information about the Contracts and the Nationwide Variable
Account-II has been filed with the Securities and Exchange Commission. You can
obtain a copy without charge from Nationwide Life Insurance Company by calling
the number listed above, or writing P.O. Box 16609, Columbus, Ohio 43216-6609.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1997, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 49 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
5
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<PAGE> 8
GLOSSARY OF SPECIAL TERMS
Accumulation Unit- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
Annuitant- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of Contract issuance, 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 at
Annuitization.
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 Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Contract Owner as
set forth in the Contract.
Code- The Internal Revenue Code of 1986, as amended.
Company- Nationwide Life Insurance Company.
Contingent 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 designated and the Annuitant dies before the Annuitization Date,
the Contingent Designated Annuitant becomes the Annuitant. A Contingent
Designated Annuitant may not be named for Contracts issued as Qualified
Contracts, Individual Retirement Annuities, SEP IRAs or Tax Sheltered Annuities.
Contingent Beneficiary- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
Contingent Owner- A Contingent Owner succeeds 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 Qualified Contracts, Individual Retirement Annuities, SEP
IRAs or Tax Sheltered Annuities.
Contract- The Individual Deferred Variable Annuity Contract described in this
prospectus.
Contract Anniversary- An anniversary of the Date of Issue of the Contract.
Contract Owner (Owner)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date. The Contract Owner is the person
named as Owner on the Data Page, unless changed.
Contract Value- The sum of the value of all 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 which is payable upon the death of the Designated
Annuitant or the Contingent Designated Annuitant, if applicable. This benefit
does not apply upon the death of the Contract Owner when the Owner and
Designated Annuitant are not the same person. If the Annuitant dies after the
Annuitization Date, any benefit that may be payable shall be as specified in the
Annuity Payment Option elected.
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<PAGE> 9
Designated Annuitant- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
Distribution- Any payment of part or all of the Contract Value
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
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 contract 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 - 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 or either of them. If permitted by state law, Joint
Owners must be spouses at the time Joint Ownership is requested. Joint Ownership
may be selected only for Non-Qualified Plans.
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 Sections 401 and 403(a) (Qualified Plans), 408 (IRAs) or 403(b)
(Tax Sheltered Annuities) of the Code.
Plan Participant-The Plan Participant is the person for whom contributions are
being made to a Qualified Contract or Tax Sheltered Annuity either through
employer contributions or employee salary reduction contributions.
Purchase Payment- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
Qualified Contracts- A Contract issued to fund a Qualified Plan.
Qualified Plans- Retirement plans which receive favorable tax treatment under
the provisions of Sections 401 or 403(a) of the Code.
SEP IRA- A retirement plan which receives favorable tax treatment under the
provisions of Section 408(k) 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 a Valuation Date
and ending at the close of business for the next succeeding Valuation Date.
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<PAGE> 10
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 shares of a separate underlying Mutual Fund.
Variable Annuity- An annuity providing for payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
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<PAGE> 11
Table of Contents
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS..................................................................... 3
SUMMARY OF CONTRACT EXPENSES.................................................................. 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES........................................................ 9
SYNOPSIS...................................................................................... 13
CONDENSED FINANCIAL INFORMATION............................................................... 14
NATIONWIDE LIFE INSURANCE COMPANY............................................................. 23
THE VARIABLE ACCOUNT.......................................................................... 23
Underlying Mutual Fund Options....................................................... 23
Voting Rights........................................................................ 23
Substitution of Securities........................................................... 24
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS................................................. 24
Expenses of the Variable Account..................................................... 24
Mortality Risk Charge................................................................ 24
Expense Risk Charge.................................................................. 24
Contract Maintenance Charge and Administration Charge................................ 24
Contingent Deferred Sales Charge..................................................... 25
Waiver of the Contingent Deferred Sales Charge....................................... 26
Premium Taxes........................................................................ 27
OPERATION OF THE CONTRACT..................................................................... 27
Investments of the Variable Account.................................................. 27
Allocation of Purchase Payments and Contract Value................................... 27
Value of an Accumulation Unit........................................................ 28
Net Investment Factor................................................................ 28
Valuation of Assets.................................................................. 28
Determining the Contract Value....................................................... 28
Right to Revoke...................................................................... 28
Transfers............................................................................ 29
Contract Ownership Provisions........................................................ 30
Joint Ownership Provisions........................................................... 30
Contingent Ownership Provisions...................................................... 30
Beneficiary Provisions............................................................... 30
Surrender (Redemption)............................................................... 31
Surrenders Under a Qualified Contract or Tax-Sheltered Annuity Contract.............. 31
Loan Privilege....................................................................... 32
Assignment........................................................................... 33
Contract Owner Services.............................................................. 34
Asset Rebalancing................................................................. 34
Dollar Cost Averaging............................................................. 34
Systematic Withdrawals............................................................ 34
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS................................ 35
Annuity Commencement Date............................................................ 35
Change in Annuity Commencement Date.................................................. 35
Annuity Payment Period-Variable Account.............................................. 35
Value of an Annuity Unit............................................................. 35
Assumed Investment Rate.............................................................. 35
Frequency and Amount of Annuity Payments............................................. 35
Change in Form of Annuity............................................................ 35
Annuity Payment Options.............................................................. 35
Death of Contract Owner Provisions-Non-Qualified Contracts........................... 36
Death of Annuitant Provisions- Non-Qualified Contracts............................... 36
Death of the Contract Owner/Annuitant Provisions..................................... 37
Death Benefit Payment Provisions..................................................... 37
Required Distribution Provisions for Non-Qualified Contracts......................... 37
</TABLE>
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<TABLE>
<S> <C>
Required Distributions For Qualified Plans and Tax Sheltered Annuities............... 38
Required Distributions for Individual Retirement Annuities and SEP IRAs.............. 38
Generation-Skipping Transfers........................................................ 39
FEDERAL TAX CONSIDERATIONS.................................................................... 39
Federal Income Taxes................................................................. 39
Non-Qualified Contracts-Natural Persons as Owners.................................... 40
Non-Qualified Contracts-Non-Natural Persons as Owners................................ 41
Qualified Plans, Individual Retirement Annuities, SEP IRAs, and
Tax Sheltered Annuities.............................................................. 41
Withholding.......................................................................... 42
Non-Resident Aliens.................................................................. 42
Federal Estate, Gift, and Generation Skipping Transfer Taxes......................... 42
Charge for Tax Provisions............................................................ 43
Diversification...................................................................... 43
Tax Changes.......................................................................... 43
GENERAL INFORMATION........................................................................... 44
Contract Owner Inquiries............................................................. 44
Statements and Reports............................................................... 44
Advertising.......................................................................... 44
LEGAL PROCEEDINGS............................................................................. 49
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...................................... 49
APPENDIX A.................................................................................... 50
APPENDIX B.................................................................................... 52
</TABLE>
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<PAGE> 13
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1).......................... 7%
- --------------------------------------------------------------------------------
Range of Contingent Deferred Sales Charge Over Time
Number of Completed Years from Contingent Deferred Sales Charge
Date of Purchase Payment Percentage
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- --------------------------------------------------------------------------------
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE(2)............................ $30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges................................. 1.25%
Administration Charge.............................................. 0.05%
Total Variable Account Annual Expenses........................... 1.30%
(1) During the first Contract Year, the Contract Owner may withdraw without a
Contingent Deferred Sales Charge (CDSC) any amount in order for this
Contract to meet minimum distribution requirements under the Code or up to
10% of each Purchase Payment under Individual Retirement Annuity Contracts
issued on or after March 1, 1993. Starting with the second Contract Year
after a Purchase Payment has been made, the Contract Owner may withdraw
without a CDSC, the greater of (a) an amount equal to 10% of that Purchase
Payment made to the Contract or (b) any amount withdrawn in order for this
Contract to meet minimum distribution requirements under the Code.
Withdrawals may be restricted for Contracts issued pursuant to the terms
of a Tax Sheltered Annuity Plan or other Qualified Plan. This CDSC-free
withdrawal privilege is non-cumulative; that is, free amounts not taken
during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year (see "Contingent Deferred Sales Charge" for
additional waiver provisions).
(2) The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and on the date of surrender in any year in which the entire
Contract Value is surrendered (see "Contract Maintenance Charge and
Administration Charge").
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(as a percentage of underlying Mutual Fund net assets)
- --------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- --------------------------------------------------------------------------------
American Century Variable 1.00% 0.00% 1.00%
Portfolios, Inc.-American
Century VP Balanced
- --------------------------------------------------------------------------------
American Century Variable 1.00% 0.00% 1.00%
Portfolios, Inc.-American
Century VP Capital Appreciation
- --------------------------------------------------------------------------------
American Century Variable 1.50% 0.00% 1.50%
Portfolios, Inc.-American
Century VP International
- --------------------------------------------------------------------------------
American Century Variable 1.00% 0.00% 1.00%
Portfolios, Inc.-American
Century VP Value
- --------------------------------------------------------------------------------
AVIS-Growth Fund 0.42% 0.02% 0.44%
- --------------------------------------------------------------------------------
AVIS- High-Yield Bond Fund 0.50% 0.03% 0.53%
- --------------------------------------------------------------------------------
AVIS- U.S. Government/AAA 0.51% 0.02% 0.53%
Rated Securities
- --------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% 0.05% 0.30%
- --------------------------------------------------------------------------------
Dreyfus Variable Investment 0.75% 0.08% 0.83%
Fund-Growth & Income Portfolio
- --------------------------------------------------------------------------------
The Dreyfus Socially 0.72% 0.24% 0.96%
Responsible Growth Fund*
- --------------------------------------------------------------------------------
Fidelity VIP 0.51% 0.07% 0.58%
Fund-Equity-Income Portfolio
- --------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 0.61% 0.08% 0.69%
Portfolio
- --------------------------------------------------------------------------------
Fidelity VIP Fund -High Income 0.59% 0.12% 0.71%
Portfolio
- --------------------------------------------------------------------------------
Fidelity VIP Fund -Overseas 0.76% 0.17% 0.93%
Portfolio
- --------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 0.64% 0.10% 0.74%
Manager Portfolio*
- --------------------------------------------------------------------------------
Fidelity VIP Fund 0.61% 0.13% 0.74%
II-Contrafund Portfolio
- --------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.02% 0.52%
- --------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- --------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.03% 0.53%
- --------------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.10% 1.10%
- --------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.02% 0.52%
Neuberger & Berman Advisers 0.83% 0.09% 0.92%
Management Trust-Growth
Portfolio
- --------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.65% 0.13% 0.78%
Management Trust-Limited
Maturity Bond Portfolio
- --------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.84% 0.11% 0.95%
Management Trust-Partners
Portfolio
- --------------------------------------------------------------------------------
Oppenheimer Variable Account 0.74% 0.04% 0.78%
Funds-Bond Fund
- --------------------------------------------------------------------------------
Oppenheimer Variable Account 0.73% 0.08% 0.81%
Funds-Global Securities Fund
- --------------------------------------------------------------------------------
Oppenheimer Variable Account 0.73% 0.04% 0.77%
Funds-Multiple Strategies Fund
- --------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.17% 1.17%
- --------------------------------------------------------------------------------
Strong Variable Insurance 1.00% 0.21% 1.21%
Funds, Inc.-Discovery Fund II,
Inc.
- --------------------------------------------------------------------------------
Strong Variable Insurance 1.00% 0.90% 1.90%
Funds, Inc.-International
Stock Fund II
- --------------------------------------------------------------------------------
12
14 of 139
<PAGE> 15
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(as a percentage of underlying Mutual Fund net assets)
Continued
- --------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- --------------------------------------------------------------------------------
Van Eck Worldwide Insurance 1.00% 0.08% 1.08%
Trust-Worldwide Hard Assets Fund
- --------------------------------------------------------------------------------
Van Eck Worldwide Insurance 1.00% 0.08% 1.08%
Trust-Worldwide Bond Fund*
- --------------------------------------------------------------------------------
Van Eck Worldwide Insurance 1.00% 0.00% 1.00%
Trust-Worldwide Emerging Markets
Fund*
- --------------------------------------------------------------------------------
Van Kampen American Capital Life 0.83% 0.27% 1.10%
Investment Trust-Real Estate
Securities Fund*
- --------------------------------------------------------------------------------
Warburg Pincus 0.96% 0.40% 1.36%
Trust-International Equity
Portfolio*
- --------------------------------------------------------------------------------
Warburg Pincus 0.62% 0.78% 1.40%
Trust-Post-Venture Capital
Portfolio*
- --------------------------------------------------------------------------------
Warburg Pincus Trust-Small 0.90% 0.26% 1.16%
Company Growth Portfolio*
- --------------------------------------------------------------------------------
(3) The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's net
asset value, which is the share price used to calculate the unit values of
the Variable Account. The management fees and other expenses are more
fully described in the prospectus for each individual underlying Mutual
Fund. The information relating to the underlying Mutual Fund expenses was
provided by the underlying Mutual Fund and was not independently verified
by the Company.
* The investment advisers for the indicated underlying Mutual Funds have
voluntarily agreed to reimburse a portion of the management fees and/or
operating expenses resulting in a reduction of the total expenses. Absent
any such partial reimbursement, "Management Fees" and "Other Expenses"
would have been 0.75% and 0.24% for the Dreyfus Socially Responsible
Growth Fund, Inc.; 0.71% and 0.10% for the Fidelity VIP Fund II-Asset
Manager Portfolio; 1.00% and 0.10% for the Van Eck Worldwide Insurance
Trust-Worldwide Bond Fund; 1.00% and 1.06% for the Van Eck Worldwide
Insurance Trust-Worldwide Emerging Markets Fund; 1.00% and 0.27% for the
Van Kampen American Capital Life Investment Trust-Real Estate Securities
Fund. Absent any such partial reimbursement, "Total Mutual Fund Expenses"
would have been 1.40% for the Warburg Pincus Trust-International Equity
Portfolio; 5.56% for the Warburg Pincus Trust Post-Venture Capital
Portfolio; and 1.17% for the Warburg Pincus Trust-Small Company Growth
Portfolio
13
15 of 139
<PAGE> 16
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below. The expense amounts presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing Contracts. Since
the average Contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
If you surrender your If you do not If you annuitize your
Contract surrender your Contract
at the end of the Contract at the end of at the end of the
applicable the applicable time applicable
time period period time period
- -------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century 95 121 157 278 25 76 130 278 * 76 130 278
Variable Portfolios,
Inc.-American Century
VP Balanced
- -------------------------------------------------------------------------------------------------
American Century 95 121 157 278 25 76 130 278 * 76 130 278
Variable Portfolios,
Inc.-American Century
VP Capital
Appreciation
- -------------------------------------------------------------------------------------------------
American Century 100 137 183 329 30 92 156 329 * 92 156 329
Variable Portfolios,
Inc.-American Century
VP International
- -------------------------------------------------------------------------------------------------
American Century 95 121 157 278 25 76 130 278 * 76 130 278
Variable Portfolios,
Inc.-American Century
VP Value
- -------------------------------------------------------------------------------------------------
AVIS-Growth Fund 89 103 128 218 19 58 101 218 * 58 101 218
- -------------------------------------------------------------------------------------------------
AVIS-High-Yield Bond 90 106 132 228 20 61 105 228 * 61 105 228
Fund
- -------------------------------------------------------------------------------------------------
AVIS-U.S. Govt./AAA 90 106 132 228 20 61 105 228 * 61 105 228
Rated
- -------------------------------------------------------------------------------------------------
Dreyfus Stock Index 87 99 120 202 17 54 93 202 * 54 93 202
Fund
- -------------------------------------------------------------------------------------------------
Dreyfus VIF-Growth & 93 116 148 260 23 71 121 260 * 71 121 260
Income Portfolio
- -------------------------------------------------------------------------------------------------
The Dreyfus Socially 94 120 155 274 24 75 128 274 * 75 128 274
Responsible Growth
Fund
- -------------------------------------------------------------------------------------------------
Fidelity VIP 90 108 135 233 20 63 108 233 * 63 108 233
Fund-Equity-Income
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP 92 111 141 245 22 66 114 245 * 66 114 245
Fund-Growth Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP 94 119 154 271 24 74 127 271 * 74 127 271
Fund-Overseas
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP 92 112 142 247 22 67 115 247 * 67* 115 247
Fund-High Income
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund 92 113 144 250 22 68 117 250 * 68 117 250
II-Asset Manager
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund 92 113 144 250 22 68 117 250 * 68 117 250
II-Contrafund
Portfolio
- -------------------------------------------------------------------------------------------------
NSAT-Capital 90 106 132 227 20 61 105 227 * 61 105 227
Appreciation Fund
- -------------------------------------------------------------------------------------------------
NSAT-Government Bond 90 106 131 225 20 61 104 225 * 61 104 225
Fund
- -------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 90 106 132 228 20 61 105 228 * 61 105 228
- -------------------------------------------------------------------------------------------------
NSAT - Small Company 96 124 163 288 26 79 136 288 * 79 136 288
Fund
- -------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 90 106 132 227 20 61 105 227 * 61 105 227
- -------------------------------------------------------------------------------------------------
</TABLE>
14
16 of 139
<PAGE> 17
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your
Contract your Contract at the Contract
at the end of the end of the applicable at the end of the
applicable time period applicable
time period time period
- -------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Neuberger & Berman 94 119 153 270 24 74 126 270 * 74 126 270
Advisers Management
Trust-Growth Portfolio
- -------------------------------------------------------------------------------------------------
Neuberger & Berman 92 114 146 255 22 69 119 255 * 69 119 255
Advisers Management
Trust-Limited
Maturity Bond
Portfolio
- -------------------------------------------------------------------------------------------------
Neuberger & Berman 94 120 155 273 24 75 128 273 * 75 128 273
Advisers Management
Trust- Partners
Portfolio
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 114 146 255 22 69 119 255 * 69 119 255
Account Funds-Bond
Fund
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable 93 115 147 258 23 70 120 258 * 70 120 258
Account Funds-Global
Securities Fund
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 114 145 254 22 69 118 254 * 69 118 254
Account
Funds-Multiple
Strategies Fund
- -------------------------------------------------------------------------------------------------
Strong Special Fund 97 127 166 295 27 82 139 295 * 82 139 295
II, Inc.
- -------------------------------------------------------------------------------------------------
Strong Variable 97 128 168 300 27 83 141 300 * 83 141 300
Insurance Funds,
Inc.- Discovery Fund
II, Inc.
- -------------------------------------------------------------------------------------------------
Strong Variable 104 149 204 368 34 104 177 368 * 104 177 368
Insurance Funds, Inc.
- -International Stock
Fund II
- -------------------------------------------------------------------------------------------------
Van Eck Worldwide 96 124 162 286 26 79 135 286 * 79 135 286
Insurance
Trust-Worldwide Bond
Fund
- -------------------------------------------------------------------------------------------------
Van Eck Worldwide 95 121 157 278 25 76 130 278 * 76 130 278
Insurance
Trust-Worldwide
Emerging Markets Fund
- -------------------------------------------------------------------------------------------------
Van Eck Worldwide 96 124 162 286 26 79 135 286 * 79 135 286
Insurance
Trust-Worldwide Hard
Assets Fund
- -------------------------------------------------------------------------------------------------
Van Kampen American 96 124 163 288 26 79 136 288 * 79 136 288
Capital Life
Investment Trust -
Real Estate
Securities Fund
- -------------------------------------------------------------------------------------------------
Warburg Pincus 99 133 176 315 29 88 149 315 * 88 149 315
Trust-International
Equity Portfolio
- -------------------------------------------------------------------------------------------------
Warburg Pincus 99 134 178 319 29 89 151 319 * 89 151 319
Trust-Post-Venture
Capital Portfolio
- -------------------------------------------------------------------------------------------------
Warburg Pincus 96 126 166 294 26 81 139 294 * 81 139 294
Trust-Small Company
Growth Portfolio
- -------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of the
Nationwide Variable Account-II as well as those of the underlying Mutual Fund
options are reflected in the Example. For more complete descriptions of the
expenses of the Variable Account, see "Variable Account Charges and Other
Deductions." For more complete information regarding expenses paid out of the
assets of the underlying Mutual Fund options, see the underlying Mutual Fund
prospectuses. Deductions for premium taxes may also apply but are not reflected
in the Example shown above (see "Premium Taxes").
15
17 of 139
<PAGE> 18
SYNOPSIS
The Individual Deferred Variable Annuity Contracts described in this
prospectus are designed for use in connection with the following types of
Contracts (1) Non-Qualified, (2) Individual Retirement Annuities, (3) Tax
Sheltered Annuities, (4) SEP IRAs and (5) Qualified.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. 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").
The Company does not deduct a sales charge from Purchase Payments made for
these Contracts. However, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions, deduct from the Contract
Owner's Contract Value a Contingent Deferred Sales Charge not to exceed 7% of
the lesser of the total of all Purchase Payments made within 84 months prior to
the date of the request to surrender, or the amount surrendered. This charge,
when applicable, is imposed to permit the Company to recover sales expenses
which have been advanced by the Company (see "Contingent Deferred Sales
Charge").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge from the Contract Value of the Contracts. The
Company will also assess an Administration Charge equal to an annual rate of
0.05% of the daily net asset value of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. The Company does not expect to recover from these
charges an amount in excess of accumulated administrative expenses (see
"Contract Maintenance Charge and Administration Charge"). The Company deducts a
Mortality Risk Charge equal to an annual rate of 0.80% of the daily net asset
value of the Variable Account for mortality risks assumed by the Company (see
"Mortality Risk Charge"). The Company deducts an Expense Risk Charge equal to an
annual rate of 0.45% of the daily net asset value of the Variable Account as
compensation for the Company's risk by undertaking not to increase
administrative charges on the Contracts regardless of the actual administrative
costs (see "Expense Risk Charge").
Upon Annuitization, the selected Annuity Payment Option will begin (see
"Annuity Payment Option"). However, if the net amount to be applied to any
Annuity Payment Option at the Annuitization Date is less than $500, the Contract
Value may be distributed in one lump sum in lieu of annuity payments. If any
annuity payment would be less than $20, the Company shall have the right to
change the frequency of payments to such intervals as will result in payments of
at least $20. In no event, however, will annuity payments be made less
frequently than annually (see "Frequency and Amount of Annuity Payments").
The Company will charge against the Purchase Payments or the Contract
Value the amount of any premium taxes levied by a state or any other
governmental entity (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this prospectus. If a Contract is returned to the
Company in a timely manner, the Company will void the Contract and refund the
Contract Value in full unless otherwise required by state and/or federal law.
State and/or federal law may provide additional free look privileges. All
Individual Retirement Annuity refunds will be return of Purchase Payments (see
"Right to Revoke").
16
18 of 139
<PAGE> 19
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century 12.912980 14.300170 10.74% 3,254,121 1996
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 10.801286 12.912980 19.55% 2,978,792 1995
American Century VP ----------------------------------------------------------------------
Balanced-Q 10.876699 10.801286 -0.69% 2,670,990 1994
----------------------------------------------------------------------
10.232829 10.876699 6.29% 2,039,118 1993
----------------------------------------------------------------------
10.000000 10.232829 2.33% 1,233,110 1992
- -----------------------------------------------------------------------------------------------
American Century 12.912980 14.300170 10.74% 2,577,277 1996
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 10.801286 12.912980 19.55% 2,471,621 1995
American Century VP ----------------------------------------------------------------------
Balanced-NQ 10.876699 10.801286 -0.69% 2,324,933 1994
----------------------------------------------------------------------
10.232829 10.876699 6.29% 2,073,593 1993
----------------------------------------------------------------------
10.000000 10.232829 2.33% 1,301,248 1992
- -----------------------------------------------------------------------------------------------
American Century 25.074858 23.677551 -5.57% 9,324,052 1996
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 19.378026 25.074858 29.40% 9,867,412 1995
American Century VP ----------------------------------------------------------------------
Capital Appreciation-Q 19.864882 19.378026 -2.45% 9,394,094 1994
----------------------------------------------------------------------
18.244594 19.864882 8.88% 8,366,010 1993
----------------------------------------------------------------------
18.736465 18.244594 -2.63% 7,578,213 1992
----------------------------------------------------------------------
13.379768 18.736465 40.04% 4,222,602 1991
----------------------------------------------------------------------
13.732668 13.379768 -2.57% 1,954,531 1990
----------------------------------------------------------------------
10.801278 13.732668 27.14% 548,848 1989
----------------------------------------------------------------------
11.201686 10.801278 -3.57% 224,112 1988
----------------------------------------------------------------------
10.000000 11.201686 12.02% 9,178 1987
- -----------------------------------------------------------------------------------------------
American Century 25.074858 23.677551 -5.57% 6,231,979 1996
Variable ----------------------------------------------------------------------
American Century 19.378026 25.074858 29.40% 7,570,906 1995
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 19.864882 19.378026 -2.45% 7,577,109 1994
American Century VP ----------------------------------------------------------------------
Capital Appreciation-NQ 18.244594 19.864882 8.88% 7,513,748 1993
----------------------------------------------------------------------
18.736465 18.244594 -2.63% 8,116,485 1992
----------------------------------------------------------------------
13.379768 18.736465 40.04% 5,428,104 1991
----------------------------------------------------------------------
13.732668 13.379768 -2.57% 2,629,880 1990
----------------------------------------------------------------------
10.801278 13.732668 27.14% 974,118 1989
----------------------------------------------------------------------
11.201686 10.801278 -3.57% 348,954 1988
----------------------------------------------------------------------
10.000000 11.201686 12.02% 9,741 1987
- -----------------------------------------------------------------------------------------------
American Century 10.402550 11.745639 12.91% 2,194,705 1996
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 9.392316 10.402550 10.76% 1,565,354 1995
American Century VP ----------------------------------------------------------------------
International-Q 10.000000 9.392316 -6.08% 688,372 1994
- -----------------------------------------------------------------------------------------------
American Century 10.402550 11.745639 12.91% 1,758,586 1996
Variable ----------------------------------------------------------------------
Portfolios, Inc. - 9.392316 10.402550 10.76% 1,498,305 1995
American Century VP ----------------------------------------------------------------------
International-NQ 10.000000 9.392316 -6.08% 845,551 1994
- -----------------------------------------------------------------------------------------------
American Century 10.000000 10.142565 1.43% 12,933 1996*
Variable ----------------------------------------------------------------------
Portfolio, Inc. -
American Century VP ----------------------------------------------------------------------
Value Q
- -----------------------------------------------------------------------------------------------
American Century 10.000000 10.142565 1.43% 77,276 1996*
Variable ----------------------------------------------------------------------
Portfolio, Inc. -
American Century VP ----------------------------------------------------------------------
Value NQ
- -----------------------------------------------------------------------------------------------
AVIS- 21.880052 24.479182 11.88% 486,423 1996
Growth Fund-Q ----------------------------------------------------------------------
16.632869 21.880052 31.55% 533,382 1995
----------------------------------------------------------------------
16.767635 16.632869 -0.80% 568,831 1994
----------------------------------------------------------------------
14.603954 16.767635 14.82% 614,673 1993
----------------------------------------------------------------------
13.356752 14.603954 9.34% 630,618 1992
----------------------------------------------------------------------
10.154286 13.356752 31.54% 637,666 1991
----------------------------------------------------------------------
10.758820 10.154286 -5.62% 612,309 1990
----------------------------------------------------------------------
8.912471 10.758820 20.72% 578,318 1989**
----------------------------------------------------------------------
7.950563 8.912471 12.10% 335,760 1988
----------------------------------------------------------------------
10.000000 7.950563 -20.49% 245,664 1987
- -----------------------------------------------------------------------------------------------
</TABLE>
17
19 of 139
<PAGE> 20
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS- 21.880052 24.479182 11.88% 471,250 1996
Growth Fund-NQ ----------------------------------------------------------------------
16.632869 21.880052 31.55% 544,338 1995
----------------------------------------------------------------------
16.767635 16.632869 -0.80% 538,005 1994
----------------------------------------------------------------------
14.603954 16.767635 14.82% 573,448 1993
----------------------------------------------------------------------
13.356752 14.603954 9.34% 658,355 1992
----------------------------------------------------------------------
10.154286 13.356752 31.54% 675,796 1991
----------------------------------------------------------------------
10.758820 10.154286 -5.62% 709,255 1990
----------------------------------------------------------------------
8.912471 10.758820 20.72% 847,522 1989**
----------------------------------------------------------------------
7.950563 8.912471 12.10% 365,976 1988
----------------------------------------------------------------------
10.000000 7.950563 -20.49% 148,517 1987
- -----------------------------------------------------------------------------------------------
AVIS- 20.792452 23.160826 11.39% 74,769 1996
High-Yield Bond Fund-Q ----------------------------------------------------------------------
17.247186 20.792452 20.19% 74,984 1995
----------------------------------------------------------------------
18.696382 17.247186 -7.75% 90,073 1994
----------------------------------------------------------------------
16.269615 18.696382 14.92% 97,302 1993
----------------------------------------------------------------------
14.656040 16.269615 11.01% 96,741 1992
----------------------------------------------------------------------
11.731211 14.656040 24.93% 104,317 1991
----------------------------------------------------------------------
11.446666 11.731211 2.49% 91,778 1990
----------------------------------------------------------------------
10.615988 11.446666 7.82% 107,592 1989**
----------------------------------------------------------------------
10.185386 10.615988 4.23% 80,266 1988
----------------------------------------------------------------------
10.000000 10.185386 1.85% 62,616 1987
- -----------------------------------------------------------------------------------------------
AVIS- 20.792452 23.160826 11.39% 53,096 1996
High-Yield Bond Fund-NQ ----------------------------------------------------------------------
17.247186 20.792452 20.19% 65,007 1995
----------------------------------------------------------------------
18.696382 17.247186 -7.75% 63,653 1994
----------------------------------------------------------------------
16.269615 18.696382 14.92% 90,260 1993
----------------------------------------------------------------------
14.656040 16.269615 11.01% 85,512 1992
----------------------------------------------------------------------
11.731211 14.656040 24.93% 93,543 1991
----------------------------------------------------------------------
11.446666 11.731211 2.49% 84,258 1990
----------------------------------------------------------------------
10.615988 11.446666 7.82% 120,140 1989**
----------------------------------------------------------------------
10.185386 10.615988 4.23% 67,570 1988
----------------------------------------------------------------------
10.000000 10.185386 1.85% 22,009 1987
- -----------------------------------------------------------------------------------------------
AVIS- 18.077072 18.395431 1.76% 183,087 1996
U.S. Gov't/AAA-Rated ----------------------------------------------------------------------
Securities Fund-Q 15.872495 18.077072 13.89% 315,331 1995
----------------------------------------------------------------------
16.810323 15.872495 -5.58% 346,442 1994
----------------------------------------------------------------------
15.319654 16.810323 9.73% 414,364 1993
----------------------------------------------------------------------
14.425067 15.319654 6.20% 396,892 1992
----------------------------------------------------------------------
12.605067 14.425067 14.44% 436,968 1991
----------------------------------------------------------------------
11.780016 12.605067 7.00% 457,802 1990
----------------------------------------------------------------------
10.909251 11.780016 7.98% 493,935 1989**
----------------------------------------------------------------------
10.389044 10.909251 5.01% 303,920 1988
----------------------------------------------------------------------
10.000000 10.389044 3.89% 86,816 1987
- -----------------------------------------------------------------------------------------------
AVIS- 18.077072 18.395431 1.76% 149,634 1996
U.S. Gov't/AAA-Rated ----------------------------------------------------------------------
Securities Fund-NQ 15.872495 18.077072 13.89% 238,614 1995
----------------------------------------------------------------------
16.810323 15.872495 -5.58% 272,776 1994
----------------------------------------------------------------------
15.319654 16.810323 9.73% 365,338 1993
----------------------------------------------------------------------
14.425067 15.319654 6.20% 447,387 1992
----------------------------------------------------------------------
12.605067 14.425067 14.44% 496,734 1991
----------------------------------------------------------------------
11.780016 12.605067 7.00% 528,128 1990
----------------------------------------------------------------------
10.909251 11.780016 7.98% 997,613 1989*
----------------------------------------------------------------------
10.389044 10.909251 5.01% 801,676 1988
----------------------------------------------------------------------
10.000000 10.389044 3.89% 167,148 1987
- -----------------------------------------------------------------------------------------------
</TABLE>
** On October 20, 1989, the Company substituted shares of the American VI
Series for the then existing shares of the American Life/Annuity Series.
The unit values for the American VI Series started at the same unit
values as the corresponding units of the American Life/Annuity Series on
the date of the substitution.
18
20 of 139
<PAGE> 21
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 13.619180 16.470432 20.94% 7,592,255 1996
Fund-Q ----------------------------------------------------------------------
10.087774 13.619180 35.01% 3,284,707 1995
----------------------------------------------------------------------
10.130946 10.087774 -0.43% 539,188 1994
----------------------------------------------------------------------
10.000000 10.130946 1.31% 114,256 1993
- -----------------------------------------------------------------------------------------------
Dreyfus Stock Index 13.619180 16.470432 20.94% 6,210,747 1996
Fund-NQ ----------------------------------------------------------------------
10.087774 13.619180 35.01% 2,805,145 1995
----------------------------------------------------------------------
10.130946 10.087774 -0.43% 418,990 1994
----------------------------------------------------------------------
10.000000 10.130946 1.31% 53,556 1993
- -----------------------------------------------------------------------------------------------
The Dreyfus Socially 14.239508 17.037112 19.65% 1,552,615 1996
Responsible Growth ----------------------------------------------------------------------
Fund-Q 10.721141 14.239508 32.82% 640,387 1995
----------------------------------------------------------------------
10.702195 10.721141 0.18% 301,426 1994
----------------------------------------------------------------------
10.000000 10.702195 7.02% 32,265 1993
- -----------------------------------------------------------------------------------------------
The Dreyfus Socially 14.239508 17.037112 19.65% 1,190,421 1996
Responsible Growth ----------------------------------------------------------------------
Fund-NQ 10.721141 14.239508 32.82% 421,093 1995
----------------------------------------------------------------------
10.702195 10.721141 0.18% 263,764 1994
----------------------------------------------------------------------
10.000000 10.702195 7.02% 48,396 1993
- -----------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 9.986925 -0.13% 15,022 1996*
Investment Fund - ----------------------------------------------------------------------
Growth & Income
Portfolio Q ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 9.986925 -0.13% 2,643 1996*
Investment Fund - ----------------------------------------------------------------------
Growth & Income
----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund- 14.832631 16.573676 11.74% 13,781,464 1996
Overseas Portfolio-Q ----------------------------------------------------------------------
13.701507 14.832631 8.26% 14,272,080 1995
----------------------------------------------------------------------
13.646118 13.701507 0.41% 15,065,853 1994
----------------------------------------------------------------------
10.074553 13.646118 35.45% 11,518,590 1993
----------------------------------------------------------------------
11.432117 10.074553 -11.88% 5,381,715 1992
----------------------------------------------------------------------
10.707951 11.432117 6.76% 3,095,641 1991
----------------------------------------------------------------------
11.042233 10.707951 -3.03% 1,715,341 1990
----------------------------------------------------------------------
8.858811 11.042233 24.65% 356,389 1989
----------------------------------------------------------------------
8.300609 8.858811 6.72% 53,275 1988
----------------------------------------------------------------------
10.000000 8.300609 -16.99% 434 1987
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund- 14.832631 16.573676 11.74% 12,840,712 1996
Overseas ----------------------------------------------------------------------
Portfolio-NQ 13.701507 14.832631 8.26% 14,672,390 1995
----------------------------------------------------------------------
13.646118 13.701507 0.41% 17,550,925 1994
----------------------------------------------------------------------
10.074553 13.646118 35.45% 14,793,318 1993
----------------------------------------------------------------------
11.432117 10.074553 -11.88% 5,341,001 1992
----------------------------------------------------------------------
10.707951 11.432117 6.76% 3,211,265 1991
----------------------------------------------------------------------
11.042233 10.707951 -3.03% 1,989,713 1990
----------------------------------------------------------------------
8.858811 11.042233 24.65% 605,461 1989
----------------------------------------------------------------------
8.300609 8.858811 6.72% 167,313 1988
----------------------------------------------------------------------
10.000000 8.300609 -16.99% 101,502 1987
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund- 21.817076 24.553550 12.54% 7,274,256 1996
High ----------------------------------------------------------------------
Income Portfolio-Q 18.327364 21.817076 19.04% 6,464,833 1995
----------------------------------------------------------------------
18.859652 18.327364 -2.82% 4,924,388 1994
----------------------------------------------------------------------
15.855840 18.859652 18.94% 4,044,756 1993
----------------------------------------------------------------------
13.055215 15.855840 21.45% 1,837,635 1992
----------------------------------------------------------------------
9.778064 13.055215 33.52% 669,289 1991
----------------------------------------------------------------------
10.147625 9.778064 -3.64% 277,945 1990
----------------------------------------------------------------------
10.736745 10.147625 -5.49% 209,652 1989
----------------------------------------------------------------------
9.736528 10.736745 10.27% 67,813 1988
----------------------------------------------------------------------
10.000000 9.736528 -2.63% 5,430 1987
- -----------------------------------------------------------------------------------------------
</TABLE>
19
21 of 139
<PAGE> 22
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Fund- 21.817076 24.553550 12.54% 8,722,126 1996
High -----------------------------------------------------------------------
Income Portfolio-NQ 18.327364 21.817076 19.04% 7,993,534 1995
-----------------------------------------------------------------------
18.859652 18.327364 -2.82% 6,177,851 1994
-----------------------------------------------------------------------
15.855840 18.859652 18.94% 5,307,509 1993
-----------------------------------------------------------------------
13.055215 15.855840 21.45% 2,645,096 1992
-----------------------------------------------------------------------
9.778064 13.055215 33.52% 1,098,412 1991
-----------------------------------------------------------------------
10.147625 9.778064 -3.64% 425,270 1990
-----------------------------------------------------------------------
10.736745 10.147625 -5.49% 353,195 1989
-----------------------------------------------------------------------
9.736528 10.736745 10.27% 140,237 1988
-----------------------------------------------------------------------
10.000000 9.736528 -2.63% 39,928 1987
- ------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 24.863579 28.043676 12.79% 23,565,494 1996
Equity- -----------------------------------------------------------------------
Income Portfolio-Q 18.646331 24.863579 33.34% 21,482,777 1995
-----------------------------------------------------------------------
17.644458 18.646331 5.68% 15,283,540 1994
-----------------------------------------------------------------------
15.123262 17.644458 16.67% 10,828,747 1993
-----------------------------------------------------------------------
13.099125 15.123262 15.45% 6,712,294 1992
-----------------------------------------------------------------------
10.095775 13.099125 29.75% 4,458,956 1991
-----------------------------------------------------------------------
12.075648 10.095775 -16.40% 3,063,355 1990
-----------------------------------------------------------------------
10.425721 12.075648 15.83% 1,898,037 1989
-----------------------------------------------------------------------
8.589543 10.425721 21.38% 319,889 1988
-----------------------------------------------------------------------
10.000000 8.589543 -14.10% 8,805 1987
- ------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 24.863579 28.043676 12.79% 20,058,276 1996
Equity- -----------------------------------------------------------------------
Income Portfolio-NQ 18.646331 24.863579 33.34% 21,094,657 1995
-----------------------------------------------------------------------
17.644458 18.646331 5.68% 15,217,260 1994
-----------------------------------------------------------------------
15.123262 17.644458 16.67% 11,195,669 1993
-----------------------------------------------------------------------
13.099125 15.123262 15.45% 6,754,475 1992
-----------------------------------------------------------------------
10.095775 13.099125 29.75% 4,614,322 1991
-----------------------------------------------------------------------
12.075648 10.095775 -16.40% 3,627,225 1990
-----------------------------------------------------------------------
10.425721 12.075648 15.83% 2,861,738 1989
-----------------------------------------------------------------------
8.589543 10.425721 21.38% 678,815 1988
-----------------------------------------------------------------------
10.000000 8.589543 -14.10% 420,904 1987
- ------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 34.006052 38.497038 13.21% 17,849,804 1996
Growth -----------------------------------------------------------------------
Portfolio-Q 25.451479 34.006052 33.61% 15,252,906 1995
-----------------------------------------------------------------------
25.790764 25.451479 -1.32% 11,689,858 1994
-----------------------------------------------------------------------
21.890060 25.790764 17.82% 8,260,724 1993
-----------------------------------------------------------------------
20.287900 21.890060 7.90% 5,747,021 1992
-----------------------------------------------------------------------
14.125398 20.287900 43.63% 3,088,464 1991
-----------------------------------------------------------------------
16.214983 14.125398 -12.89% 1,245,106 1990
-----------------------------------------------------------------------
12.501824 16.214983 29.70% 398,400 1989
-----------------------------------------------------------------------
10.938414 12.501824 14.29% 38,122 1988
-----------------------------------------------------------------------
10.000000 10.938414 9.38% 2,784 1987
- ------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 34.006052 38.497038 13.21% 13,715,597 1996
Growth -----------------------------------------------------------------------
Portfolio-NQ 25.451479 34.006052 33.61% 13,813,237 1995
-----------------------------------------------------------------------
25.790764 25.451479 -1.32% 10,492,508 1994
-----------------------------------------------------------------------
21.890060 25.790764 17.82% 8,788,434 1993
-----------------------------------------------------------------------
20.287900 21.890060 7.90% 6,695,765 1992
-----------------------------------------------------------------------
14.125398 20.287900 43.63% 4,003,764 1991
-----------------------------------------------------------------------
16.214983 14.125398 -12.89% 2,190,071 1990
-----------------------------------------------------------------------
12.501824 16.214983 29.70% 857,832 1989
-----------------------------------------------------------------------
10.938414 12.501824 14.29% 105,051 1988
-----------------------------------------------------------------------
10.000000 10.938414 9.38% 209 1987
- ------------------------------------------------------------------------------------------------
Fidelity VIP Fund II 18.056027 20.422622 13.11% 21,570,235 1996
- - Asset -----------------------------------------------------------------------
Manager Portfolio-Q 15.641016 18.056027 15.44% 22,704,319 1995
-----------------------------------------------------------------------
16.874276 15.641016 -7.31% 24,788,850 1994
-----------------------------------------------------------------------
14.123234 16.874276 19.48% 17,438,762 1993
-----------------------------------------------------------------------
12.789976 14.123234 10.42% 6,977,842 1992
-----------------------------------------------------------------------
10.572963 12.789976 20.97% 2,513,661 1991
-----------------------------------------------------------------------
10.028081 10.572963 5.43% 729,271 1990
-----------------------------------------------------------------------
10.000000 10.028081 0.28% 124,631 1989
- ------------------------------------------------------------------------------------------------
</TABLE>
20
22 of 139
<PAGE> 23
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Fund 18.056027 20.422622 13.11% 13,822,886 1996
II - Asset ----------------------------------------------------------------------
Manager Portfolio-NQ 15.641016 18.056027 15.44% 16,037,811 1995
----------------------------------------------------------------------
16.874276 15.641016 -7.31% 20,692,145 1994
----------------------------------------------------------------------
14.123234 16.874276 19.48% 16,652,403 1993
----------------------------------------------------------------------
12.789976 14.123234 10.42% 6,313,629 1992
----------------------------------------------------------------------
10.572963 12.789976 20.97% 1,991,456 1991
----------------------------------------------------------------------
10.028081 10.572963 5.43% 696,595 1990
----------------------------------------------------------------------
10.000000 10.028081 0.28% 161,084 1989
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund 11.071500 13.255157 19.72% 10,594,586 1996
II - ----------------------------------------------------------------------
Contrafund 10.000000 11.071500 10.72% 3,025,498 1995
Portfolio - Q ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund 11.071500 13.255157 19.72% 9,866,842 1996
II - ----------------------------------------------------------------------
Contrafund 10.000000 11.071500 10.72% 3,490,716 1995
Portfolio - NQ ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NSAT Capital 14.442619 17.979967 24.49% 2,288,355 1996
Appreciation Fund-Q ----------------------------------------------------------------------
11.311683 14.442619 27.68% 897,315 1995
----------------------------------------------------------------------
11.564256 11.311683 -2.18% 890,035 1994
----------------------------------------------------------------------
10.689287 11.564256 8.19% 545,013 1993
----------------------------------------------------------------------
10.000000 10.689287 6.89% 189,896 1992
- -----------------------------------------------------------------------------------------------
NSAT-Capital 14.442619 17.979967 24.49% 2,612,175 1996
Appreciation Fund-NQ ----------------------------------------------------------------------
11.311683 14.442619 27.68% 904,797 1995
----------------------------------------------------------------------
11.564256 11.311683 -2.18% 897,902 1994
----------------------------------------------------------------------
10.689287 11.564256 8.19% 549,294 1993
----------------------------------------------------------------------
10.000000 10.689287 6.89% 551,252 1992
- -----------------------------------------------------------------------------------------------
NSAT- 29.663756 30.296925 2.13% 3,938,276 1996
Government Bond ----------------------------------------------------------------------
Fund-Q 25.309101 29.663756 17.21% 4,150,795 1995
----------------------------------------------------------------------
26.497619 25.309101 -4.49% 4,217,320 1994
----------------------------------------------------------------------
24.513489 26.497619 8.09% 4,093,697 1993
----------------------------------------------------------------------
23.025331 24.513489 6.46% 3,388,192 1992
----------------------------------------------------------------------
19.989831 23.025331 15.19% 2,396,577 1991
----------------------------------------------------------------------
18.497836 19.989831 8.07% 1,366,952 1990
----------------------------------------------------------------------
16.442690 18.497836 12.64% 769,336 1989
----------------------------------------------------------------------
15.416798 16.442690 6.65% 397,372 1988
----------------------------------------------------------------------
15.399065 15.416798 0.12% 345,246 1987
- -----------------------------------------------------------------------------------------------
NSAT- 29.585401 30.216906 2.13% 3,184,368 1996
Government Bond ----------------------------------------------------------------------
Fund-NQ 25.242252 29.585401 17.21% 3,385,486 1995
----------------------------------------------------------------------
26.427634 25.242252 -4.49% 3,855,380 1994
----------------------------------------------------------------------
24.448737 26.427634 8.09% 4,068,930 1993
----------------------------------------------------------------------
22.964507 24.448737 6.46% 3,746,706 1992
----------------------------------------------------------------------
19.937021 22.964507 15.19% 3,069,935 1991
----------------------------------------------------------------------
18.448970 19.937021 8.07% 2,213,029 1990
----------------------------------------------------------------------
16.399248 18.448970 12.50% 1,776,299 1989
----------------------------------------------------------------------
15.376062 16.399248 6.65% 1,568,736 1988
----------------------------------------------------------------------
15.358367 15.376062 0.12% 1,514,167 1987
- -----------------------------------------------------------------------------------------------
NSAT-Money 21.334141 22.132823 3.74% 9,766,503 1996
Market Fund-Q*** ----------------------------------------------------------------------
20.457373 21.334141 4.29% 9,961,763 1995
----------------------------------------------------------------------
19.951530 20.457373 2.54% 11,466,217 1994
----------------------------------------------------------------------
19.672720 19.951530 1.42% 5,669,948 1993
----------------------------------------------------------------------
19.275668 19.672720 2.06% 5,743,893 1992
----------------------------------------------------------------------
18.453701 19.275668 4.45% 5,848,337 1991
----------------------------------------------------------------------
17.301093 18.453701 6.66% 4,869,455 1990
----------------------------------------------------------------------
16.070303 17.301093 7.66% 1,988,984 1989
----------------------------------------------------------------------
15.171173 16.070303 5.93% 1,232,073 1988
----------------------------------------------------------------------
14.441015 15.171173 5.06% 646,540 1987
- -----------------------------------------------------------------------------------------------
</TABLE>
21
23 of 139
<PAGE> 24
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT-Money 21.334141 22.132823 3.74% 10,963.993 1996
Market Fund-NQ*** ----------------------------------------------------------------------
20.457373 21.334141 4.29% 10,688,426 1995
----------------------------------------------------------------------
19.951530 20.457373 2.54% 16,632,423 1994
----------------------------------------------------------------------
19.672720 19.951530 1.42% 8,583,554 1993
----------------------------------------------------------------------
19.275668 19.672720 2.06% 7,286,887 1992
----------------------------------------------------------------------
18.453701 19.275668 4.45% 7,417,882 1991
----------------------------------------------------------------------
17.301093 18.453701 6.66% 7,729,382 1990
----------------------------------------------------------------------
16.070303 17.301093 7.66% 5,325,942 1989
----------------------------------------------------------------------
15.171173 16.070303 5.93% 5,407,347 1988
----------------------------------------------------------------------
14.441015 15.171173 5.06% 5,181,222 1987
- -----------------------------------------------------------------------------------------------
NSAT-Small 11.410135 13.831813 21.22% 3,071,120 1996
Company Fund - Q ----------------------------------------------------------------------
10.000000 11.410135 14.10% 157,084 1995
- -----------------------------------------------------------------------------------------------
NSAT-Small 11.410135 13.831813 21.22% 3,061,699 1996
Company Fund - NQ ----------------------------------------------------------------------
10.000000 11.410135 14.10% 607,477 1995
- -----------------------------------------------------------------------------------------------
NSAT-Total 52.147953 62.707634 20.25% 3,546,292 1996
Return Fund-Q ----------------------------------------------------------------------
40.926247 52.147953 27.42% 2,843,673 1995
----------------------------------------------------------------------
41.023082 40.926247 -0.24% 2,189,971 1994
----------------------------------------------------------------------
37.471598 41.023082 9.48% 1,747,873 1993
----------------------------------------------------------------------
35.094975 37.471598 6.77% 1,417,457 1992
----------------------------------------------------------------------
25.674744 35.094975 36.69% 905,547 1991
----------------------------------------------------------------------
28.286971 25.674744 -9.23% 720,473 1990
----------------------------------------------------------------------
25.311336 28.286971 11.76% 604,552 1989
----------------------------------------------------------------------
21.361366 25.311336 18.49% 467,922 1988
----------------------------------------------------------------------
21.799104 21.361366 -2.01% 542,976 1987
- -----------------------------------------------------------------------------------------------
NSAT-Total 50.805130 61.092889 20.25% 3,148,253 1996
Return Fund-NQ ----------------------------------------------------------------------
39.872391 50.805130 27.42% 2,833,128 1995
----------------------------------------------------------------------
39.966728 39.872391 -0.24% 2,396,609 1994
----------------------------------------------------------------------
36.506693 39.966728 9.48% 2,125,354 1993
----------------------------------------------------------------------
34.191261 36.506693 6.77% 2,066,486 1992
----------------------------------------------------------------------
25.013609 34.191261 36.69% 1,759,891 1991
----------------------------------------------------------------------
27.558577 25.013609 -9.23% 1,524,116 1990
----------------------------------------------------------------------
24.659571 27.558577 11.76% 1,576,425 1989
----------------------------------------------------------------------
20.811313 24.659571 18.49% 1,429,315 1988
----------------------------------------------------------------------
21.237770 20.811313 -2.01% 2,024,376 1987
- -----------------------------------------------------------------------------------------------
Neuberger & Berman 27.626244 29.757359 7.71% 5,597,573 1996
Advisers Management ----------------------------------------------------------------------
Trust-Growth 21.247525 27.626244 30.02% 5,919,670 1995
Portfolio-Q ----------------------------------------------------------------------
22.656907 21.247525 -6.22% 4,909,356 1994
----------------------------------------------------------------------
21.495392 22.656907 5.40% 4,959,418 1993
----------------------------------------------------------------------
19.882145 21.495392 8.11% 4,432,865 1992
----------------------------------------------------------------------
15.527030 19.882145 28.05% 3,336,332 1991
----------------------------------------------------------------------
17.135185 15.527030 -9.39% 1,761,170 1990
----------------------------------------------------------------------
13.408445 17.135185 27.79% 751,612 1989
----------------------------------------------------------------------
10.783816 13.408445 24.34% 109,355 1988
----------------------------------------------------------------------
10.000000 10.783816 7.84% 353 1987
- -----------------------------------------------------------------------------------------------
Neuberger & Berman 27.626244 29.757359 7.71% 4,702,904 1996
Advisers Management ----------------------------------------------------------------------
Trust-Growth 21.247525 27.626244 30.02% 5,358,461 1995
Portfolio-NQ ----------------------------------------------------------------------
22.656907 21.247525 -6.22% 4,342,056 1994
----------------------------------------------------------------------
21.495392 22.656907 5.40% 4,728,052 1993
----------------------------------------------------------------------
19.882145 21.495392 8.11% 4,843,969 1992
----------------------------------------------------------------------
15.527030 19.882145 28.05% 3,982,667 1991
----------------------------------------------------------------------
17.135185 15.527030 -9.39% 2,294,185 1990
----------------------------------------------------------------------
13.408445 17.135185 27.79% 1,363,755 1989
----------------------------------------------------------------------
10.783816 13.408445 24.34% 291,414 1988
----------------------------------------------------------------------
10.000000 10.783816 7.84% 701 1987
- -----------------------------------------------------------------------------------------------
</TABLE>
*** The 7-day yield on the Money Market Fund as of December 31, 1996 was 3.64%.
22
24 of 139
<PAGE> 25
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger & Berman 16.311479 16.791470 2.94% 3,722,398 1996
Advisers Management ----------------------------------------------------------------------
Trust- Limited 14.896724 16.311479 9.50% 4,061,293 1995
Maturity ----------------------------------------------------------------------
Bond Portfolio-Q 15.115753 14.896724 -1.45% 3,859,535 1994
----------------------------------------------------------------------
14.362908 15.115753 5.24% 5,013,322 1993
----------------------------------------------------------------------
13.836035 14.362908 3.81% 3,563,619 1992
----------------------------------------------------------------------
12.589849 13.836035 9.90% 1,462,609 1991
----------------------------------------------------------------------
11.776036 12.589849 6.91% 720,644 1990
----------------------------------------------------------------------
10.770188 11.776036 9.34% 303,493 1989
----------------------------------------------------------------------
10.182117 10.770188 5.78% 104,283 1988
----------------------------------------------------------------------
10.000000 10.182117 1.82% 645 1987
- -----------------------------------------------------------------------------------------------
Neuberger & Berman 16.311479 16.791470 2.94% 3,388,267 1996
Advisers Management ----------------------------------------------------------------------
Trust- Limited 14.896724 16.311479 9.50% 3,866,535 1995
Maturity ----------------------------------------------------------------------
Portfolio-NQ 15.115753 14.896724 -1.45% 4,238,249 1994
----------------------------------------------------------------------
14.362908 15.115753 5.24% 5,023,386 1993
----------------------------------------------------------------------
13.836035 14.362908 3.81% 3,217,005 1992
----------------------------------------------------------------------
12.589849 13.836035 9.90% 1,326,257 1991
----------------------------------------------------------------------
11.776036 12.589849 6.91% 676,768 1990
----------------------------------------------------------------------
10.770188 11.776036 9.34% 299,695 1989
----------------------------------------------------------------------
10.182117 10.770188 5.78% 101,445 1988
----------------------------------------------------------------------
10.000000 10.182117 1.82% 99 1987
- -----------------------------------------------------------------------------------------------
Neuberger & Berman 13.494251 17.256151 27.88% 5,383,558 1996
Advisers Management ----------------------------------------------------------------------
Trust-Partners 10.017795 13.494251 34.70% 2,151,917 1995
Portfolio-Q ----------------------------------------------------------------------
10.000000 10.017795 0.18% 223,285 1994
- -----------------------------------------------------------------------------------------------
Neuberger & Berman 13.494251 17.256151 27.88% 5,392,259 1996
Advisers Management ----------------------------------------------------------------------
Trust-Partners 10.017795 13.494251 34.70% 2,173,222 1995
Portfolio-NQ ----------------------------------------------------------------------
10.000000 10.017795 0.18% 324,320 1994
- -----------------------------------------------------------------------------------------------
Oppenheimer Variable 15.831164 18.045475 13.99% 4,869,534 1996
Accounts ----------------------------------------------------------------------
Fund-Multiple 13.216172 15.831164 19.79% 4,418,303 1995
Strategies Fund-Q ----------------------------------------------------------------------
13.655607 13.216172 -3.22% 3,897,893 1994
----------------------------------------------------------------------
11.932236 13.655607 14.44% 2,951,734 1993
----------------------------------------------------------------------
11.091678 11.932236 7.58% 1,837,408 1992
----------------------------------------------------------------------
9.565675 11.091678 15.95% 1,118,029 1991
----------------------------------------------------------------------
9.880485 9.565675 -3.19% 643,641 1990
----------------------------------------------------------------------
10.000000 9.880485 -1.20% 139,332 1989
- -----------------------------------------------------------------------------------------------
Oppenheimer Variable 15.831164 18.045475 13.99% 3,811,559 1996
Accounts ----------------------------------------------------------------------
Fund-Multiple 13.216172 15.831164 19.79% 3,837,204 1995
Strategies Fund-NQ ----------------------------------------------------------------------
13.655607 13.216172 -3.22% 3,363,638 1994
----------------------------------------------------------------------
11.932236 13.655607 14.44% 2,677,668 1993
----------------------------------------------------------------------
11.091678 11.932236 7.58% 1,697,934 1992
----------------------------------------------------------------------
9.565675 11.091678 15.95% 1,012,431 1991
----------------------------------------------------------------------
9.880485 9.565675 -3.19% 603,205 1990
----------------------------------------------------------------------
10.000000 9.880485 -1.20% 184,606 1989
- -----------------------------------------------------------------------------------------------
Oppenheimer Variable 16.781326 17.356310 3.43% 3,808,030 1996
Accounts Fund-Bond ----------------------------------------------------------------------
Fund-Q 14.531774 16.781326 15.48% 3,369,101 1995
----------------------------------------------------------------------
15.013579 14.531774 -3.21% 2,694,486 1994
----------------------------------------------------------------------
13.456350 15.013579 11.57% 2,304,838 1993
----------------------------------------------------------------------
12.801628 13.456350 5.11% 1,429,504 1992
----------------------------------------------------------------------
11.026344 12.801628 16.10% 609,779 1991
----------------------------------------------------------------------
10.352435 11.026344 6.51% 193,600 1990
----------------------------------------------------------------------
10.000000 10.352435 3.52% 64,637 1989
- -----------------------------------------------------------------------------------------------
Oppenheimer Variable 16.781326 17.356310 3.43% 3,276,566 1996
Accounts Fund-Bond ----------------------------------------------------------------------
Fund-NQ 14.531774 16.781326 15.48% 3,073,942 1995
----------------------------------------------------------------------
5.013579 14.531774 -3.21% 2,666,115 1994
----------------------------------------------------------------------
13.456350 15.013579 11.57% 2,249,484 1993
----------------------------------------------------------------------
12.801628 13.456350 5.11% 1,407,269 1992
----------------------------------------------------------------------
11.026344 12.801628 16.10% 627,014 1991
----------------------------------------------------------------------
10.352435 11.026344 6.51% 243,677 1990
----------------------------------------------------------------------
10.000000 10.352435 3.52% 56,538 1989
- -----------------------------------------------------------------------------------------------
</TABLE>
23
25 of 139
<PAGE> 26
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer 11.411200 13.266755 16.26% 7,895,779 1996
Variable -----------------------------------------------------------------------
Accounts 11.307851 11.411200 0.91% 6,518,772 1995
Fund-Global -----------------------------------------------------------------------
Securities Fund-Q 12.151882 11.307851 -6.95% 6,376,101 1994
-----------------------------------------------------------------------
10.000000 12.151882 21.52% 1,254,946 1993
- ------------------------------------------------------------------------------------------------
Oppenheimer 11.411200 13.266755 16.26% 5,355,527 1996
Variable -----------------------------------------------------------------------
Accounts 11.307851 11.411200 0.91% 4,810,440 1995
Fund-Global -----------------------------------------------------------------------
Securities Fund-NQ 12.151882 11.307851 -6.95% 6,373,740 1994
-----------------------------------------------------------------------
10.000000 12.151882 21.52% 1,833,969 1993
- ------------------------------------------------------------------------------------------------
Strong Special 18.071722 21.072564 16.61% 11,342,542 1996
Fund II, Inc.-Q -----------------------------------------------------------------------
14.551898 18.071722 24.19% 9,874,627 1995
-----------------------------------------------------------------------
14.230988 14.551898 2.26% 8,576,003 1994
-----------------------------------------------------------------------
11.519061 14.230988 23.54% 4,733,084 1993
-----------------------------------------------------------------------
10.000000 11.519061 15.19% 1,132,322 1992
- ------------------------------------------------------------------------------------------------
Strong Special 18.071722 21.072564 16.61% 8,634,564 1996
Fund II, Inc.-NQ -----------------------------------------------------------------------
14.551898 18.071722 24.19% 8,712,015 1995
-----------------------------------------------------------------------
14.230988 14.551898 2.26% 8,937,552 1994
-----------------------------------------------------------------------
11.519061 14.230988 23.54% 5,766,194 1993
-----------------------------------------------------------------------
10.000000 11.519061 15.19% 1,281,636 1992
- ------------------------------------------------------------------------------------------------
Strong Variable 16.212409 16.129688 -0.51% 4,502,456 1996
Insurance -----------------------------------------------------------------------
Funds, 12.143604 16.212409 33.51% 5,223,195 1995
Inc.-Discovery -----------------------------------------------------------------------
Fund II, Inc.-Q 13.003747 12.143604 -6.61% 3,921,214 1994
-----------------------------------------------------------------------
10.796708 13.003747 20.44% 2,178,730 1993
-----------------------------------------------------------------------
10.000000 10.796708 7.97% 1,002,256 1992
- ------------------------------------------------------------------------------------------------
Strong Variable 16.212409 16.129688 -0.51% 3,833,429 1996
Insurance -----------------------------------------------------------------------
Funds, 12.143604 16.212409 33.51% 5,248,509 1995
Inc.-Discovery -----------------------------------------------------------------------
Fund II, Inc.-NQ 13.003747 12.143604 -6.61% 4,385,371 1994
-----------------------------------------------------------------------
10.796708 13.003747 20.44% 3,188,982 1993
-----------------------------------------------------------------------
10.000000 10.796708 7.97% 1,433,375 1992
- ------------------------------------------------------------------------------------------------
Strong Variable 10.226470 11.140682 8.94% 1,788,555 1996
Insurance Funds, -----------------------------------------------------------------------
Inc.-International 10.000000 10.226470 2.26% 78,603 1995
Stock Fund II - Q -----------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Strong Variable 10.226470 11.140682 8.94% 1,660,749 1996
Insurance -----------------------------------------------------------------------
Funds, 10.000000 10.226470 2.26% 86,735 1995
Inc.-International -----------------------------------------------------------------------
Stock Fund II - NQ
- ------------------------------------------------------------------------------------------------
Van Eck Worldwide 14.433345 14.604281 1.18% 2,627,198 1996
Insurance Trust - -----------------------------------------------------------------------
Worldwide Bond 12.465907 14.433345 15.78% 2,993,355 1995
Fund-Q -----------------------------------------------------------------------
12.798654 12.465907 -2.60% 2,731,900 1994
-----------------------------------------------------------------------
12.031194 12.798654 6.38% 2,906,303 1993
-----------------------------------------------------------------------
12.872259 12.031194 -6.53% 2,263,731 1992
-----------------------------------------------------------------------
11.012132 12.872259 16.89% 1,132,905 1991
-----------------------------------------------------------------------
10.027192 11.012132 9.82% 453,396 1990
-----------------------------------------------------------------------
10.000000 10.027192 0.27% 51,091 1989
- ------------------------------------------------------------------------------------------------
Van Eck Worldwide 14.433345 14.604281 1.18% 2,639,292 1996
Insurance Trust - -----------------------------------------------------------------------
Worldwide Bond 12.465907 14.433345 15.78% 3,020,939 1995
Fund-NQ -----------------------------------------------------------------------
12.798654 12.465907 -2.60% 3,204,016 1994
-----------------------------------------------------------------------
12.031194 12.798654 6.38% 3,619,098 1993
-----------------------------------------------------------------------
12.872259 12.031194 -6.53% 2,707,532 1992
-----------------------------------------------------------------------
11.012132 12.872259 16.89% 1,168,830 1991
-----------------------------------------------------------------------
10.027192 11.012132 9.82% 497,712 1990
-----------------------------------------------------------------------
10.000000 10.027192 0.27% 27,550 1989
- ------------------------------------------------------------------------------------------------
Van Eck Worldwide 13.944310 16.248199 16.52% 3,151,393 1996
Insurance -----------------------------------------------------------------------
Trust-Worldwide 12.728311 13.944310 9.55% 3,166,034 1995
Hard Assets Fund-Q -----------------------------------------------------------------------
13.544828 12.728311 -6.03% 3,213,104 1994
-----------------------------------------------------------------------
8.325308 13.544828 62.69% 2,189,942 1993
-----------------------------------------------------------------------
8.795164 8.325308 -5.34% 800,912 1992
-----------------------------------------------------------------------
9.175494 8.795164 -4.15% 449,387 1991
-----------------------------------------------------------------------
10.823789 9.175494 -15.23% 337,698 1990
-----------------------------------------------------------------------
10.000000 10.823789 8.24% 44,378 1989
- ------------------------------------------------------------------------------------------------
</TABLE>
24
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<PAGE> 27
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
Accumulation Accumulation Percent Number Of
Unit Value At Unit Value Change in Accumulation
Beginning Of At End Accumulation Units At End Of
Fund Period Of Period Unit Value The Period Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 13.944310 16.248199 16.52% 3,558,069 1996
Insurance ----------------------------------------------------------------------
Trust-Worldwide 12.728311 13.944310 9.55% 3,714,045 1995
Hard Assets Fund-NQ ----------------------------------------------------------------------
13.544828 12.728311 -6.03% 4,473,812 1994
----------------------------------------------------------------------
8.325308 13.544828 62.69% 3,344,681 1993
----------------------------------------------------------------------
8.795164 8.325308 -5.34% 960,152 1992
----------------------------------------------------------------------
9.175494 8.795164 -4.15% 565,314 1991
----------------------------------------------------------------------
10.823789 9.175494 -15.23% 475,693 1990
----------------------------------------------------------------------
10.000000 10.823789 8.24% 83,552 1989
- -----------------------------------------------------------------------------------------------
Van Eck Worldwide 10.000000 10.077830 0.78% 271,881 1996*
Insurance Trust - ----------------------------------------------------------------------
Worldwide Emerging
Markets Fund Q ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Van Eck Worldwide 10.000000 10.077830 0.78% 239,183 1996*
Insurance Trust - ----------------------------------------------------------------------
Worldwide Emerging
Markets Fund NQ ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Van Kampen American 10.765351 14.931303 38.70% 2,491,780 1996
Capital Life ----------------------------------------------------------------------
Investment 10.000000 10.765351 7.65% 161,110 1995
Trust-Real Estate ----------------------------------------------------------------------
Securities Fund - Q
----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Van Kampen 10.765351 14.931303 38.70% 3,554,657 1996
American ----------------------------------------------------------------------
Capital Life 10.000000 10.765351 7.65% 310,010 1995
Investment ----------------------------------------------------------------------
Trust-Real Estate
Securities Fund - NQ ----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Warburg Pincus 10.661059 11.572294 8.55% 5,551,036 1996
Trust- ----------------------------------------------------------------------
International 10.000000 10.661059 6.61% 1,798,470 1995
Equity ----------------------------------------------------------------------
Portfolio - Q
- -----------------------------------------------------------------------------------------------
Warburg Pincus 10.661059 11.572294 8.55% 5,736,148 1996
Trust- ----------------------------------------------------------------------
International 10.000000 10.661059 6.61% 2,012,385 1995
Equity ----------------------------------------------------------------------
Portfolio - NQ
- -----------------------------------------------------------------------------------------------
Warburg Pincus 10.000000 10.163772 1.64% 205,349 1996*
Trust- ----------------------------------------------------------------------
Post-Venture
Capital ----------------------------------------------------------------------
Portfolio Q
- -----------------------------------------------------------------------------------------------
Warburg Pincus 10.000000 10.163772 1.64% 198,784 1996*
Trust- ----------------------------------------------------------------------
Post-Venture
Capital ----------------------------------------------------------------------
Portfolio NQ
- -----------------------------------------------------------------------------------------------
Warburg Pincus 12.430073 13.973889 12.42% 4,899,073 1996
Trust- ----------------------------------------------------------------------
Small Company 10.000000 12.430073 24.30% 2,450,661 1995
Growth ----------------------------------------------------------------------
Portfolio - Q
- -----------------------------------------------------------------------------------------------
Warburg Pincus 12.430073 13.973889 12.42% 4,810,067 1996
Trust- ----------------------------------------------------------------------
Small Company 10.000000 12.430073 24.30% 2,574,975 1995
Growth ----------------------------------------------------------------------
Portfolio - NQ
- -----------------------------------------------------------------------------------------------
</TABLE>
* The American Century Variable Portfolio, Inc. - American Century VP Value,
Dreyfus Variable Investment Fund - Growth and Income Portfolio, Van Eck
Worldwide Insurance Trust - Worldwide Emerging Markets Fund, and Warburg
Pincus Trust - Post-Venture Capital Portfolio were added December 23,
1996. Consequently, the Condensed financial information reflects the
accumulation unit outstanding for the period from December 23, 1996 to
December 31, 1996.
25
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<PAGE> 28
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March 1929. The Company is a member of the "Nationwide
Insurance Enterprise," with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
the District of Columbia, Puerto Rico and in all states.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on October 7, 1981,
pursuant to the provisions of Ohio law. The Company has caused the Variable
Account to be registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and
as such, is not chargeable with liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains, or losses of the Company.
Purchase Payments are allocated within the Variable Account among one or
more Sub-Accounts made up of shares in the underlying Mutual Fund option(s)
designated by the Contract Owner. There are two Sub-Accounts within the Variable
Account for each of the underlying Mutual Fund options which may be designated
by the Contract Owner. One such Sub-Account contains the underlying Mutual Funds
shares attributable to Accumulation Units under Qualified Contracts, Individual
Retirement Annuities, and Tax Sheltered Annuities and one such Sub-Account
contains the underlying Mutual Funds shares attributable to Accumulation Units
under Non-Qualified Contracts.
Underlying Mutual Fund Options
Contract Owners may choose from among a number of different underlying
Mutual Fund options. (See Appendix B which contains a summary of investment
objectives for each underlying Mutual Fund option.) More detailed information
may be found in the current prospectus for each underlying Mutual Fund offered.
Such a prospectus for the underlying Mutual Fund option(s) should be read in
conjunction with this prospectus. A copy of each prospectus may be obtained
without charge from Nationwide Life Insurance Company by calling 1-800-848-6331,
TDD 1-800-238-3035, or writing P.O.
Box 16609, Columbus, Ohio 43216-6609.
The underlying Mutual Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect Contract
Owners and variable annuity payees, including withdrawal of the Variable Account
from participation in the underlying Mutual Fund or Mutual Funds which are
involved in the conflict.
Voting Rights
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds.
These shares will be voted in accordance with instructions received from
Contract Owners who have an interest in the Variable Account. If the Investment
Company Act of 1940 or any Regulation thereunder should be amended or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the underlying Mutual
Funds in its own right, it may elect to do so.
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<PAGE> 29
The Contract Owner shall be the person who has the voting interest under
the Contract. The number of underlying Mutual Fund shares attributable to each
Contract Owner is determined by dividing the Contract Owner's interest in each
respective Sub-Account of the Variable Account by the net asset value of the
underlying Mutual Fund corresponding to the Sub-Account. The number of shares
which a person has the right to vote will be determined as of the date to be
chosen by the Company not more than 90 days prior to the meeting of the
underlying Mutual Fund. Each person having a voting interest will receive
periodic reports relating to the underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
Voting instructions will be solicited by written communication at least 21
days prior to such meeting. Underlying Mutual Fund shares held in the Variable
Account as to which no timely instructions are received will be voted by the
Company in the same proportion as the voting instructions which are received
with respect to all Contracts participating in the Variable Account.
Substitution of Securities
If the shares of the underlying Mutual Fund options described in this
prospectus should no longer be available for investment by the Variable Account
or if, in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate, the Company may
eliminate Sub-Accounts, combine two or more Sub-Accounts, or substitute shares
of another underlying Mutual Fund for underlying Mutual Fund shares already
purchased or to be purchased in the future with 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, under such
requirements as it may impose.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
Expenses of Variable Account
The Variable Account is responsible for the following types of expenses:
(1) administrative expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk, Expense Risk,
Contract Maintenance and Administration Charges described in this prospectus
will not change regardless of actual expenses. If these charges are insufficient
to cover these expenses, the loss will be borne by the Company.
For 1996, the Variable Account incurred total expenses equal to 1.50% of
its average net assets, relating to the administrative, sales, mortality and
expense risk charges described below for all Contracts outstanding during that
year. Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each underlying Mutual Fund prospectus.
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 rate of 0.80% of the daily net asset value of the Variable
Account. The Company expects to generate a profit through assessing this charge.
Expense Risk Charge
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
deducts an Expense Risk Charge from the Variable Account. This amount is
computed on a daily basis, and is equal to an annual rate of 0.45% of the daily
net asset value of the Variable Account. The Company expects to generate a
profit through assessing this charge.
Contract Maintenance Charge and Administration Charge
Each year on the Contract Anniversary, (and on the date of surrender in
any year in which the entire Contract Value is surrendered) the Company deducts
a Contract Maintenance Charge from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. The Contract Maintenance Charges are as follows:
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<PAGE> 30
- --------------------------------------------------------------------------------
Amount Type of Contract Issued
- --------------------------------------------------------------------------------
- Non-Qualified Contracts
- Individual Retirement Annuities
- Tax Sheltered Annuities (sold prior to
$30.00 December 17, 1990)
- Qualified Contracts (issued pursuant
to a 401 plan prior to January 14,
1991).(1)
- --------------------------------------------------------------------------------
- Tax Sheltered Annuity Contracts issued
$12.00 on or after December 17, 1990 and
before August 1, 1994.(2)
- --------------------------------------------------------------------------------
- Qualified Contracts issued on or after
$30.00 to $0.00 January 14, 1991 and before August 1,
1994.(3)
- --------------------------------------------------------------------------------
- Qualified Contracts (sold on or after
$12.00 to $0.00(4) August 1, 1994); SEP IRAs
- Tax Sheltered Annuity Contracts (sold
on or after August 1, 1994).
- --------------------------------------------------------------------------------
(1) If additional Contracts are or were issued (on or after January 14, 1991)
pursuant to a plan which was funded by Contracts described in this
prospectus prior to January 14, 1991, such additional Qualified Contracts
shall have a Contract Maintenance Charge of $30.00.
(2) This charge may be lowered to reflect savings in administration of the
Contracts.
(3) Variances are based on internal underwriting guidelines which can result
in reductions of charges in incremental amounts of $5.00. Underwriting
considerations include the size of the group, the average participant
account balance transferred to the Company, if any, and administrative
savings.
(4) The charge is determined based on Company underwriting guidelines.
All Contract Maintenance Charge reductions shall be based on objective
underwriting guidelines which shall be applied in a non-discriminatory manner.
The deduction of the Contract Maintenance Charge is made from each
Sub-Account and the Fixed Account in the same proportion that the value of the
Sub-Account or Fixed Account bears to the total Contract Value. In any Contract
Year when a Contract is surrendered for its full value on any date other than
the Contract Anniversary, the Contract Maintenance Charge will be deducted at
the time of such surrender. The amount of the Contract Maintenance Charge may
not be increased by the Company. In no event will reduction or elimination of
the Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
The Company also assesses an Administration Charge equal on an annual
basis to 0.05% of the daily net asset value of the Variable Account. The
deduction of the Administration Charge is made from each Sub-Account in the same
proportion that the value in that Sub-Account bears to the total Variable
Account value. The Contract Maintenance Charge and Administrative Charge are
designed only to reimburse the Company for administrative expenses and the
Company will monitor these charges to ensure that they do not exceed annual
administration expenses.
Contingent Deferred Sales Charge
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions (see "Waiver of
Contingent Deferred Sales Charge" section), deduct a Contingent Deferred Sales
Charge not to exceed 7% of the lesser of the total of all Purchase Payments made
within 84 months prior to the date of the request to surrender, or the amount
surrendered. The Contingent Deferred Sales Charge, when it is applicable, will
be used to cover expenses relating to the sale of the Contracts, including
commissions paid to sales personnel, the costs of preparation of sales
literature and other promotional activity. The Company attempts to recover its
distribution costs relating to the sale of the Contracts from the Contingent
Deferred Sales Charge. Any shortfall will be made up from the General Account of
the Company, which may indirectly include portions of the Mortality and Expense
Risk Charges, since the Company expects to generate a profit from these charges.
The maximum amount that may be paid to a selling agent on the sale of these
Contracts is 5.25% of Purchase Payments.
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<PAGE> 31
The Contingent Deferred Sales Charge is calculated by multiplying the
applicable Contingent Deferred Sales Charge percentages noted below by the
Purchase Payments that are surrendered. For purposes of calculating the
Contingent Deferred Sales Charge, surrenders are considered to come first from
the oldest Purchase Payment made to the Contract, then the next oldest Purchase
Payment and so forth. For tax purposes, a surrender is usually treated as a
withdrawal of earnings first.
The Contingent Deferred Sales Charge applies to Purchase Payments as
follows for Contracts issued on or after December 15, 1988:
<TABLE>
<CAPTION>
Number of Completed Contingent Deferred Number of Completed Contingent Deferred
Years From Date of Sales Charge Years From Date of Sales Charge
Purchase Payment Percentage Purchase Payment Percentage
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
For Contracts Issued Prior to December 15, 1988
For Contracts issued prior to December 15, 1988, a Contingent Deferred
Sales charge will be made by the Company equal to 5% of the lesser of the total
of all Purchase Payments made within 96 months prior to the date of the request
for surrender, or the amount surrendered. For these Contracts, the Contract
Owner may, after the first year from the date of each Purchase Payment, withdraw
without a Contingent Deferred Sales Charge, up to 5% of that Purchase Payment
for each year that the Purchase Payment has remained on deposit (less the amount
of such Purchase Payment previously surrendered free of charge).
Waiver of Contingent Deferred Sales Charge
During the first Contract Year, the Contract Owner may withdraw without a
Contingent Deferred Sales Charge (CDSC) any amount in order for this Contract to
meet minimum distribution requirements under the Code or up to 10% of each
purchase payment under Individual Retirement Annuity Contracts issued on or
after March 1, 1993. Starting with the second year after a Purchase Payment has
been made, the Contract Owner may withdraw, without a CDSC, the greater of: (a)
an amount equal to 10% of that Purchase Payment or (b) any amount withdrawn from
this Contract to meet minimum distribution requirements under the Code. This
CDSC-free withdrawal privilege is non-cumulative; that is, free amounts not
taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
In addition, no CDSC will be deducted: (1) upon the Annuitization of
Contracts which have been in force for at least two years, (2) upon payment of a
death benefit pursuant to the death of the Annuitant, or (3) from any values
which have been held under a Contract for at least 84 months. No CDSC applies
upon the transfer of values among the Sub-Accounts or between the Fixed Account
and the Variable Account. When a Contract described in this prospectus is
exchanged for another Contract issued by the Company or any of its affiliated
insurance companies, of the type and class which the Company determined is
eligible for such exchange, the Company may waive the CDSC on the first
Contract. A CDSC may apply to the contract received in the exchange.
When a Contract is held by a Charitable Remainder Trust, the amount which
may be withdrawn from this Contract without application of a CDSC, shall be the
larger of (a) or (b), where (a) is the amount which would otherwise be available
for withdrawal without application of a CDSC; and where (b) is the difference
between the total Purchase Payments made to the Contract as of the date of the
withdrawal (reduced by previous withdrawals of such Purchase Payments), and the
Contract Value at the close of the day prior to the date of the withdrawal.
For Tax Sheltered Annuity Contracts issued on or after December 17, 1990,
Qualified Contracts sold in conjunction with 401 cases sold on or after January
14, 1991, and SEP IRA Contracts sold on or after January 14, 1991, the Company
will waive the Contingent Deferred Sales Charge when:
A. the Plan Participant experiences a case of hardship (as provided in
Code Section 403(b) and as defined for purposes of Code Section
401(k));
B. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Plan Participant attains age 59 1/2 and has participated in the
Contract for at least 5 years, as determined from the Contract
Anniversary date immediately preceding the Distribution;
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<PAGE> 32
D. the Plan Participant has participated in the Contract for at least 15
years as determined from the Contract Anniversary date immediately
preceding the Distribution;
E. the Plan Participant dies; or
F. the Contract is annuitized after 2 years from the inception of the
Contract.
The Contract Owner may be subject to income tax on all or a portion of any
such withdrawals and to a tax penalty if the Contract Owner takes withdrawals
prior to age 59 1/2 (See "FEDERAL TAX CONSIDERATIONS- Non-Qualified
Contracts-Natural Persons as Owners").
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by state law.
Premium Taxes
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. 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.
OPERATION OF THE CONTRACT
Investments of the Variable Account
The 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. 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.
Allocation Of Purchase Payments and Contract Value
Purchase Payments are allocated to the Fixed Account or to one or more
Sub-Accounts within the Variable Account in accordance with the designation of
the underlying Mutual Funds by the Contract Owner and converted into
Accumulation Units.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. Subsequent Purchase Payments, if any, after the first
Contract Year must be at least $10 each. However, if periodic payments are
expected by the Company, this initial first year minimum may be satisfied by
Purchase Payments made on an annualized basis. The Company reserves the right to
lower the subsequent Purchase Payment $10 minimum for certain employer sponsored
programs. The cumulative total of all Purchase Payments under Contracts issued
on the life of any one Designated Annuitant may not exceed $1,000,000 without
prior consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial Purchase Payment allocated to designated Sub-Accounts of the
Variable Account will be priced no later than 2 business days after receipt of
an order to purchase if all information necessary for processing the purchase
order is complete. The Company may, however, retain the Purchase Payment for up
to 5 business days while attempting to complete an order to purchase. If it is
not 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 order to purchase is complete. Thereafter,
subsequent Purchase Payments will be priced on the basis of the Accumulation
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.
30
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<PAGE> 33
Value of an Accumulation Unit
The value of an Accumulation Unit for each Sub-Account was arbitrarily set
initially at $10 when underlying Mutual Fund shares in that Sub-Account were
available for purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each Sub-Account for
the immediately preceding Valuation Period by the Net Investment Factor for the
Sub-Account during the subsequent Valuation Period. The value of an Accumulation
Unit may increase or decrease from Valuation Period to Valuation Period. The
number of Accumulation Units will not change as a result of investment
experience.
Net Investment Factor
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain Distributions
made by the underlying Mutual Fund held in the Sub-Account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period (see "Charge For Tax
Provisions").
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account.
Such factor is equal to an annual rate of 1.30% of the daily net asset
value of the Variable Account.
For underlying Mutual Fund options that credit dividends on a daily basis
and pay such dividends once a month (the Nationwide Separate Account Trust -
Money Market Fund), the Net Investment Factor allows for the monthly
reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge, Administration Charge,
and any charge or credit for tax reserves.
Valuation of Assets
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
Determining the Contract Value
The sum of the value of all Accumulation Units attributable to the
Contract and amounts credited to the Fixed Account is the Contract Value. The
number of Accumulation Units credited per each Sub-Account are determined by
dividing the net amount allocated to the Sub-Account by the Accumulation Unit
Value for the Sub-Account for the Valuation Period during which the Purchase
Payment is received by the Company. In the event part or all of the Contract
Value is surrendered or charges or deductions are made against the Contract
Value, an appropriate number of Accumulation Units from the Variable Account and
an appropriate amount from the Fixed Account will be deducted in the same
proportion that the Contract Owner's interest in each of the Variable Account
and the Fixed Account bears to the total Contract Value.
Right to Revoke
Unless otherwise required by state and/or federal law, the Contract Owner
may revoke the Contract 10 days after receipt of the Contract and receive a
refund of the Contract Value. All Individual Retirement Annuity refunds will be
return of Purchase Payments. In order to revoke the Contract, it must be mailed
or delivered to the Home Office of the Company at the mailing address shown on
page 1 of this prospectus. Mailing or delivery must occur on or before 10 days
after receipt of the Contract for revocation to be effective. In order to
31
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<PAGE> 34
revoke the Contract, if it has not been received, written notice must be mailed
or delivered to the Home Office of the Company at the mailing address shown on
page 1 of this prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
Transfers
Transfers between the Fixed and Variable Account must be made prior to the
Annuitization Date. The Contract Owner may request a transfer of up to 100% of
the Variable Account value 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 25% of the 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 current Interest Rate Guarantee
Period. In addition, transfers from the Fixed Account may not be made prior to
the end of the then current Interest Rate Guarantee Period. 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. 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 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 will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. Transfers
from the Fixed Account must be made within 45 days after the expiration date of
the guarantee period. Contract Owners who have entered into a Dollar Cost
Averaging agreement with the Company (see "Dollar Cost Averaging") may transfer
from the Fixed Account to the Variable Account under the terms of that
agreement.
Transfers 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 Contract Owner's election. The Company
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include the following: requesting
identifying information, such as name, contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; or providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record; or such other
procedures as the Company may deem reasonable. Although the Company's 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 believed to be
genuine shall be borne by the Contract Owner.
Contracts described in this prospectus may in some cases be sold to
individuals who independently utilize the services of a firm or individual
engaged in market timing. Generally, such firms or individuals obtain
authorization from multiple Contract Owners to make transfers and exchanges
among the Sub-Accounts (the underlying Mutual Funds) on the basis of perceived
market trends. Because of the unusually large transfers of funds associated with
some of these transactions, the ability of the Company or underlying Mutual
Funds to process such transactions may be compromised, and the execution of such
transactions may possibly disadvantage or work to the detriment of other
Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts
may be subject to modification if such rights are exercised by a market timing
firm or any other third party authorized to initiate transfer or exchange
transactions on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL
CONTRACT OWNERS TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED
DIRECTLY BY THE CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF
RECORD AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF
ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the
Company may, among other things, not accept (1) the transfer or exchange
instructions of any agent acting under a power of attorney on behalf of more
than one Contract Owner, or (2) the transfer or exchange instructions of
individual Contract Owners who have executed preauthorized transfer or exchange
forms which are submitted by market timing firms or other third parties on
behalf of more than one Contract Owner at the same time. The Company
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will not impose any such restrictions or otherwise modify exchange rights unless
such action is reasonably intended to prevent the use of such rights in a manner
that will disadvantage or potentially impair the contract rights of other
Contract Owners.
Contract 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. Prior to the Annuitization
Date, the Contract Owner may name a new Contract Owner in Non-Qualified
Contracts. Such change may be subject to state and federal gift taxes and may
also result in federal income taxation. Any change of Contract Owner designation
will automatically revoke any prior Contract Owner designation. Once proper
notice of the change is received and recorded by the Company, the change will
become effective as of the date the written request is signed. A change of Owner
will not apply and will not be effective with respect to any payment made or
action taken by the Company prior to the time that the change was received and
recorded by the Company.
Prior to the Annuitization Date, the Contract Owner may request a change
in the Annuitant, the Contingent Annuitant, Contingent Owner, Beneficiary, or
Contingent Beneficiary. Such a request must be made in writing on a form
acceptable to the Company and must be signed by both the Contract Owner and the
person to be named as Designated Annuitant, Contingent Designated Annuitant, or
Contingent Owner, as applicable. Such request must be received by the Company at
its Home Office prior to the Annuitization Date. Any such change is subject to
underwriting and approval by the Company. If the Contract Owner is not a natural
person and there is a change of the Annuitant, such change shall be treated as
the death of a Contract Owner and Distributions shall be made as if the Contract
Owner died at the time of such change.
On the Annuitization Date, the Annuitant shall become the Contract Owner.
Joint Ownership Provisions
Where permitted by state law, joint owners must be spouses at the time
joint ownership is requested. If a Joint Owner is named, the Joint Owner will
possess an undivided interest in the Contract. Unless otherwise provided, the
exercise of any ownership right in the Contract (including the right to
surrender or partially surrender the Contract, to change the Contract Owner, the
Contingent Owner, the Designated Annuitant, the Contingent Designated Annuitant,
the Beneficiary, the Contingent Beneficiary, the Annuity Payment Option or the
Annuitization Date) shall require a written request signed by both Joint Owners.
The Company will not be liable for any loss, liability, cost, or expense for
acting in accordance with the instructions of either the Owner or Joint Owner.
Contingent Ownership Provisions
The Contingent Owner is the person who may receive certain benefits under the
Contract if the Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If more than one
Contingent Owner survives the Contract Owner, each will share equally unless
otherwise specified in the Contingent Owner designation. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights and
interest of the Contingent Owner will vest in the Designated Annuitant. If a
Contract Owner, who is also the Designated Annuitant, dies before the
Annuitization Date and there is no surviving Joint Owner, then the Contingent
Owner does not have any rights in the Contract; however, if the Contingent Owner
is also the Beneficiary, the Contingent Owner will have all the rights of a
beneficiary.
Subject to the terms of any existing assignment, the Contract Owner may
change the Contingent Owner prior to the Annuitization Date by written notice to
the Company. The change will take effect upon receipt and recording by the
Company at its Home Office, 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.
Beneficiary Provisions
The Beneficiary is the person or persons who may receive certain benefits
under the Contract in the event the Annuitant dies prior to the Annuitization
Date. If more than one Beneficiary survives the Annuitant, each will share
equally unless otherwise specified in the Beneficiary designation. If no
Beneficiary survives the Annuitant, all rights and interest of the Beneficiary
shall vest in the Contingent Beneficiary, and if more than one Contingent
Beneficiary survives, each will share equally unless otherwise specified in the
Contingent Beneficiary designation. If no Contingent Beneficiaries survive the
Annuitant, all rights and interest of the Contingent Beneficiary will vest with
the Contract Owner or the estate of the last surviving Contract Owner.
Subject to the terms of any existing assignment, the Contract Owner may
change the Beneficiary or Contingent Beneficiary during the lifetime of the
Annuitant, by written notice to the Company. The change will
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take effect upon receipt and recording by the Company at its Home Office,
whether or not the Annuitant is living at the time of recording, but without
further liability as to any payment or settlement made by the Company before
receipt of such change.
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. In some cases (for
example, requests by a corporation, partnership, agent, fiduciary, or surviving
spouse), the Company will require additional documentation of a customary
nature. The Company may require that the signature(s) be guaranteed by a member
firm of a major stock exchange or other depository institution qualified to give
such a guaranty.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all Sub-Accounts
in which the Contract Owner has an interest and the Fixed Account. The number of
Accumulation Units surrendered from each Sub-Account and the amount surrendered
from the Fixed Account will be in the same proportion that the Contract Owner's
interest in the Sub-Accounts and Fixed Account bears to the total Contract
Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
Purchase Payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
Certain redemption restrictions also apply to Contracts issued under the
Texas Optional Retirement Program or the Louisiana Optional Retirement Plan.
With respect to Contracts issued under the Texas Optional Retirement Program,
the Texas Attorney General has ruled that withdrawal benefits are available only
in the event of a participant's death, retirement, termination of employment due
to total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a Distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable Contingent Deferred Sales Charge. The
Company issues this Contract to participants in the Texas Optional Retirement
Program in reliance upon, and in compliance with, Rule 6c-7 of the Investment
Company Act of 1940 and to participants in the Louisiana Optional Retirement
Plan in reliance upon, and in compliance with, an exemptive order the Company
obtained from the Securities and Exchange Commission on August 22, 1990.
Surrenders Under a Qualified Contract or Tax Sheltered Annuity Contract
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code, may be executed only:
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1. when the Contract Owner attains age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Code Section
72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case
of hardship may not include any income attributable to salary
reduction contributions.
B. The surrender limitations described in Section A. above also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to salary
reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts, may be withdrawn in the case of
hardship).
C. Any Distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event of
a ten-day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling 90-24. Such
restrictions are subject to legislative change and/or reinterpretation from time
to time. Distributions pursuant to Qualified Domestic Relations Orders will not
be considered to be a violation of the restrictions stated in this provision.
The Contract surrender provisions may also be modified pursuant to the
plan terms and Code tax provisions when the Contract is issued to fund a
Qualified Plan.
Loan Privilege
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity Contract may receive a loan from the Contract Value subject to
the terms of the Contract, the Plan, and the Code, which may impose restrictions
on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period. Additional loans are subject to the
Contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated in this provision.
For salary reduction Tax Sheltered Annuities, loans may only be secured by
the Contract Value. For loans from Qualified Contracts and other Tax Sheltered
Annuities, the Company reserves the right to limit a loan to 50% of the Contract
Value subject to the acceptance by the Contract Owner of the Company's loan
agreement. Where permitted, the Company may require other named collateral where
the loan from a Contract exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal to the
principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in each
option until the required balance is reached or all such variable units are
exhausted. The remaining required collateral will next be transferred from the
Fixed Account. No withdrawal charges are deducted at the time of the loan, or on
the transfer from the Variable Account to the collateral fixed account.
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Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the collateral
fixed account will never be less than 3.0%. Specific loan terms are disclosed at
the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently
than quarterly, within five years. Loans used to purchase the principal
residence of the Contract Owner must be repaid within 15 years. During the loan
term, the outstanding balance of the loan will continue to earn interest at an
annual rate as specified in the loan agreement. Loan repayments will consist of
principal and interest in amounts set forth in the loan agreement. Loan
repayments will be allocated between the Fixed and Variable Accounts in the same
manner as a Purchase Payment. Both loan repayments and Purchase Payments will be
allocated to the Contract in accordance with the most current allocation, unless
the Contract Owner and the Company agree otherwise on a case by case basis.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If a Contract Owner who is not the Annuitant
dies prior to Annuitization and while the loan is outstanding, the Distribution
will be reduced by the amount of the loan outstanding plus accrued interest. If
annuity payments start while the loan is outstanding, the Contract Value will be
reduced by the amount of the outstanding loan plus accrued interest. Until the
loan is repaid, the Company reserves the right to restrict any transfer of the
Contract which would otherwise qualify as a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue.
A grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, the
entire loan will be treated as a deemed Distribution, may be taxable to the
borrower, and may be subject to the early withdrawal tax penalty. Interest which
subsequently accrues on defaulted amounts may also be treated as additional
deemed Distributions each year. Any defaulted amounts, plus accrued interest,
will be deducted from the Contract when the Participant becomes eligible for a
Distribution of at least that amount, and this amount may again be treated as a
Distribution where required by law. Additional loans may not be available while
a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under
the terms of the employer's plan. Loans permitted under this Contract may still
be taxable in whole or part if the Participant has additional loans from other
plans or contracts. The Company will calculate the maximum nontaxable loan based
on the information provided by the Participant or the employer.
Loan repayments must be identified as such or else they will be treated as
Purchase Payments, and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify the loan's term or
procedures if there is a change in applicable law. The Company also reserves the
right to assess a loan processing fee.
Individual Retirement Annuities, SEP IRAs and Non-Qualified Contracts are
not eligible for loans.
Assignment
Where permitted, the Contract Owner may assign some or all rights under
the Contract at any time during the lifetime of the Annuitant prior to the
Annuitization Date. Such assignment will take effect upon receipt and recording
by the Company at its Home Office of a written notice executed by the Contract
Owner. The Company is not responsible 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 assignee as to the proper allocation of
Contract rights under the assignment.
If this Contract is a Non-Qualified Contract, any portion of the Contract
Value attributable to Purchase Payments made after August 13, 1982, which is
pledged or assigned after August 13, 1982, shall be treated as a Distribution
and shall be included in gross income to the extent that the cash value exceeds
the investment in the Contract for the taxable year in which it was pledged or
assigned. In addition, any Contract Values assigned may, under certain
conditions, be subject to a tax penalty equal to 10% of the amount which is
included in gross income. All rights in this Contract are personal to the
Contract Owner and may not be assigned without written consent of the Company.
Assignment of the entire Contract Value may cause the portion of the Contract
Value exceeding the total investment in the Contract and previously taxed
amounts to
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be included in gross income for federal income tax purposes each year that the
assignment is in effect. Individual Retirement Annuities, SEP IRAs, Tax
Sheltered Annuities, and Qualified Contracts, may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed by law.
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 or based on another frequency
authorized by the Company. If the last day of the three month period falls on a
Saturday, Sunday, recognized holiday or any other day when the New York Stock
Exchange is closed, the Asset Rebalancing exchange will occur on the first
business day after that day. An Asset Rebalancing request must be in writing on
a form provided by the Company. The Contract Owner may want to contact a
financial adviser in order to discuss the use of Asset Rebalancing in his or her
Contract.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Code may have superseding plan restrictions with regard to the
frequency of fund exchanges and underlying Mutual Fund options.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice; such discontinuation will not affect Asset
Rebalancing programs which have already commenced. The Company also reserves the
right to assess a processing fee for this service.
Dollar Cost Averaging- If the Contract Value is $15,000 or more, the
Contract Owner may direct the Company to automatically transfer a specified
amount from the Money Market Fund Sub-Account, Limited Maturity Bond Portfolio
Sub-Account or the Fixed Account to any other Sub-Account within the Variable
Account on a monthly basis or as frequently as otherwise authorized by the
Company. 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.
The minimum monthly Dollar Cost Averaging transfer is $100. In addition, Dollar
Cost Averaging monthly transfers from the Fixed Account must be equal to or less
than 1/30th of the Fixed Account value when the Dollar Cost Averaging program is
requested. Transfers out of the Fixed Account, other than for Dollar Cost
Averaging, may be subject to certain additional restrictions (see "Transfers").
A written election of this service, on a form provided by the Company, must be
completed by the Contract Owner in order to begin transfers. Once elected,
transfers from the Money Market Fund Sub-Account, Limited Maturity Bond
Portfolio Sub-Account or the Fixed Account will be processed monthly or on
another approved frequency until either the value in the Money Market Fund
Sub-Account, Limited Maturity Bond Portfolio Sub-Account or the Fixed Account is
completely depleted or the Contract Owner instructs the Company in writing to
cancel the transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice; such discontinuation will not affect
Dollar Cost Averaging programs which have already commenced. The Company also
reserves the right to assess a processing fee for this service.
Systematic Withdrawals- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals 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 Sub-Accounts in which the Contract
Owner has an interest, and the Fixed Account. A Contingent Deferred Sales Charge
may also apply to Systematic Withdrawals in accordance with the considerations
set forth in the "Contingent Deferred Sales Charge" section. Each Systematic
Withdrawal is subject to federal income taxes on the taxable portion. Unless
directed by the Contract Owner, the Company will withhold federal income taxes
from each Systematic Withdrawal. In addition, the Internal Revenue Service may
assess a 10% federal penalty tax may be assessed on Systematic Withdrawals if
the Contract Owner is under age 59 1/2. Unless the Contract Owner has made an
irrevocable election of distributions of substantially equal payments, the
Systematic Withdrawals may be discontinued at any time by notifying the Company
in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice; such discontinuation will not affect
any Systematic Withdrawal programs already commenced. The Company also reserves
the right to assess a processing fee for this service. Systematic withdrawals
are not available prior to the expiration of the ten day free look provision of
the Contract or of applicable state/federal law.
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ANNUITY PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS
Annuity Commencement Date
An Annuity Commencement Date will be selected. Such date must be the first
day of a calendar month or any other agreed upon date and must be at least 2
years after the Date of Issue. In the event the Contract is issued subject to
the terms of a Qualified Plan or Tax Sheltered Annuity Plan, Annuitization may
occur during the first 2 years subject to approval by the Company.
Change in Annuity Commencement Date
If the Contract Owner requests in writing and the Company approves the
request, the Annuity Commencement Date may be changed. The new date must comply
with the Annuity Commencement Date provisions above.
Annuity Payment Period-Variable Account
At the Annuitization Date, the Variable Account Contract Value is applied
to the Annuity Payment Option elected and the amount of the first such payment
shall be determined in accordance with the Annuity Table in the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with the
investment performance of the Variable Account. The dollar amount of the first
annuity payment determined as above is divided by the value of an Annuity Unit
as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
Value of an Annuity Unit
The value of an Annuity Unit was arbitrarily set initially at $10 when the
first underlying Mutual Fund shares were purchased. The value of an Annuity Unit
for a Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (see "Net Investment
Factor").
Assumed Investment Rate
A 3.5% assumed investment rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
Frequency and Amount of Annuity Payments
Annuity payments will be paid as monthly installments. However, if the net
amount available to apply under any Annuity Payment Option is less than $500,
the Company shall have the right to pay such amount in one lump sum in lieu of
the payments otherwise provided for. In addition, if the payments provided for
would be or become less than $20, the Company shall have the right to change the
frequency of payments to such intervals as will result in payments of at least
$20. In no event will the Company make payments under an annuity option less
frequently than annually.
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 periodically, but at least
annually, during the lifetime of the Annuitant, ceasing with the last
payment due prior to the death of the Annuitant. IT WOULD BE
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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 periodically,
but at least annually, during the joint lifetimes of the Annuitant and
designated second person and continuing thereafter during the lifetime of
the survivor. AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM
NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE
DEATH OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS
RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments will
be continued during the remainder of the selected period to such
recipient as chosen by the Annuitant at the time the Annuity Payment
Option was selected. In the alternative, the recipient may, at any
time, elect to have the present value of the guaranteed number of
annuity payments remaining paid in a lump sum as specified in section
(2) below.
(2) If someone other than the Annuitant is the payee, the present value,
computed as of the date on which notice of death is received by the
Company at its Home Office, of the guaranteed number of annuity
payments remaining after receipt of such notice and to which the
deceased would have been entitled had he or she not died, computed at
the Assumed Investment Rate effective in determining the Annuity
Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states. The
Contract Owner may request an alternative non-guaranteed option by giving notice
in writing prior to Annuitization. If such a request is approved by the Company,
it will be permitted under the Contract.
If the Contract Owner of a Non-Qualified Contract fails to elect an
Annuity Payment Option, no distribution will be made until an effective Annuity
Payment Option has been elected. Qualified Plan Contracts, Individual Retirement
Annuities, SEP IRAs, or Tax Sheltered Annuities are subject to the minimum
Distribution requirements set forth in the Plan, Contract, or Code.
Death of Contract Owner Provisions - Non-Qualified Contracts
For Non-Qualified Contracts, if the Contract Owner and the Annuitant are
not the same person and such Contract Owner dies prior to the Annuitization
Date, then the Joint Owner, if any, becomes the new Contract Owner. If there is
no surviving Joint Owner, the Contingent Owner becomes the new Contract Owner.
If there is no surviving Contingent Owner, the Designated Annuitant becomes the
Contract Owner. The entire interest in the Contract Value, less any applicable
deductions (which may include a Contingent Deferred Sales Charge), must be
distributed in accordance with the "Required Distribution Provisions-
Non-Qualified Contracts" provisions.
Death of the Annuitant Provisions - Non-Qualified Contracts
If the Contract Owner and Designated Annuitant are not the same person,
and the Designated Annuitant dies prior to the Annuitization Date, a Death
Benefit will be payable to the Beneficiary, the Contingent Beneficiary, the
Contract Owner, or the last surviving Contract Owner's estate, as specified in
the "Beneficiary Provisions", unless there is a surviving Contingent Designated
Annuitant. In such case, the Contingent Designated Annuitant becomes the
Designated Annuitant and no Death Benefit is payable.
The Beneficiary may elect to receive such Death Benefits in the form of:
(1) a lump sum distribution; (2) election of an annuity payout; or (3) any
distribution that is permitted under state and federal regulations and is
acceptable by the Company. Such election must be received by the Company within
60 days of the Annuitant's death.
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be paid according to the selected Annuity Payment Option.
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Death of the Contract Owner/Annuitant Provisions
If any Contract Owner and Designated Annuitant are the same person, and
such person dies before the Annuitization Date, a Death Benefit will be payable
to the Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the Beneficiary Provisions
and in accordance with the appropriate "Required Distributions Provisions."
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be paid according to the selected Annuity Payment Option.
Death Benefit Payment Provisions
The value of the Death Benefit will be determined as of the Valuation Date
coincident with or next following the date the Company receives in writing at
the Home Office the following three items: (1) proper proof of the Designated
Annuitant's death; (2) an election specifying the distribution method; and (3)
any applicable state required form(s).
If the Designated Annuitant dies prior to his 75th birthday the dollar
amount of the death benefit will be the greater of: (1) the Contract Value; or,
(2) the sum of all purchase payments, less any amounts surrendered.
If the Contract Owner has (1) requested an Annuity Commencement Date later
than the first day of the calendar month after the Annuitant's 75th birthday;
(2) the Company has approved the request; and (3) the Designated Annuitant dies
after his or her 75th birthday, the dollar amount of the death benefit will be
equal to the Contract Value.
If the Annuitant dies after the Annuitization Date, any payment that may
be payable will be determined according to the selected Annuity Payment Option.
Required Distribution Provisions For Non-Qualified Contracts
Upon the death of any Contract Owner or Joint Owner (including an
Annuitant who becomes the Owner of the Contract on the Annuitization Date) (each
of the foregoing "a deceased Owner"), certain distributions for Non-Qualified
Contracts issued on or after January 19, 1985, are required by Section 72(s) of
the Code. Notwithstanding any provision of the Contract to the contrary, the
following distributions shall be made in accordance with such requirements:
1. If any deceased Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been distributed,
then the remaining portion of such interest shall be distributed at
least as rapidly as under the method of distribution in effect as of
the date of such deceased Owner's death.
2. If any deceased Owner dies prior to the Annuitization Date, then the
entire interest in the Contract (consisting of either the Death
Benefit or the Contract Value reduced by certain charges as set forth
elsewhere in the Contract) shall be distributed within 5 years of the
death of the deceased Owner, provided however:
(a) If any portion of such interest is payable to or for the benefit
of a natural person who is a surviving Contract Owner, Contingent
Owner, Joint Owner, Annuitant, Contingent Designated Annuitant,
Beneficiary, or Contingent Beneficiary as the case may be (each a
"designated beneficiary"), such portion may, at the election of
the designated beneficiary, be distributed over the life of such
designated beneficiary, or over a period not extending beyond the
life expectancy of such designated beneficiary, provided that
payments begin within one year of the date of the deceased Owner's
death (or such longer period as may be permitted by federal income
tax regulations), and
(b) If the designated beneficiary is the surviving spouse of the
deceased Owner, such spouse may elect to become the Owner of this
Contract, in lieu of a Death Benefit, and the distributions
required under these distribution rules will be made upon the
death of such spouse.
In the event that this Contract is owned by a person that is not a natural
person (e.g., a trust or corporation), then, for purposes of these distribution
provisions, (i) the death of the Annuitant shall be treated as the death of any
Owner, (ii) any change of the Annuitant shall be treated as the death of any
Owner, and (iii) in either case the appropriate distribution required under
these distribution rules shall be made upon such death or change, as the case
may be. The Annuitant is the primary annuitant as defined in Section 72(s)(6)(B)
of the Code.
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These distribution provisions shall not be applicable to any Contract that
is not required to be subject to the provisions of 72(s) of the Code by reason
of Section 72(s)(5) or any other law or rule (including Tax Sheltered Annuities,
Individual Retirement Annuities, Qualified Plans and SEP IRAs).
Upon the death of a "deceased Owner", the designated beneficiary must
elect a method of distribution which complies with these above distribution
provisions and which is acceptable to the Company. Such election must be
received by the Company within 60 days of the deceased Owner's death.
Required Distributions for Qualified Plans or Tax Sheltered Annuities
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Code and applicable regulations and will be paid,
notwithstanding anything else contained herein, to the Annuitant under the
Annuity Payments Option selected, over a period not exceeding:
A. the life of the Annuitant or the lives of the Annuitant and the
Annuitant's designated beneficiary under the selected Annuity Payment
Option; or
B. a period not extending beyond the life expectancy of the Annuitant or
the life expectancy of the Annuitant and the Annuitant's designated
beneficiary under the selected annuity Payment Option.
No Distributions will be required from this Contract if Distributions
otherwise required from this Contract are being withdrawn from another Tax
Sheltered Annuity Contract of the Annuitant.
If the Annuitant's entire interest in a Qualified Plan or Tax Sheltered
Annuity is to be distributed in equal or substantially equal payments over a
period described in (A) or (B), above, such payments will commence no later than
(i) the first day of April following the calendar year in which the Annuitant
attains age 70 1/2 or (ii) when the Annuitant retires, whichever is later (the
"required beginning date"). However, provision (ii) does not apply to any
employee who is a 5% Owner (as defined in Section 416 of the Code) with respect
to the plan year ending in the calendar year in which the employee attains the
age of 70 1/2.
If the Annuitant dies prior to the commencement of his or her
Distribution, the interest in the Qualified Contract or Tax Sheltered Annuity
must be distributed by December 31 of the calendar year in which the fifth
anniversary of his or her death occurs unless:
(a) the Annuitant names his or her surviving spouse as the Beneficiary
and such spouse elects to receive Distribution of the account in
substantially equal payments over his or her life (or a period not
exceeding his or her life expectancy) and commencing not later than
December 31 of the year in which the Annuitant would have attained
age 70 1/2; or
(b) the Annuitant names a Beneficiary other than his or her surviving
spouse and such Beneficiary elects to receive a Distribution of the
account in substantially equal payments over his or her life (or a
period not exceeding his or her life expectancy) commencing not later
than December 31 of the year following the year in which the
Annuitant dies.
If the Annuitant dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the required beginning date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Annuitant by the life expectancy of the Annuitant, or the joint and last
survivor expectancy of the Annuitant and the Annuitant's designated beneficiary
(if the Annuitant dies prior to the required beginning date) or the beneficiary
under the selected Annuity Payment Option (if the Annuitant dies after the
required beginning date) whichever is applicable under the applicable minimum
distribution or MDIB provisions. Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
If the amounts distributed to the Annuitant are less than those mentioned
above, penalty tax of 50% is levied on the excess of the amount that should have
been distributed for that year over the amount that actually was distributed for
that year.
Required Distributions for Individual Retirement Annuities and SEP IRAs
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70 1/2. Distribution may be accepted in a lump sum or in
substantially equal payments over: (a) the Owner's life or the lives of the
Owner and his or her spouse or
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designated beneficiary, or (b) a period not extending beyond the life expectancy
of the Owner or the joint life expectancy of the Owner and the Owner's
designated beneficiary.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and
such spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity
established for his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments
over his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the
year in which the Owner would have attained age 70 1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse
and such Beneficiary elects to receive a Distribution of the account
in nearly equal payments over his or her life (or a period not
exceeding his or her life expectancy) commencing not later than
December 31 of the year following the year in which the Owner dies.
No Distribution will be required from this Contract if Distributions
otherwise required from this Contract are being withdrawn from another
Individual Retirement Annuity or Individual Annuity Account of the Contract
Owner.
If the Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse who is the beneficiary under the
Annuity Payment Option, may 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 excess of the amount that
should have been distributed for that year over the amount that actually was
distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income tax
rates. The portion of the Distribution which is taxable is based on the ratio
between the amount by which non-deductible Purchase Payments exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Owner of an Individual Retirement Annuity must annually report
the amount of non-deductible Purchase Payments, the amount of any Distribution,
the amount by which non-deductible Purchase Payments for all years exceed
non-taxable Distributions for all years, and the total balance of all Individual
Retirement Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum Distribution from a Qualified Plan. If the
Owner dies prior to the time Distribution of his or her interest in the annuity
is completed, the balance will also be included in his or her gross estate.
Simplified Employee Pensions (SEPs) and Salary Reduction Simplified
Employee Pensions (SAR SEPs), described in Section 408(k) of the Code, are taxed
in a manner similar to IRAs, and are subject to similar distribution
requirements as IRAs. SAR SEPs cannot be established after 1996.
Generation-Skipping Transfers
The Company may determine whether the Death Benefit or any other payment
constitutes a direct skip as defined in Section 2612 of the Code, and the amount
of the tax on the generation-skipping transfer resulting 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.
FEDERAL TAX CONSIDERATIONS
Federal Income 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 a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
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Section 72 of the Code governs federal income taxation of annuities in
general. That section sets forth different rules for: (1) Qualified Contracts;
(2) Individual Retirement Annuities, including SEP IRAs; (3) Tax Sheltered
Annuities; and (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned by
Individual Retirement Accounts are 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.
A change of the Annuitant or Contingent Annuitant may be treated by the
Internal Revenue Service as a taxable transaction.
Non-Qualified Contracts - Natural Persons as Owners
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 until the investment has been recovered; thereafter the
entire amount is includable in income. 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
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Section 1035 of the
Code, for purposes of determining whether the Contract is an immediate annuity,
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 tax, equal to 10% of the
portion of any Distribution that is includable in gross income, if such
Distribution is made prior to attaining age 59 1/2. The penalty tax does not
apply if the Distribution is attributable to the Contract Owner's death,
disability, or is one of a series of substantially equal periodic payments made
over the life or life expectancy of the Contract Owner (or the joint lives or
joint life expectancies of the Contract Owner and the beneficiary selected by
the Contract Owner to receive payment under the Annuity Payment Option selected
by the Contract Owner) 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
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including but not limited to first year withdrawals. Such election shall be
irrevocable and may not be amended or changed.
In order to qualify as an annuity contract under Section 72 of the Code,
the contract must provide for Distribution of the entire contract to be made
upon the death of a Contract Owner. If a Contract Owner dies prior to the
Annuitization Date, then the Joint Contract Owner, the Contingent Owner or other
named recipient must receive the Distribution within 5 years of the Contract
Owner's death. However, the recipient may elect for payments to be made over
his/her life or life expectancy provided that such payments begin within one
year from the death of the Contract Owner. If the Joint Contract Owner,
Contingent Owner or other named recipient is the surviving spouse, such spouse
may be treated as the Contract Owner and the Contract may be continued
throughout the life of the surviving spouse. In the event the Contract Owner
dies on or after the Annuitization Date and before the entire interest has been
distributed, the remaining portion must be distributed at least as rapidly as
under the method of Distribution being used as of the date of the Contract
Owner's death (see "Required Distribution For Qualified Plans and Tax Sheltered
Annuities"). If the Contract Owner is not an individual, the death of the
Annuitant (or a change in the Annuitant) will result in a Distribution pursuant
to these rules, regardless of whether a Contingent Annuitant is named.
The Code requires that any election to receive an annuity rather than a
lump sum payment must be made within 60 days after the lump sum becomes payable
(generally, the election must be made within 60 days after the death of an Owner
or the Annuitant). If the election is made more than 60 days after the lump sum
first becomes payable, the election would be ignored for tax purposes, and the
entire amount of the lump sum would be subject to immediate tax. If the election
is made within the 60 day period, each Distribution would be taxable when it is
paid.
Non-Qualified Contracts - Non-Natural Persons as Owners
The foregoing discussion of the taxation of Non-Qualified Contracts
applies to Contracts owned (or, pursuant to Section 72(u) of the Code, deemed to
be owned) by individuals; it does not apply to Contracts where one or more
non-individuals is an Owner.
As a general rule, contracts owned by corporations, partnerships, trusts,
and similar entities ("Non-Natural Persons"), rather than by one or more
individuals, are not treated as annuity contracts for most purposes under the
Code; in particular, they are not treated as annuity contracts for purposes of
Section 72. Therefore, the taxation rules for Distributions, as described above,
do not apply to Non-Qualified Contracts owned by Non-Natural Persons. Rather,
the following rules will apply:
The income earned under a Non-Qualified Contract that is owned by a
Non-Natural Person is taxed as ordinary income during the taxable year that it
is earned, and is not deferred, even if the income is not distributed out of the
Contract to the Owner.
The foregoing Non-Natural Person rule does not apply to all entity-owned
contracts. First, for this purpose, a Contract that is owned by a Non-Natural
Person as an agent for an individual is treated as owned by the individual. This
exception does not apply, however, to a Non-Natural Person who is an employer
that holds the Contract under a non-qualified deferred compensation arrangement
for one or more employees.
The Non-Natural Person rules also do not apply to a Contract that is (a)
acquired by the estate of a decedent by reason of the death of the decedent; (b)
issued in connection with certain qualified retirement plans and individual
retirement plans; (c) used in connection with certain structured settlements;
(d) purchased by an employer upon the termination of certain qualified
retirement plans; or (e) an immediate annuity.
Qualified Plans, Individual Retirement Annuities, SEP IRAs and Tax Sheltered
Annuities
The Contract may be purchased as a Qualified Contract, an Individual
Retirement Annuity, SEP IRA, or a Tax Sheltered Annuity. The Contract Owner
should seek competent advice as to the tax consequences associated with the use
of a Contract as an Individual Retirement Annuity.
For information regarding eligibility, limitations on permissible amounts
of Purchase Payments, and the tax consequences of distributions from Qualified
Plans, Tax Sheltered Annuities, Individual Retirement Annuities, SEP IRAs and
other plans that receive favorable tax treatment, the purchasers of such
contracts should seek competent advice. The terms of such plans may limit the
rights available under the Contracts.
Pursuant to Section 403(b)(1)(E) Code, a Contract that is issued as a
Tax-Sheltered Annuity is required to limit the amount of the Purchase Payment
for any year to an amount that does not exceed the limit set forth in Section
402(g) of the Code ($7,000), as it is from time to time increased to reflect
increases in the cost of
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living. This limit may be reduced by any deposits, contributions or payments
made to any other Tax-Sheltered Annuity or other plan, contract or arrangement
by or on behalf of the Owner.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans or Individual Retirement Annuities. Most Distributions
from Tax-Sheltered Annuities may be rolled into another Tax-Sheltered Annuity,
Individual Retirement Annuity, or an Individual Retirement Account.
Distributions that 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 Contract
Owner, (b) over the joint lives (or joint life expectancies) of the
Contract Owner and the Contract Owner's designated Beneficiary, or (c)
for a specified period of ten years or more, or
2. a required minimum distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described above.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of ERISA. It is the responsibility of the plan and its
fiduciaries to determine and satisfy the requirements of section 404(c).
Withholding
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner or
other payee. The Contract Owner or other payee 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. However, if the Internal Revenue Service notifies the Company
that the Contract Owner or other payee has furnished an incorrect taxpayer
identification number, or if the Contract Owner or other payee fails to provide
a taxpayer identification number, the Distributions may be subject to back-up
withholding at the statutory rate, which is presently 31%, and which cannot be
waived by the Contract Owner or other payee.
Non-Resident Aliens
Distributions to nonresident aliens (NRAs) are generally subject to
federal income tax and tax withholding, at a statutory rate of thirty percent
(30%) of the amount of income that is distributed. The Company may be required
to withhold such amount from the Distribution and remit it to the Internal
Revenue Service. Distributions to certain NRAs may be subject to lower, or in
certain instances, zero tax and withholding rates, if the United States has
entered into an applicable treaty. However, in order to obtain the benefits of
such treaty provisions, the NRA must give to the Company sufficient proof of his
or her residency and citizenship in the form and manner prescribed by the
Internal Revenue Service. In addition, for any Distribution made after December
31, 1997, the NRA must obtain an Individual Taxpayer Identification Number from
the Internal Revenue Service, and furnish that number to the Company prior to
the Distribution. If the Company does not have the proper proof of citizenship
or residency and (for Distributions after December 31, 1997) a proper Individual
Taxpayer Identification Number prior to any Distribution, the Company will be
required to withhold 30% of the income, regardless of any treaty provision.
A payment may not be subject to withholding where the recipient
sufficiently establishes to the Company that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includable in the recipient's gross income for United
States federal income tax purposes. Any such Distributions will be subject to
the rules set forth in the section entitled "Withholding."
Federal Estate, Gift, and Generation Skipping Transfer Taxes
A transfer of the Contract from one Contract Owner to another, or the
payment of a Distribution under the Contract to someone other than a Contract
Owner, may constitute a gift for federal gift tax purposes. Upon the death of
the Contract Owner, the value of the Contract may be included in his or her
gross estate, even if a all or a portion of the value is also subject to federal
income taxes.
The Company may be required to determine whether the Death Benefit or any
other payment or Distribution constitutes a "direct skip" as defined in Section
2612 of the Code, and the amount of the generation skipping transfer tax, if
any, resulting from such direct skip. A direct skip may occur when property is
transferred to, or a Death Benefit or other Distribution is made to (a) an
individual who is two or more generations younger than the Owner; or (b) certain
trusts, as described in Section 2613 of the Code (generally, trusts that have no
beneficiaries who are not 2 or more generations younger than the Owner). If the
Owner is
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not an individual, then for this purpose only, "Owner" refers to any person who
would be required to include the Contract, Death Benefit, Distribution, or other
payment in his federal gross estate at his death, or who is required to report
the transfer of the Contract, Death Benefit, Distribution, or other payment for
federal gift tax purposes.
If the Company determines that a generation skipping transfer tax is
required to be paid by reason of such direct skip, the Company is required to
reduce the amount of such Death Benefit, Distribution, or other payment by such
tax liability, and pay the tax liability directly to the Internal Revenue
Service.
Federal estate, gift and generation skipping transfer tax consequences,
and state and local estate, inheritance, succession, generation skipping
transfer, and other tax consequences, of owning or transferring a Contract, and
of receiving a Distribution, Death Benefit, or other payment, depend on the
circumstances of the person owning or transferring the Contract, or receiving a
Distribution, Death Benefit, or other payment.
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.
Diversification
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the Owner or the Company pays an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the Owner if the income, for the period the contract was
not diversified, had been received by the Owner. If the failure to diversify is
not corrected in this manner, the Owner of an annuity contract will be deemed
the Owner of the underlying securities and will be taxed on the earnings of his
or her account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in this area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of underlying
Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual Funds such
that the Contract would no longer qualify as an annuity under Section 72 of the
Code, the Company will take whatever steps are available to remain in
compliance.
Tax Changes
In the recent past, the Code has been subjected to numerous amendments and
changes, and it is reasonable to believe that it will continue to be revised.
The United States Congress has, in the past, considered numerous legislative
proposals that, if enacted, could change the tax treatment of the Contracts. It
is reasonable to believe that such proposals, and other proposals will be
considered in the future, and some of them may be enacted into law. In addition,
the Treasury Department may amend existing regulations, issue new regulations,
or adopt new interpretations of existing law that may be in variance with its
current positions on these matters. In addition, current state law (which is not
discussed herein), and future amendments to state law, may affect the tax
consequences of the Contract.
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the Internal Revenue
Service, is general and is not intended as tax advice.Statutes, regulations, and
rulings are subject to interpretation by the courts. The courts may determine
that a different interpretation than the currently favored interpretation is
appropriate, thereby changing the operation of the rules that are applicable to
annuity contracts.
Any of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a Contract may be changed retroactively.
There is no way of predicting whether, when, and to what extent any such change
may take place. No representation is made as to the likelihood of the
continuation of these current laws, interpretations, and policies.
46
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<PAGE> 49
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
ANNUITY CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
GENERAL INFORMATION
Contract Owner Inquiries
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 16609, Columbus, Ohio 43216-6609, or calling
1-800-848-6331, TDD 1-800-238-3035.
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. Contract Owners
should therefore give the Company prompt notice of any address change. The
Company will send a confirmation statement to Contract Owners each time a
transaction is made affecting the Owners' Variable Account Contract Value, such
as making additional Purchase Payments, transfers, exchanges or withdrawals.
Quarterly statements are also mailed detailing the Contract activity during the
calendar quarter. Instead of receiving an immediate confirmation of transactions
made pursuant to some types of periodic payment plan (such as a dollar cost
averaging program) or salary reduction arrangement, the Contract Owner may
receive confirmation of such transactions in their quarterly statements. The
Contract Owner should review the information in these statements carefully. All
errors or corrections must be reported to the Company immediately to assure
proper crediting to the Owner's Contract. The Company will assume all
transactions are accurately reported on 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.
Advertising
A "yield" and "effective yield" may be advertised for the Nationwide
Separate Account Trust Money Market Fund Sub-Account. "Yield" is a measure of
the net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage of
the offering price of the Sub-Account's units. Yield is an annualized figure,
which means that it is assumed that the Sub-Account generates the same level of
net income over a 52-week period. The "effective yield" is calculated similarly
but includes the effect of assumed compounding, calculated under rules
prescribed by the Securities and Exchange Commission. The effective yield will
be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of a
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual fund options 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 1/2 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 Fund
options 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 charges or other fees.
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<PAGE> 50
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the Variable Account. The Company may
advertise for the Sub-Accounts standardized "average annual total return,"
calculated in a manner prescribed by the Securities and Exchange Commission, and
nonstandardized "total return." "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund option held in the Sub-Account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation reflects the deduction of all
applicable charges made to the Contracts except for premium taxes, which may be
imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner and
for the same time periods as the average annual total return except total return
will assume an initial investment of $10,000 and will not reflect the deduction
of any applicable Contingent Deferred Sales Charge, which, if reflected, would
decrease the level of performance shown. The Contingent Deferred Sales Charge is
not reflected because the Contracts are designed for long term investment. An
assumed initial investment of $10,000 will be used because that figure more
closely approximates the size of a typical Contract than does the $1,000 figure
used in calculating the standardized average annual total return quotations. The
amount of the hypothetical initial investment assumed affects performance
because the Contract Maintenance Charge is a fixed per Contract charge.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
All performance information and comparative material advertised by the Company
is historical in nature and is not intended to represent or guarantee future
results. A Contract Owner's Contract Value at redemption may be more or less
than original cost.
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<PAGE> 51
Below are quotations of standardized average annual total return and
non-standardized total return calculated as described above, for each of the
Sub-Accounts available within the Variable Account for which there is
significant investment history. These figures are based upon historical earnings
and are not necessarily representative of future results.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
Non-Standardized Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 10.44% 5.02% 8.53% 5-01-91
Portfolios, Inc. - American
Century VP Balanced
- --------------------------------------------------------------------------------------
American Century Variable -5.87% 4.51% 9.14% 11-20-87
Portfolios, Inc. - American
Century VP Capital
Appreciation
- --------------------------------------------------------------------------------------
American Century Variable 12.61% N/A 5.98% 5-01-94
Portfolios, Inc. - American
Century VP International
- --------------------------------------------------------------------------------------
American Century Variable N/A N/A 17.11% 5-01-96
Portfolios, Inc. - American
Century VP Value
- --------------------------------------------------------------------------------------
AVIS Growth Fund 11.58% 12.63% 13.49%* 2-08-84
- --------------------------------------------------------------------------------------
AVIS High Yield Bond 11.43% 9.33% 10.04%* 2-08-84
Fund
- --------------------------------------------------------------------------------------
AVIS US Govt./AAA-rated 1.46% 4.71% 5.63%* 11-19-85
- --------------------------------------------------------------------------------------
Dreyfus Socially Responsible 19.35% N/A 17.55% 10-06-93
Growth Fund
- --------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 20.64% 12.88% 11.92% 9-29-89
- --------------------------------------------------------------------------------------
Dreyfus Variable Investment 17.78% N/A 25.18% 5-02-94
Fund - Growth & Income
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund- 12.49% 16.21% 12.04%* 10-09-86
Equity Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 12.91% 13.42% 13.46%* 10-09-86
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-High 12.24% 13.24% 9.45%* 9-09-85
Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund- Overseas 11.44% 7.43% 6.24% 1-28-87
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 12.81% 9.56% 9.99% 9-06-89
Manager.
- --------------------------------------------------------------------------------------
Fidelity VIP Fund 19.42% N/A 28.31% 7-01-95
II-Contrafund Portfolio
- --------------------------------------------------------------------------------------
NSAT- 24.19% N/A 12.50% 4-15-92
Capital Appreciation Fund
- --------------------------------------------------------------------------------------
NSAT-Government Bond Fund 1.83% 5.37% 6.77%* 11-08-82
- --------------------------------------------------------------------------------------
NSAT-Money Market Fund 3.44% 2.51% 4.12%* 11-10-81
- --------------------------------------------------------------------------------------
NSAT-Small Company Fund 20.92% N/A 30.78% 10-23-95
- --------------------------------------------------------------------------------------
NSAT-Total Return 19.95% 12.05% 10.92%* 11-08-82
- --------------------------------------------------------------------------------------
N&B Advisers Management 7.41% 8.13% 9.78%* 9-10-84
Trust-
Growth Portfolio
- --------------------------------------------------------------------------------------
N&B Advisers Management 2.64% 3.67% 5.05%* 9-10-84
Trust-
Limited Maturity Bond
- --------------------------------------------------------------------------------------
N&B Advisers Management 27.58% N/A 19.85% 3-22-94
Trust-
Partners Portfolio
- --------------------------------------------------------------------------------------
Oppenheimer Variable Account 3.13% 6.01% 7.17%* 4-30-85
Funds-Bond Fund
- --------------------------------------------------------------------------------------
Oppenheimer Variable Account 15.96% 10.72% 8.95% 11-12-90
Funds-Global Securities Fund
- --------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 52
Non-Standardized Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account 13.69% 9.96% 9.87% 2-09-87
Funds-Multiple Strategies
Fund
- --------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 16.31% N/A 17.14% 5-08-92
- --------------------------------------------------------------------------------------
Strong Variable Insurance -0.81% N/A 10.56% 5-08-92
Funds, Inc.-Discovery Fund
II, Inc.
- --------------------------------------------------------------------------------------
Strong Variable Insurance 8.64% N/A 8.99% 10-23-95
Funds, Inc.- International
Stock II
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 0.88% 2.25% 5.02% 9-01-89
Trust-Worldwide Bond Fund
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 16.22% 12.82% 6.53% 9-01-89
Trust-Worldwide Hard Assets
Fund
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 24.89% N/A 22.93% 12-27-95
Trust - Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------
Van Kampen American Capital 38.40% N/A 30.27% 7-01-95
Life Investment Trust-Real
Estate Securities Fund
- --------------------------------------------------------------------------------------
Warburg Pincus 8.25% N/A 9.79% 7-01-95
Trust-International Equity
Portfolio
- --------------------------------------------------------------------------------------
Warburg Pincus Trust - N/A N/A -10.04% 9-30-96
Post-Venture Capital
Portfolio
- --------------------------------------------------------------------------------------
Warburg Pincus Trust-Small 12.12% N/A 24.50% 7-01-95
Company Growth Portfolio
- --------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/96.
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<PAGE> 53
Standardized Average Annual Total Return
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 2.34% 1.80% 5.73% 5-01-91
Portfolios, Inc.-American
Century VP Balanced
- ------------------------------------------------------------------------------------
American Century Variable -13.46% 1.48% 6.80% 11-20-87
Portfolios, Inc.-American
Century VP Capital
Appreciation
- ------------------------------------------------------------------------------------
American Century Variable 4.51% N/A 1.16% 5-01-94
Portfolios, Inc.-American
Century VP International
- ------------------------------------------------------------------------------------
American Century Variable N/A N/A 7.41% 5-01-96
Portfolios, Inc. -
American Century VP Value
- ------------------------------------------------------------------------------------
AVIS-Growth Fund 3.48% 10.03% 11.67%* 2-08-84
- ------------------------------------------------------------------------------------
AVIS-High Yield Bond Fund 3.33% 6.63% 8.00%* 2-08-84
- ------------------------------------------------------------------------------------
AVIS-US Govt./AAA-rated -6.56% 1.80% 3.20%* 11-19-85
- ------------------------------------------------------------------------------------
Dreyfus Socially 11.25% N/A 13.50% 10-06-93
Responsible Growth Fund
- ------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 12.54% 10.13% 9.20% 9-19-89
- ------------------------------------------------------------------------------------
Dreyfus Variable 9.68% N/A 21.08% 5-02-94
Investment Fund - Growth
& Income Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity 4.39% 13.82% 9.90%* 10-09-86
Income Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 4.81% 10.84% 11.55%* 10-09-86
Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP Fund-High 4.14% 10.84% 7.08%* 9-09-85
Income Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP 3.34% 4.50% 3.67% 1-28-87
Fund-Overseas Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP Fund 4.71% 6.90% 7.46% 9-06-89
II-Asset Manager Portfolio
- ------------------------------------------------------------------------------------
Fidelity VIP Fund II - 11.32% N/A 23.79% 7-01-95
Contrafund Portfolio
- ------------------------------------------------------------------------------------
NSAT-Capital Appreciation 16.09% N/A 9.35% 4-15-92
Fund
- ------------------------------------------------------------------------------------
NSAT-Government Bond Fund -6.21% 2.47% 4.49%* 11-08-82
- ------------------------------------------------------------------------------------
NSAT-Money Market Fund -4.66% -0.61% 1.65%* 11-10-81
- ------------------------------------------------------------------------------------
NSAT-Small Company Fund 12.82% N/A 21.64% 10-23-95
- ------------------------------------------------------------------------------------
NSAT-Total Return Fund 11.85% 9.31% 8.75%* 11-08-82
- ------------------------------------------------------------------------------------
N&B Advisers Management -0.69% 5.28% 7.71%* 9-10-84
Trust- Growth Portfolio
- ------------------------------------------------------------------------------------
N&B Advisers Management -5.45% 0.64% 2.63%* 9-10-84
Trust- Limited Maturity
Bond Portfolio
- ------------------------------------------------------------------------------------
N&B Advisers Management 19.48% N/A 15.73% 3-22-94
Trust- Partners
Portfolio
- ------------------------------------------------------------------------------------
Oppenheimer Variable -4.97% 3.15% 4.92%* 4-30-85
Account Funds-Bond Fund
- ------------------------------------------------------------------------------------
Oppenheimer Variable 7.86% 8.11% 5.91% 11-12-90
Account Funds-Global
Securities Fund
- ------------------------------------------------------------------------------------
Oppenheimer Variable 5.59% 7.25% 7.77% 2-09-87
Account Funds-Multiple
Strategies Fund.
- ------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 54
Standardized Average Annual Total Return
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strong Special Fund II, 8.21% N/A 14.45% 5-08-92
Inc.
- ------------------------------------------------------------------------------------
Strong Variable Insurance -8.70% N/A 7.58% 5-08-92
Funds, Inc.-Discovery
Fund II, Inc.
- ------------------------------------------------------------------------------------
Strong Variable Insurance 0.54% N/A -0.14% 10-23-95
Funds, Inc.-
International Stock Fund
II
- ------------------------------------------------------------------------------------
Van Eck Worldwide -7.11% -1.00% 2.24% 9-01-89
Insurance Trust-Worldwide
Bond
- ------------------------------------------------------------------------------------
Van Eck Worldwide 8.12% 10.29% 3.35% 9-01-89
Insurance Trust-Worldwide
Hard Assets Fund
- ------------------------------------------------------------------------------------
Van Eck Worldwide 16.79% N/A 11.62% 12-27-95
Insurance Trust -
Worldwide Emerging
Markets Fund
- ------------------------------------------------------------------------------------
Van Kampen American 30.30% N/A 23.24% 7-01-95
Capital Life Investment
Trust-Real Estate
Securities Fund
- ------------------------------------------------------------------------------------
Warburg Pincus 0.15% N/A 2.68% 7-01-95
Trust-International
Equity Portfolio
- ------------------------------------------------------------------------------------
Warburg Pincus Trust - N/A N/A -18.85% 9-30-96
Post-Venture Capital
Portfolio
- ------------------------------------------------------------------------------------
Warburg Pincus 4.02% N/A 17.79% 7-01-95
Trust-Small Company
Growth Portfolio
- ------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/96.
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 Advisory Services, Inc., is not
engaged in any litigation of any material nature.
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected to
have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In October 1996, a policyholder of Nationwide Life
filed a complaint in Alabama state court against Nationwide Life and an agent of
Nationwide Life (Wayne M. King v. Nationwide Life Insurance Company and Danny
Nix) related to the sale of a whole life policy on a "vanishing premium" basis
and seeking unspecified compensatory and punitive damages. In February 1997,
Nationwide Life was named as a defendant in a lawsuit filed in New York Supreme
Court also related to the sale of whole life policies on a "vanishing premium"
basis (John H. Snyder v. Nationwide Mutual Insurance Company, Nationwide Mutual
Insurance Co. and Nationwide Life Insurance Co.). The plaintiff in such lawsuit
seeks to represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit is in an early stage
and has not been certified as a class action. Nationwide Life intends to defend
these cases vigorously. There can be no assurance that any future litigation
relating to pricing and sales practices will not have a material adverse effect
on the Company.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................1
Underwriters..................................................................2
Calculations of Performance...................................................2
Underlying Mutual Fund Performance Summary....................................3
Annuity Payments..............................................................6
Financial Statements..........................................................7
52
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<PAGE> 55
APPENDIX A
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which support insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which related to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
The Fixed Account
The Fixed Account is made up of all the general assets of the Company,
other than those in the Nationwide Variable Account II and any other segregated
asset account. Fixed Account Purchase Payments will be allocated to the Fixed
Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The amount of such investment income allocated to
the Contracts will vary from year to year in the sole discretion of the Company
at such rate or rates as the Company prospectively declares from time to time.
Any such rate or rates so determined will remain effective for a period of not
less than twelve months, and remain at such rate unless changed. However, the
Company guarantees that it will credit interest at not less than 3.0% per year
(or as otherwise required under state law, or at such minimum rate as stated in
the contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED
ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF
THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED
ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3.0% FOR ANY GIVEN
YEAR. New Purchase Payments deposited to the Contract which are allocated to the
Fixed Account may receive a different rate of interest than money transferred
from the Variable Sub-Accounts to the Fixed Account and amounts maturing in the
Fixed Account at the expiration of an Interest Rate Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract Value
will not be less than the amount of the Purchase Payments allocated to the Fixed
Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
Transfers
Contract Owners may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred will be determined by the Company
at its sole discretion, but will not be less than 10% of the total value of the
portion of the Fixed Account that is maturing and will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. The Interest
Rate Guarantee Period expires on the final day of a calendar quarter. Transfers
under this provision must be made within 45 days after the expiration date of
the guarantee period. Owners who have entered into a Dollar Cost Averaging
Agreement with the Company (see "Dollar Cost Averaging") may transfer from the
Fixed Account to the Variable Account under the terms of that agreement. Any
Group Annuity Contract offered in conjunction with the prospectus, the assets of
which are invested in the
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<PAGE> 56
general account of the Company, may be subject to restrictions or surrender of a
plan's or a participant's interest in the Annuity Contract, and may require that
such a surrender be completed over a period of 5 years.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
First and Subsequent Payments
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
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<PAGE> 57
APPENDIX B
PARTICIPATING UNDERLYING MUTUAL FUNDS
Below are the investment objectives of each Underlying Mutual Fund available
through the Variable Account. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AVAILABLE FOR ALL CONTRACTS
American Century Variable Portfolios, Inc. a member of the American CenturySM
Investments.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end management investment
company, designed only to provide investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
-American Century VP Balanced (formerly "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.
-American Century VP Capital Appreciation (formerly "TCI Growth")
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it is
unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least three
years continuous operation. There can be no assurance that the Fund will
achieve its investment objective.
-American Century VP International (formerly "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.
-American Century VP Value (formerly "TCI Valued")
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its
total asset in equity securities, including common and preferred stock,
convertible preferred stock and convertible debt obligations. The equity
securities in which the Fund will invest will be primarily securities of
well-established companies with intermediate-to-large market
capitalizations that are believed by management to be undervalued at the
time of purchase.
(Although the Statement of Additional Information concerning refers to
redemptions of securities in kind under certain conditions, all
surrendering or redeeming Contract Owners will receive cash from the
Company.)
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Dreyfus Stock Index Fund, Inc.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on January
24, 1989, and commenced operations on September 29, 1989. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's manager, while Mellon Equity
Associates, an affiliate of Dreyfus, serves as the Fund's index manager.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
Dreyfus Variable Investment Fund
Dreyfus Variable Investment Fund (the "Fund") is an open-end, management
investment company. It was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts on October 29, 1986 and commenced
operations on August 31, 1990. The Dreyfus Corporation ("Dreyfus") serves as the
Fund's manager. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which
is a wholly-owned subsidiary of Mellon Bank Corporation.
-Growth and Income Portfolio
Investment Objective: To provide long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests in equity securities, debt securities and money market
instruments of domestic and foreign issuers. The proportion of the
Portfolio's assets invested in each type of security will vary from time
to time in accordance with Dreyfus' assessment of economic conditions and
investment opportunities. In purchasing equity securities, Dreyfus will
invest in common stocks, preferred stocks and securities convertible into
common stocks, particularly those which offer opportunities for capital
appreciation and growth of earnings, while paying current dividends. The
Portfolio will generally invest in investment-grade debt obligations,
except that it may invest up to 35% of the value of its net assets in
convertible debt securities rated not lower than Caa by Moody's Investor
Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed to
be of comparable quality by Dreyfus. These securities are considered to
have predominantly speculative characteristics with respect to capacity to
pay interest and repay principal and are considered to be of poor
standing. See "Investment Considerations and Risks-Lower Rated Securities"
in the Portfolio's prospectuses.
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. NCM Capital Management
Group, Inc. serves as the Fund's sub-investment adviser and provides day-to-day
management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital growth
through equity investment in companies that, in the opinion of the Fund's
management, not only meet traditional investment standards but which also
show evidence that they conduct their business in a manner that
contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
Fidelity Variable Insurance Products Fund
The Fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981. The Fund's
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. Fidelity Management & Research Company ("FMR")
is the Fund's manager.
-Equity-Income Portfolio
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
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-Growth Portfolio
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and established
companies, and smaller, less well-known companies which may have a narrow
product line or whose securities are thinly traded. These latter
securities will often involve greater risk than may be found in the
ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and investment
in the Portfolio may involve greater risk than is inherent in other
underlying mutual funds. It is also important to point out that the
Portfolio makes most sense for you if you can afford to ride out changes
in the stock market, because it invests primarily in common stocks. FMR
also can make temporary investments in securities such as investment-grade
bonds, high-quality preferred stocks and short-term notes, for defensive
purposes when it believes market conditions warrant.
-High Income Portfolio
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower-rated, high-yielding, fixed-income
securities, while also considering growth of capital. The Portfolio
manager will seek high current income normally by investing the
Portfolio's assets as follows:
o at least 65% in income-producing debt securities and preferred stocks,
including convertible securities
o up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated
or that are unrated. Lower-rated securities are usually defined as Ba
or lower by Moody's; BB or lower by Standard & Poor's and may be
deemed to be of a speculative nature. The Portfolio may also purchase
lower-quality bonds such as those rated Ca3 by Moody's or C-by
Standard & Poor's which provide poor protection for payment of
principal and interest (commonly referred to as "junk bonds"). For a
further discussion of lower-rated securities, please see the "Risks of
Lower-Rated Debt Securities" section of the Portfolio's prospectus.
-Overseas Portfolio
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio provides
a means for investors to diversify their own portfolios by participating
in companies and economies outside of the United States.
Fidelity Variable Insurance Products Fund II
The Variable Insurance Products Fund II is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988. The Fund's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies.
Fidelity Management & Research Company ("FMR") is the Fund's manager.
-Asset Manager Portfolio
Investment Objective: To seek high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
-Contrafund Portfolio
Investment Objective: To seek capital appreciation by investing primarily
in companies that the Fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The Fund primarily invests in common stock
and securities convertible into common stock, but it has the flexibility
to invest in any type of security that may produce capital appreciation.
Nationwide Separate Account Trust
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts. The Trust
offers shares in the five separate mutual funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable
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annuity contracts issued by life insurance companies. The assets of the Trust
are managed by Nationwide Advisory Services, Inc., One Nationwide Plaza,
Columbus, Ohio 43215, 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 time of
purchase. Nationwide Advisory Services, Inc. ("NAS"), 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. The sub-advisers were chosen because they utilize
a number of different investment styles when investing in small company
stocks. By utilizing a number of investment styles, NAS 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 (formerly "Advisers Management
Trust")
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
-Growth Portfolio
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to
purchase such stocks.
-Limited Maturity Bond Portfolio (formerly "Bond Portfolio")
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its objectives
through investments in a diversified portfolio of limited maturity debt
securities.
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-Partners Portfolio
Investment Objective: To seek capital growth. This Portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed to
be undervalued based on fundamentals such as low price-to-earnings ratios,
consistent cash flows, and support from asset values. The objective of the
Partners Portfolio is not fundamental and can be changed by the Trustees
of the Trust without shareholder approval. Shareholders will, however,
receive at least 30 days prior notice thereof. There is no assurance the
investment objective will be met.
Oppenheimer Variable Account Funds
The Oppenheimer Variable Account Funds is an open-end, diversified
management investment company organized as a Massachusetts business trust in
1984. Shares of the Funds are sold only to provide benefits under variable life
insurance policies and variable annuity contracts.
Oppenheimer Funds, Inc. is the Funds' investment adviser.
-Oppenheimer Bond Fund
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the Fund seeks capital growth when consistent with its primary objective.
-Oppenheimer Global Securities Fund
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
-Oppenheimer Multiple Strategies Fund
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Strong Special Fund II, Inc.
The Strong Special Fund II, Inc. is a diversified, open-end management
company commonly called a Mutual Fund. The Special Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. (the "Advisor")
is the investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
Strong Variable Insurance Funds, Inc.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series 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 insurance policies and variable annuity
contracts. Strong Capital Management, Inc. is the investment advisor to the
Funds.
-Discovery Fund II, Inc.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities, the
Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate to
long-term corporate or U.S. government debt securities.
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-International Stock Fund II
Investment Objective: To seek capital growth by investing primarily in the
equity securities of issuers located outside the United States.
Van Eck Worldwide Insurance Trust (formerly "Van Eck Investment Trust")
Van Eck Worldwide Insurance Trust is an open-end management investment
company organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
-Worldwide Bond Fund (formerly "Global Bond Fund")
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-Worldwide Emerging Markets Fund
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to the
world's major economies, exhibit relatively low gross national product per
capita, as well as the potential for rapid economic growth. Peregrine
Asset Management (Hong Kong) Limited serves as sub-investment adviser to
this Fund.
-Worldwide Hard Assets Fund (formerly "Gold and Natural Resources Fund")
Investment Description: Seeks long-term capital appreciation by investing
globally, primarily in "Hard Assets Securities." Hard assets are tangible,
finite assets, such as real estate, energy, timber, and industrial and
previous metals. Income is a secondary consideration.
Van Kampen American Capital Life Investment Trust
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate funds which are sold
only to insurance companies to provide funding for variable life insurance
policies and variable annuity contracts. Van Kampen American Capital Asset
Management, Inc. serves as the Fund's investment adviser.
-Real Estate Securities Fund
Investment Objective: To seek long-term capital growth by investing in a
portfolio of securities of companies operating in the real estate industry
("Real Estate Securities"). Current income is a secondary consideration.
Real Estate Securities include equity securities, including common stocks
and convertible securities, as well as non-convertible preferred stocks
and debt securities of real estate industry companies. A "real estate
industry company" is a company that derives at least 50% of its assets
(marked to market), gross income or net profits from the ownership,
construction, management or sale of residential, commercial or industrial
real estate. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in Real Estate Securities, primarily equity
securities of real estate investment trusts. The Fund may invest up to 25%
of its total assets in securities issued by foreign issuers, some or all
of which may also be Real Estate Securities. There can be no assurance
that the Fund will achieve its investment objective.
Warburg Pincus Trust
The Warburg Pincus Trust ("Trust") is an open-end management investment
company organized in March 1995 as a business trust under the laws of The
Commonwealth of Massachusetts. The Trust offers its shares to insurance
companies for allocation to separate accounts for the purpose of funding
variable annuity and variable life contracts. Trust portfolios are managed by
Warburg, Pincus Counsellors, Inc. ("Counsellors.")
-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
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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.
-Post-Venture Capital Portfolio
Investment Objective: The Portfolio seeks long-term growth of capital by
investing primarily in equity securities of issuers in their post-venture
capital stage of development and pursues an aggressive investment
strategy. Under normal market conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of "post-venture
capital companies." A post-venture capital company is one that has
received venture capital financing either (a) during the early stages of
the company's existence or the early stages of the development of a new
product or service or (b) as part of a restructuring or recapitalization
of the company. The Portfolio may invest up to 10% of its assets in
venture capital and other investment funds.
-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.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT-II
This Statement of Additional Information is not a prospectus. It contains
information in addition to and in some respects more detailed than set forth in
the prospectus and should be read in conjunction with the prospectus dated May
1, 1997. The prospectus may be obtained from Nationwide Life Insurance Company
by writing P. O. Box 16609, Columbus, Ohio 43216-6609, or calling
1-800-848-6331, TDD 1-800-238-3035.
TABLE OF CONTENTS
Page
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................1
Underwriters..................................................................2
Calculations of Performance...................................................2
Underlying Mutual Fund Performance Summary....................................3
Annuity Payments..............................................................6
Financial Statements..........................................................7
General Information and History
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 Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company, as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%), the ultimate controlling
persons of Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $67.5 billion as of December 31, 1996.
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").
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The Contract Owner may transfer up to 100% of the Contract Value from the
Variable Account to the Fixed Account. However, the Company, at its sole
discretion, reserves the right to limit such transfers to 25% of the Contract
Value for any 12 month period. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such portion will be determined by the
Company at its sole discretion (but will not be less than 10% of the total value
of the portion of the Fixed Account that is maturing), and will be declared upon
the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter.
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 Transfer. Transfers must also be made prior to the
Annuitization Date.
Underwriters
The Contracts, which are offered continuously, are distributed by
Nationwide Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio
43215, a wholly owned subsidiary of the Company. During the fiscal years ended
December 31, 1996, 1995 and 1994, no underwriting commissions were paid by the
Company to NAS.
Calculations of Performance
Any current yield quotations of the Nationwide 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, 1996, the Nationwide Separate Account Trust
Money Market Fund Sub-Account's seven-day current unit value yield was 3.64%.
The Nationwide Separate Account Trust Money Market Fund Sub-Account's effective
yield is computed similarly but includes the effect of assumed compounding on an
annualized basis of the current unit value yield quotations of the Fund, and for
the period ending December 31, 1996 was 3.70%.
The Nationwide Separate Account Trust Money Market Fund Sub-Account's
yield and effective yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Fund's portfolio, portfolio
quality and average maturity, changes in interest rates, and the Fund's
expenses. Although the Sub-Account determines its yield on the basis of a seven
calendar day period, it may use a different time period on occasion. The yield
quotes may reflect the expense limitation described "Investment Manager and
Other Services" in the Fund's Statement of Additional Information. There is no
assurance that the yields quoted on any given occasion will remain in effect for
any period of time and there is no guarantee that the net asset values will
remain constant. It should be noted that a Contract Owner's investment in the
Nationwide Separate Account Trust Money Market Fund Sub-Account is not
guaranteed or insured. Yield of other money market funds may not be comparable
if a different base period or another method of calculation is used.
All performance advertising shall also include quotations of standardized
average annual total return, calculated in accordance with a standard method
prescribed by rules of the Securities and Exchange Commission, to facilitate
comparison with standardized average annual total return advertised for a
specific period is found by first taking a hypothetical $1,000 investment in
each of the Sub-Accounts' units on the first day of the period at the offering
price, which is the Accumulation Unit Value per unit ("initial investment") and
computing the ending redeemable value ("redeemable value") of that investment at
the end of the period. The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. Standardized average annual total return reflects the deduction of a
maximum $30 Contract Maintenance Charge and a 1.30% Mortality, Expense Risk and
Administration Charge. The redeemable value also reflects the effect of any
applicable Contingent Deferred Sales Charge that may be imposed at the end of
the period (see "Contingent Deferred Sales Charge"
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located in the prospectus). No deduction is made for premium taxes which may be
assessed by certain states. Nonstandardized total return may also be advertised,
and is calculated in a manner similar to standardized average annual total
return except the nonstandardized total return is based on a hypothetical
initial investment of $10,000 and does not reflect the deduction of any
applicable Contingent Deferred Sales Charge. Reflecting the Contingent Deferred
Sales Charge would decrease the level of the performance advertised. The
Contingent Deferred Sales Charge is not reflected because the Contract is
designed for long term investment. An assumed initial investment of $10,000 will
be used because that figure more closely approximates the size of a typical
Contract than does the $1,000 figure used in calculating the standardized
average annual total return quotations. The amount of the hypothetical initial
investment used affects performance because the Contract Maintenance Charge is
fixed per Contract charge.
The standardized average annual total return and nonstandardized average
annual total return quotations will be current to the last day of the calendar
quarter preceding the date on which an advertisement is submitted for
publication. Both the standardized average annual return and the nonstandardized
average annual total return will be based on rolling calendar quarters and will
cover periods of one, five, and ten years, or a period covering the time the
underlying Mutual Fund held in the Sub-Account has been in existence, if the
underlying Mutual Fund has not been in existence for one of the prescribed
periods. For those underlying Mutual Funds which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Funds would have achieved
(reduced by the applicable charges) had they been held as Sub-Accounts within
the Variable Account for the period quoted.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, therefore,
would not be considered a guarantee of future performance. Factors affecting a
Sub-Account's performance include general market conditions, operating expenses
and investment management. A Contract Owner's account when redeemed may be more
or less than original cost.
Below are quotations of standardized average annual total return and
nonstandardized average annual total return calculated as described above, for
each of the Sub-Accounts available within the Variable Account.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
Non-Standardized Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 10.44% 5.02% 8.53% 5-01-91
Portfolios, Inc. - American
Century VP Balanced
- --------------------------------------------------------------------------------------
American Century Variable -5.87% 4.51% 9.14% 11-20-87
Portfolios, Inc. - American
Century VP Capital
Appreciation
- --------------------------------------------------------------------------------------
American Century Variable 12.61% N/A 5.98% 5-01-94
Portfolios, Inc. - American
Century VP International
- --------------------------------------------------------------------------------------
American Century Variable N/A N/A 17.11% 5-01-96
Portfolios, Inc. - American
Century VP Value
- --------------------------------------------------------------------------------------
AVIS Growth Fund 11.58% 12.63% 13.49%* 2-08-84
- --------------------------------------------------------------------------------------
AVIS High Yield Bond 11.43% 9.33% 10.04%* 2-08-84
Fund
- --------------------------------------------------------------------------------------
AVIS US Govt./AAA-rated 1.46% 4.71% 5.63%* 11-19-85
- --------------------------------------------------------------------------------------
Dreyfus Socially Responsible 19.35% N/A 17.55% 10-06-93
Growth Fund
- --------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 20.64% 12.88% 11.92% 9-29-89
- --------------------------------------------------------------------------------------
Dreyfus Variable Investment 17.78% N/A 25.18% 5-02-94
Fund - Growth & Income
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund- 12.49% 16.21% 12.04%* 10-09-86
Equity Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 12.91% 13.42% 13.46%* 10-09-86
Portfolio
- --------------------------------------------------------------------------------------
</TABLE>
6
66 of 139
<PAGE> 67
Non-Standardized Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Fund-High 12.24% 13.24% 9.45%* 9-09-85
Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund- Overseas 11.44% 7.43% 6.24% 1-28-87
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 12.81% 9.56% 9.99% 9-06-89
Manager.
- --------------------------------------------------------------------------------------
Fidelity VIP Fund 19.42% N/A 28.31% 7-01-95
II-Contrafund Portfolio
- --------------------------------------------------------------------------------------
NSAT- 24.19% N/A 12.50% 4-15-92
Capital Appreciation Fund
- --------------------------------------------------------------------------------------
NSAT-Government Bond Fund 1.83% 5.37% 6.77%* 11-08-82
- --------------------------------------------------------------------------------------
NSAT-Money Market Fund 3.44% 2.51% 4.12%* 11-10-81
- --------------------------------------------------------------------------------------
NSAT-Small Company Fund 20.92% N/A 30.78% 10-23-95
- --------------------------------------------------------------------------------------
NSAT-Total Return 19.95% 12.05% 10.92%* 11-08-82
- --------------------------------------------------------------------------------------
N&B Advisers Management 7.41% 8.13% 9.78%* 9-10-84
Trust-Growth Portfolio
- --------------------------------------------------------------------------------------
N&B Advisers Management 2.64% 3.67% 5.05%* 9-10-84
Trust-Limited Maturity Bond
- --------------------------------------------------------------------------------------
N&B Advisers Management 27.58% N/A 19.85% 3-22-94
Trust-Partners Portfolio
- --------------------------------------------------------------------------------------
Oppenheimer Variable Account 3.13% 6.01% 7.17%* 4-30-85
Funds-Bond Fund
- --------------------------------------------------------------------------------------
Oppenheimer Variable Account 15.96% 10.72% 8.95% 11-12-90
Funds-Global Securities Fund
- --------------------------------------------------------------------------------------
Oppenheimer Variable Account 13.69% 9.96% 9.87% 2-09-87
Funds-Multiple Strategies
Fund
- --------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 16.31% N/A 17.14% 5-08-92
- --------------------------------------------------------------------------------------
Strong Variable Insurance -0.81% N/A 10.56% 5-08-92
Funds, Inc.-Discovery Fund
II, Inc.
- --------------------------------------------------------------------------------------
Strong Variable Insurance 8.64% N/A 8.99% 10-23-95
Funds, Inc.- International
Stock II
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 0.88% 2.25% 5.02% 9-01-89
Trust-Worldwide Bond Fund
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 16.22% 12.82% 6.53% 9-01-89
Trust-Worldwide Hard Assets
Fund
- --------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 24.89% N/A 22.93% 12-27-95
Trust - Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------
Van Kampen American Capital 38.40% N/A 30.27% 7-01-95
Life Investment Trust-Real
Estate Securities Fund
- --------------------------------------------------------------------------------------
Warburg Pincus 8.25% N/A 9.79% 7-01-95
Trust-International Equity
Portfolio
- --------------------------------------------------------------------------------------
Warburg Pincus Trust - N/A N/A -10.04% 9-30-96
Post-Venture Capital
Portfolio
- --------------------------------------------------------------------------------------
Warburg Pincus Trust-Small 12.12% N/A 24.50% 7-01-95
Company Growth Portfolio
- --------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/96.
7
67 of 139
<PAGE> 68
Standardized Average Annual Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 2.34% 1.80% 5.73% 5-01-91
Portfolios, Inc.-American
Century VP Balanced
- --------------------------------------------------------------------------------------
American Century Variable -13.46% 1.48% 6.80% 11-20-87
Portfolios, Inc.-American
Century VP Capital
Appreciation
- --------------------------------------------------------------------------------------
American Century Variable 4.51% N/A 1.16% 5-01-94
Portfolios, Inc.-American
Century VP International
- --------------------------------------------------------------------------------------
American Century Variable N/A N/A 7.41% 5-01-96
Portfolios, Inc. -
American Century VP Value
- --------------------------------------------------------------------------------------
AVIS-Growth Fund 3.48% 10.03% 11.67%* 2-08-84
- --------------------------------------------------------------------------------------
AVIS-High Yield Bond Fund 3.33% 6.63% 8.00%* 2-08-84
- --------------------------------------------------------------------------------------
AVIS-US Govt./AAA-rated -6.56% 1.80% 3.20%* 11-19-85
- --------------------------------------------------------------------------------------
Dreyfus Socially 11.25% N/A 13.50% 10-06-93
Responsible Growth Fund
- --------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 12.54% 10.13% 9.20% 9-19-89
- --------------------------------------------------------------------------------------
Dreyfus Variable 9.68% N/A 21.08% 5-02-94
Investment Fund - Growth &
Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity 4.39% 13.82% 9.90%* 10-09-86
Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 4.81% 10.84% 11.55%* 10-09-86
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-High 4.14% 10.84% 7.08%* 9-09-85
Income Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas 3.34% 4.50% 3.67% 1-28-87
Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 4.71% 6.90% 7.46% 9-06-89
Manager Portfolio
- --------------------------------------------------------------------------------------
Fidelity VIP Fund II - 11.32% N/A 23.79% 7-01-95
Contrafund Portfolio
- --------------------------------------------------------------------------------------
NSAT-Capital Appreciation 16.09% N/A 9.35% 4-15-92
Fund
- --------------------------------------------------------------------------------------
NSAT-Government Bond Fund -6.21% 2.47% 4.49%* 11-08-82
- --------------------------------------------------------------------------------------
NSAT-Money Market Fund -4.66% -0.61% 1.65%* 11-10-81
- --------------------------------------------------------------------------------------
NSAT-Small Company Fund 12.82% N/A 21.64% 10-23-95
- --------------------------------------------------------------------------------------
NSAT-Total Return Fund 11.85% 9.31% 8.75%* 11-08-82
- --------------------------------------------------------------------------------------
N&B Advisers Management -0.69% 5.28% 7.71%* 9-10-84
Trust- Growth Portfolio
- --------------------------------------------------------------------------------------
N&B Advisers Management -5.45% 0.64% 2.63%* 9-10-84
Trust- Limited Maturity
Bond Portfolio
- --------------------------------------------------------------------------------------
N&B Advisers Management 19.48% N/A 15.73% 3-22-94
Trust-Partners Portfolio
- --------------------------------------------------------------------------------------
Oppenheimer Variable -4.97% 3.15% 4.92%* 4-30-85
Account Funds-Bond Fund
- --------------------------------------------------------------------------------------
Oppenheimer Variable 7.86% 8.11% 5.91% 11-12-90
Account Funds-Global
Securities Fund
- --------------------------------------------------------------------------------------
Oppenheimer Variable 5.59% 7.25% 7.77% 2-09-87
Account Funds-Multiple
Strategies Fund.
- --------------------------------------------------------------------------------------
</TABLE>
8
68 of 139
<PAGE> 69
Standardized Average Annual Total Return
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/96 12/31/96 To 12/31/96 Effective
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strong Special Fund II, 8.21% N/A 14.45% 5-08-92
Inc.
- ------------------------------------------------------------------------------------
Strong Variable Insurance -8.70% N/A 7.58% 5-08-92
Funds, Inc.-Discovery
Fund II, Inc.
- ------------------------------------------------------------------------------------
Strong Variable Insurance 0.54% N/A -0.14% 10-23-95
Funds, Inc.-
International Stock Fund
II
- ------------------------------------------------------------------------------------
Van Eck Worldwide -7.11% -1.00% 2.24% 9-01-89
Insurance Trust-Worldwide
Bond
- ------------------------------------------------------------------------------------
Van Eck Worldwide 8.12% 10.29% 3.35% 9-01-89
Insurance Trust-Worldwide
Hard Assets-Fund
- ------------------------------------------------------------------------------------
Van Eck Worldwide 16.79% N/A 11.62% 12-27-95
Insurance Trust -
Worldwide Emerging
Markets Fund
- ------------------------------------------------------------------------------------
Van Kampen American 30.30% N/A 23.24% 7-01-95
Capital Life Investment
Trust-Real Estate
Securities Fund
- ------------------------------------------------------------------------------------
Warburg Pincus 0.15% N/A 2.68% 7-01-95
Trust-International
Equity Portfolio
- ------------------------------------------------------------------------------------
Warburg Pincus Trust - N/A N/A -18.85% 9-30-96
Post-Venture Capital
Portfolio
- ------------------------------------------------------------------------------------
Warburg Pincus 4.02% N/A 17.79% 7-01-95
Trust-Small Company
Growth Portfolio
- ------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/96.
Annuity Payments
See "Frequency and Amount of Annuity Payments" located in the prospectus.
9
69 of 139
<PAGE> 70
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-II:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-II as of December 31,
1996, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the
three year period then ended. These financial statements and schedules of
changes in unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide Variable Account-II as of December 31, 1996, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American VI Series - Growth Fund (AVISGro)
591,641 shares (cost $17,724,667) ............................................. $ 23,446,735
American VI Series - High-Yield Bond Fund (AVISHiYld)
206,455 shares (cost $2,831,913) .............................................. 2,970,891
American VI Series - U.S. Government/AAA-Rated Securities Fund (AVISGvt)
558,936 shares (cost $6,405,065) .............................................. 6,125,940
Dreyfus VIF - Growth and Income Portfolio (DryGroInc)
10,651 shares (cost $208,490) ................................................. 208,234
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
4,048,465 shares (cost $80,578,592) ........................................... 81,333,655
Dreyfus Stock Index Fund (DryStkIx)
22,473,273 shares (cost $421,400,078) ......................................... 455,757,970
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
88,020,775 shares (cost $1,496,527,408) ....................................... 1,851,076,908
Fidelity VIP - Growth Portfolio (FidVIPGr)
53,397,112 shares (cost $1,442,803,412) ....................................... 1,662,786,063
Fidelity VIP - High Income Portfolio (FidVIPHI)
52,277,585 shares (cost $618,483,737) ......................................... 654,515,361
Fidelity VIP - Overseas Portfolio (FidVIPOv)
29,860,586 shares (cost $497,414,533) ......................................... 562,573,437
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
54,719,104 shares (cost $789,170,511) ......................................... 926,394,430
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
31,863,416 shares (cost $470,893,739) ......................................... 527,658,176
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
8,543,374 shares (cost $130,457,688) .......................................... 139,086,134
Nationwide SAT - Government Bond Fund (NSATGvtBd)
25,523,974 shares (cost $278,390,626) ......................................... 281,784,675
Nationwide SAT - Money Market Fund (NSATMyMkt)
842,095,034 shares (cost $842,095,034) ........................................ 842,095,034
Nationwide SAT - Small Company Fund (NSATSmCo)
11,411,941 shares (cost $153,200,271) ......................................... 158,511,867
Nationwide SAT - Total Return Fund (NSATTotRe)
43,928,334 shares (cost $493,101,989) ......................................... 582,928,991
Neuberger & Berman - Growth Portfolio (NBAMTGro)
14,576,973 shares (cost $355,570,591) ......................................... 375,794,365
Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
14,503,021 shares (cost $202,666,998) ......................................... 203,767,444
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Neuberger & Berman - Partners Portfolio (NBAMTPart)
21,480,783 shares (cost $316,971,355) ......................................... 354,003,309
Oppenheimer - Bond Fund (OppBdFd)
18,495,009 shares (cost $212,436,168) ......................................... 215,096,952
Oppenheimer - Global Securities Fund (OppGlSec)
17,352,191 shares (cost $273,206,728) ......................................... 306,613,219
Oppenheimer - Multiple Strategies Fund (OppMult)
15,186,448 shares (cost $210,778,683) ......................................... 237,364,175
Strong Special Fund II, Inc. (StSpec2)
31,310,474 shares (cost $502,480,063) ......................................... 602,413,525
Strong VIF - Strong Discovery Fund II (StDisc2)
19,325,445 shares (cost $231,435,391) ......................................... 208,714,811
Strong VIF - Strong International Stock Fund II (StIntStk2)
6,217,919 shares (cost $69,638,167) ........................................... 69,827,234
TCI Portfolios - TCI Balanced (TCIBal)
17,471,812 shares (cost $113,742,920) ......................................... 131,737,463
TCI Portfolios - TCI Growth (TCIGro)
44,171,041 shares (cost $481,435,940) ......................................... 452,311,464
TCI Portfolios - TCI International (TCIInt)
14,897,654 shares (cost $81,567,837) .......................................... 88,790,017
TCI Portfolios - TCI Value (TCIValue)
192,219 shares (cost $1,073,951) .............................................. 1,072,583
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
9,078,169 shares (cost $146,560,262) .......................................... 151,786,988
Van Eck - Worldwide Bond Fund (VEWrldBd)
9,841,666 shares (cost $109,164,680) .......................................... 109,242,492
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
975,190 shares (cost $12,083,831) ............................................. 12,180,122
Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRESec)
10,164,489 shares (cost $130,485,494) ......................................... 150,231,143
Warburg Pincus - International Equity Portfolio (WPIntEq)
23,071,607 shares (cost $262,173,995) ......................................... 264,862,050
Warburg Pincus - Post Venture Capital Portfolio (WPPVenCap)
968,094 shares (cost $9,297,111) .............................................. 9,448,597
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
18,047,620 shares (cost $255,570,779) ......................................... 257,178,579
---------------
Total investments .......................................................... 12,961,691,033
Accounts receivable ................................................................. 344,106
----------------
Total assets ............................................................... 12,962,035,139
ACCOUNTS PAYABLE ....................................................................... 32,685,984
----------------
CONTRACT OWNERS' EQUITY (NOTE 4) ....................................................... $ 12,929,349,155
================
</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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ................... $ 600,928,342 255,746,278 219,361,059
Mortality, expense and administration charges (note 2) ... (146,901,903) (94,261,621) (63,749,637)
---------------- --------------- ---------------
Net investment activity ............................... 454,026,439 161,484,657 155,611,422
---------------- --------------- ---------------
Proceeds from mutual fund shares sold .................... 4,787,197,972 2,702,034,116 2,081,239,624
Cost of mutual fund shares sold .......................... (4,367,124,608) (2,527,741,633) (1,966,796,733)
---------------- --------------- ---------------
Realized gain (loss) on investments ................... 420,073,364 174,292,483 114,442,891
Change in unrealized gain (loss) on investments .......... 281,999,873 974,875,269 (372,586,662)
---------------- --------------- ---------------
Net gain (loss) on investments ........................ 702,073,237 1,149,167,752 (258,143,771)
---------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 1,156,099,676 1,310,652,409 (102,532,349)
---------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners .......... 3,619,439,725 2,272,793,729 2,110,347,434
Redemptions .............................................. (664,029,620) (445,809,864) (229,544,830)
Annuity benefits ......................................... (792,443) (401,351) (155,993)
Annual contract maintenance charge (note 2) .............. (6,040,328) (5,167,706) (3,881,459)
Contingent deferred sales charges (note 2) ............... (10,783,506) (7,795,056) (4,253,379)
Adjustments to maintain reserves ......................... 559,630 (180,793) 29,075
---------------- --------------- ---------------
Net equity transactions .............................. 2,938,353,458 1,813,438,959 1,872,540,848
---------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ....................... 4,094,453,134 3,124,091,368 1,770,008,499
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................. 8,834,896,021 5,710,804,653 3,940,796,154
---------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ....................... $ 12,929,349,155 8,834,896,021 5,710,804,653
================ =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-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 VISeries - Growth Fund (AVISGro)
American VISeries - High-Yield Bond Fund (AVISHiYld)
American VISeries - U.S. Government/AAA-Rated Securities Fund
(AVISGvt)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Growth andIncome Portfolio (DryGroInc)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman);
Neuberger & Berman - Growth Portfolio (NBAMTGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
Neuberger & Berman - Partners Portfolio (NBAMTPart)
<PAGE> 6
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
Strong Special Fund II, Inc. (StSpec2)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Portfolios of the TCIPortfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Balanced (TCIBal)
TCI Portfolios - TCI Growth (TCIGro)
TCI Portfolios - TCI International (TCIInt)
TCI Portfolios - TCIValue (TCIValue)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck);
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
Van Eck - Worldwide Bond Fund (VEWrldBd)
(formerly Van Eck - Global Bond Fund (VEGlobBd)
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
Fund of the Van Kampen American Capital Life Investment Trust (Van
Kampen American Capital LIT);
Van Kampen American Capital LIT - Real Estate Securities
Fund (VKACRESec)
Portfolios of the Warburg Pincus Trust (Warburg Pincus);
Warburg Pincus - International Equity Portfolio (WPIntEq)
Warburg Pincus - Post Venture Capital Portfolio (WPPVenCap)
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1996, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain contract expenses
(see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. The cost of investments sold is
determined on the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
<PAGE> 7
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments
received from the contract owners. However, if any part of the contract value
of such contracts is surrendered the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge. For contracts issued prior to December 15, 1988, the contingent
deferred sales charge will be equal to 5% of the lesser of the total of all
purchase payments made within 96 months prior to the date of the request for
surrender or the amount surrendered. For contracts issued on or after December
15, 1988, the Company will deduct a contingent deferred sales charge not to
exceed 7% of the lesser of purchase payments or the amount surrendered, such
charge declining 1% per year, to 0%, after the purchase payment has been held
in the contract for 84 months. No sales charges are deducted on redemptions
used to purchase units in the fixed investment options of the Company.
The following contract 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(SM) 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:
o Beginning unit value - Jan. 1
o 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.)
o Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
o 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.)
o Ending unit value - Dec. 31
o 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,
1996, for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts:
Dreyfus VIF - Growth and Income Portfolio:
Non-tax qualified .......................................... 100 $ 9.988028 $ 999
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified .............................................. 3,819 12.423035 47,444
Non-tax qualified .......................................... 4,955 12.423035 61,556
Dreyfus Stock Index Fund:
Tax qualified .............................................. 21,527 12.854891 276,727
Non-tax qualified .......................................... 17,543 12.854891 225,513
Fidelity VIP - Equity-Income Portfolio:
Tax qualified .............................................. 38,049 12.163794 462,820
Non-tax qualified .......................................... 26,246 12.163794 319,251
Fidelity VIP - Growth Portfolio:
Tax qualified .............................................. 38,429 10.972453 421,660
Non-tax qualified .......................................... 35,425 10.972453 388,699
Fidelity VIP - High Income Portfolio:
Tax qualified .............................................. 13,647 11.487324 156,768
Non-tax qualified .......................................... 18,821 11.487324 216,203
Fidelity VIP - Overseas Portfolio:
Tax qualified .............................................. 511 11.775309 6,017
Non-tax qualified .......................................... 3,662 11.775309 43,121
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified .............................................. 6,477 11.975202 77,563
Non-tax qualified .......................................... 1,925 11.975202 23,052
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified .............................................. 14,615 12.282942 179,515
Non-tax qualified .......................................... 12,689 12.282942 155,858
Nationwide SAT - Capital Appreciation Fund:
Tax qualified .............................................. 12,286 13.467403 165,461
Non-tax qualified .......................................... 16,971 13.467403 228,555
Nationwide SAT - Government Bond Fund:
Tax qualified .............................................. 5,170 10.534938 54,466
Non-tax qualified .......................................... 16,048 10.534938 169,065
Nationwide SAT - Money Market Fund:
Tax qualified .............................................. 32,496 10.507347 341,447
Non-tax qualified .......................................... 33,761 10.507347 354,739
Nationwide SAT - Small Company Fund:
Tax qualified .............................................. 13,231 13.903343 183,955
Non-tax qualified .......................................... 31,720 13.903343 441,014
Nationwide SAT - Total Return Fund:
Tax qualified .............................................. 49,402 12.691338 626,977
Non-tax qualified .......................................... 65,856 12.691338 835,801
Neuberger & Berman - Growth Portfolio:
Tax qualified .............................................. 6,941 10.795282 74,930
Non-tax qualified .......................................... 7,119 10.795282 76,852
Neuberger & Berman - Limited Maturity Bond Portfolio:
Tax qualified .............................................. 1,473 10.533549 15,516
Non-tax qualified .......................................... 2,542 10.533549 26,776
Neuberger & Berman - Partners Portfolio:
Tax qualified .............................................. 11,527 13.585552 156,601
Non-tax qualified .......................................... 19,721 13.585552 267,921
Oppenheimer - Bond Fund:
Tax qualified .............................................. 5,191 10.693801 55,512
Non-tax qualified .......................................... 2,496 10.693801 26,692
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer - Global Securities Fund:
Tax qualified ............................................. 1,508 11.787738 17,776
Non-tax qualified ......................................... 4,650 11.787738 54,813
Oppenheimer - Multiple Strategies Fund:
Tax qualified ............................................. 4,469 11.803522 52,750
Non-tax qualified ......................................... 4,093 11.803522 48,312
Strong Special Fund II, Inc.:
Tax qualified ............................................. 7,847 12.408965 97,373
Non-tax qualified ......................................... 8,283 12.408965 102,783
Strong VIF - Strong Discovery Fund II:
Tax qualified ............................................. 897 10.467953 9,390
Non-tax qualified ......................................... 5,000 10.467953 52,340
Strong VIF - Strong International Stock Fund II:
Tax qualified ............................................. 3,313 11.142737 36,916
Non-tax qualified ......................................... 2,222 11.142737 24,759
TCI Portfolios - TCI Balanced:
Tax qualified ............................................. 5,362 11.371689 60,975
Non-tax qualified ......................................... 1,084 11.371689 12,327
TCI Portfolios - TCI Growth:
Tax qualified ............................................. 7,475 9.377268 70,095
Non-tax qualified ......................................... 10,548 9.377268 98,911
TCI Portfolios - TCI International:
Tax qualified ............................................. 365 11.752593 4,290
Non-tax qualified ......................................... 9,164 11.752593 107,701
TCI Portfolios - TCI Value:
Non-tax qualified ......................................... 109 10.143681 1,106
Van Eck - Gold and Natural Resources Fund:
Tax qualified ............................................. 1,121 12.953621 14,521
Non-tax qualified ......................................... 8,904 12.953621 115,339
Van Eck - Worldwide Bond Fund:
Tax qualified ............................................. 683 10.285816 7,025
Non-tax qualified ......................................... 181 10.285816 1,862
Van Eck - Worldwide Emerging Markets Fund:
Non-tax qualified ......................................... 151 10.078944 1,522
Van Kampen American Capital LIT - Real Estate Securities Fund:
Tax qualified ............................................. 3,666 14.773661 54,160
Non-tax qualified ......................................... 10,037 14.773661 148,283
Warburg Pincus - International Equity Portfolio:
Tax qualified ............................................. 6,990 11.306243 79,031
Non-tax qualified ......................................... 7,213 11.306243 81,552
Warburg Pincus - Post Venture Capital Portfolio:
Non-tax qualified ......................................... 74 10.164891 752
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified ............................................. 11,253 12.604244 141,836
Non-tax qualified ......................................... 26,142 12.604244 329,500
The BEST OF AMERICA(R) contracts:
American VI Series - Growth Fund:
Tax qualified ............................................. 486,423 24.479182 11,907,237
Non-tax qualified ......................................... 471,250 24.479182 11,535,815
American VI Series - High-Yield Bond Fund:
Tax qualified ............................................. 74,769 23.160826 1,731,712
Non-tax qualified ......................................... 53,096 23.160826 1,229,747
American VI Series - U.S. Government Fund/AAA-Rated Securities Fund:
Tax qualified ............................................. 183,087 18.395431 3,367,964
Non-tax qualified ......................................... 149,634 18.395431 2,752,582
Dreyfus VIF - Growth and Income Portfolio:
Tax qualified ............................................. 15,022 9.986925 150,024
Non-tax qualified ......................................... 2,643 9.986925 26,395
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified ........................................... 1,552,615 17.037112 26,452,076
Non-tax qualified ....................................... 1,190,421 17.037112 20,281,336
Dreyfus Stock Index Fund:
Tax qualified ........................................... 7,592,255 16.470432 125,047,720
Non-tax qualified ....................................... 6,210,747 16.470432 102,293,686
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................................... 23,565,494 28.043676 660,863,079
Non-tax qualified ....................................... 20,058,276 28.043676 562,507,793
Fidelity VIP - Growth Portfolio:
Tax qualified ........................................... 17,849,804 38.497038 687,164,583
Non-tax qualified ....................................... 13,715,597 38.497038 528,009,859
Fidelity VIP - High Income Portfolio:
Tax qualified ........................................... 7,274,256 24.553550 178,608,808
Non-tax qualified ....................................... 8,722,126 24.553550 214,159,157
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................................... 13,781,464 16.573676 228,409,519
Non-tax qualified ....................................... 12,840,712 16.573676 212,817,800
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................................... 21,570,235 20.422622 440,520,756
Non-tax qualified ....................................... 13,822,886 20.422622 282,299,576
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................................... 10,594,586 13.255157 140,432,901
Non-tax qualified ....................................... 9,866,842 13.255157 130,786,540
Nationwide SAT - Capital Appreciation Fund:
Tax qualified ........................................... 2,288,355 17.979967 41,144,547
Non-tax qualified ....................................... 2,612,175 17.979967 46,966,820
Nationwide SAT - Government Bond Fund:
Tax qualified ........................................... 3,938,276 30.296925 119,317,653
Non-tax qualified ....................................... 3,184,368 30.216906 96,221,749
Nationwide SAT - Money Market Fund:
Tax qualified ........................................... 9,766,503 22.132823 216,160,282
Non-tax qualified ....................................... 10,963,993 22.132823 242,664,116
Nationwide SAT - Small Company Fund:
Tax qualified ........................................... 3,071,120 13.831813 42,479,158
Non-tax qualified ....................................... 3,061,699 13.831813 42,348,848
Nationwide SAT - Total Return Fund:
Tax qualified ........................................... 3,546,292 62.707634 222,379,581
Non-tax qualified ....................................... 3,148,253 61.092889 192,335,871
Neuberger & Berman - Growth Portfolio:
Tax qualified ........................................... 5,597,573 29.757359 166,568,989
Non-tax qualified ....................................... 4,702,904 29.757359 139,946,003
Neuberger & Berman - Limited Maturity Bond Portfolio:
Tax qualified ........................................... 3,722,398 16.791470 62,504,534
Non-tax qualified ....................................... 3,388,267 16.791470 56,893,984
Neuberger & Berman - Partners Portfolio:
Tax qualified ........................................... 5,383,558 17.256151 92,899,490
Non-tax qualified ....................................... 5,392,259 17.256151 93,049,636
Oppenheimer - Bond Fund:
Tax qualified ........................................... 3,808,030 17.356310 66,093,349
Non-tax qualified ....................................... 3,276,566 17.356310 56,869,095
Oppenheimer - Global Securities Fund:
Tax qualified ........................................... 7,895,779 13.266755 104,751,366
Non-tax qualified ....................................... 5,355,527 13.266755 71,050,465
Oppenheimer - Multiple Strategies Fund:
Tax qualified ........................................... 4,869,534 18.045475 87,873,054
Non-tax qualified ....................................... 3,811,559 18.045475 68,781,393
Strong Special Fund II, Inc.:
Tax qualified ........................................... 11,342,542 21.072564 239,016,442
Non-tax qualified ....................................... 8,634,564 21.072564 181,952,403
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
Strong VIF - Strong Discovery Fund II:
Tax qualified ........................................... 4,502,456 16.129688 72,623,211
Non-tax qualified ....................................... 3,833,429 16.129688 61,832,014
Strong VIF - Strong International Stock Fund II:
Tax qualified ........................................... 1,788,555 11.140682 19,925,722
Non-tax qualified ....................................... 1,660,749 11.140682 18,501,876
TCI Portfolios - TCI Balanced:
Tax qualified ........................................... 3,254,121 14.300170 46,534,484
Non-tax qualified ....................................... 2,577,277 14.300170 36,855,499
TCI Portfolios - TCI Growth:
Tax qualified ........................................... 9,324,052 23.677551 220,770,717
Non-tax qualified ....................................... 6,231,979 23.677551 147,558,001
TCI Portfolios - TCI International:
Tax qualified ........................................... 2,194,705 11.745639 25,778,213
Non-tax qualified ....................................... 1,758,586 11.745639 20,655,716
TCI Portfolios - TCI Value:
Tax qualified ........................................... 12,933 10.142565 131,174
Non-tax qualified ....................................... 77,276 10.142565 783,777
Van Eck - Gold and Natural Resources Fund:
Tax qualified ........................................... 3,151,393 16.248199 51,204,461
Non-tax qualified ....................................... 3,558,069 16.248199 57,812,213
Van Eck - Worldwide Bond Fund:
Tax qualified ........................................... 2,627,198 14.604281 38,368,338
Non-tax qualified ....................................... 2,639,292 14.604281 38,544,962
Van Eck - Worldwide Emerging Markets Fund:
Tax qualified ........................................... 271,881 10.077830 2,739,970
Non-tax qualified ....................................... 239,183 10.077830 2,410,446
Van Kampen American Capital LIT - Real Estate Securities Fund:
Tax qualified ........................................... 2,491,780 14.931303 37,205,522
Non-tax qualified ....................................... 3,554,657 14.931303 53,075,661
Warburg Pincus - International Equity Portfolio:
Tax qualified ........................................... 5,551,036 11.572294 64,238,221
Non-tax qualified ....................................... 5,736,148 11.572294 66,380,391
Warburg Pincus - Post Venture Capital Portfolio:
Tax qualified ........................................... 205,349 10.163772 2,087,120
Non-tax qualified ....................................... 198,784 10.163772 2,020,395
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified ........................................... 4,899,073 13.973889 68,459,102
Non-tax qualified ....................................... 4,810,067 13.973889 67,215,342
The BEST OF AMERICA(R) America's Vision Annuity(SM) contracts:
Dreyfus VIF - Growth andIncome Portfolio:
Tax qualified ........................................... 1,683 9.986704 16,808
Non-tax qualified ....................................... 1,403 9.986704 14,011
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified ........................................... 863,844 16.091197 13,900,284
Non-tax qualified ....................................... 1,278,742 16.091197 20,576,489
Dreyfus Stock Index Fund:
Tax qualified ........................................... 5,666,553 16.369120 92,756,486
Non-tax qualified ....................................... 8,243,399 16.369120 134,937,187
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................................... 16,618,114 16.150507 268,390,966
Non-tax qualified ....................................... 22,169,855 16.150507 358,054,398
Fidelity VIP - Growth Portfolio:
Tax qualified ........................................... 12,013,122 15.220265 182,842,900
Non-tax qualified ....................................... 17,297,852 15.220265 263,277,891
Fidelity VIP - High Income Portfolio:
Tax qualified ........................................... 8,108,419 13.162137 106,724,122
Non-tax qualified ....................................... 11,738,433 13.162137 154,502,863
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................................... 3,807,002 12.718928 48,420,984
Non-tax qualified ....................................... 5,707,057 12.718928 72,587,647
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................................... 6,899,163 12.472730 86,051,397
Non-tax qualified ....................................... 9,363,900 12.472730 116,793,396
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................................... 8,168,270 13.235075 108,107,666
Non-tax qualified ....................................... 11,178,146 13.235075 147,943,601
Nationwide SAT - Capital Appreciation Fund:
Tax qualified ........................................... 1,424,586 15.932775 22,697,608
Non-tax qualified ....................................... 1,750,256 15.932775 27,886,435
Nationwide SAT - Government Bond Fund:
Tax qualified ........................................... 2,626,441 11.423331 30,002,705
Non-tax qualified ....................................... 3,145,104 11.423331 35,927,564
Nationwide SAT - Money Market Fund:
Tax qualified ........................................... 12,748,020 11.072205 141,148,691
Non-tax qualified ....................................... 18,836,301 11.072205 208,559,386
Nationwide SAT - Small Company Fund:
Tax qualified ........................................... 2,079,253 13.815158 28,725,209
Non-tax qualified ....................................... 3,209,131 13.815158 44,334,652
Nationwide SAT - Total Return Fund:
Tax qualified ........................................... 4,698,191 15.378605 72,251,624
Non-tax qualified ....................................... 6,080,735 15.378605 93,513,222
Neuberger & Berman - Growth Portfolio:
Tax qualified ........................................... 1,819,563 13.220449 24,055,440
Non-tax qualified ....................................... 3,383,799 13.220449 44,735,342
Neuberger & Berman - Limited Maturity Bond Portfolio:
Tax qualified ........................................... 2,722,579 11.092313 30,199,698
Non-tax qualified ....................................... 4,876,119 11.092313 54,087,438
Neuberger & Berman - Partners Portfolio:
Tax qualified ........................................... 3,997,138 17.213970 68,806,614
Non-tax qualified ....................................... 5,741,323 17.213970 98,830,962
Oppenheimer - Bond Fund:
Tax qualified ........................................... 3,583,135 11.601791 41,570,783
Non-tax qualified ....................................... 4,341,063 11.601791 50,364,106
Oppenheimer - Global Securities Fund:
Tax qualified ........................................... 4,661,410 12.171005 56,734,044
Non-tax qualified ....................................... 6,079,421 12.171005 73,992,663
Oppenheimer - Multiple Strategies Fund:
Tax qualified ........................................... 2,607,467 13.395639 34,928,687
Non-tax qualified ....................................... 3,408,601 13.395639 45,660,388
Strong Special Fund II, Inc.:
Tax qualified ........................................... 5,059,293 15.477893 78,307,196
Non-tax qualified ....................................... 6,638,439 15.477893 102,749,049
Strong VIF - Strong Discovery Fund II:
Tax qualified ........................................... 2,193,936 13.350547 29,290,246
Non-tax qualified ....................................... 3,358,454 13.350547 44,837,198
Strong VIF - Strong International Stock Fund II:
Tax qualified ........................................... 1,170,883 11.127252 13,028,710
Non-tax qualified ....................................... 1,645,592 11.127252 18,310,917
TCI Portfolios - TCI Balanced:
Tax qualified ........................................... 1,516,835 13.180739 19,993,006
Non-tax qualified ....................................... 2,144,874 13.180739 28,271,024
TCI Portfolios - TCI Growth:
Tax qualified ........................................... 2,639,035 12.067726 31,847,151
Non-tax qualified ....................................... 4,282,747 12.067726 51,683,017
TCI Portfolios - TCI International:
Tax qualified ........................................... 1,434,727 11.716901 16,810,554
Non-tax qualified ....................................... 2,170,866 11.716901 25,435,822
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
TCI Portfolios - TCI Value:
Tax qualified ........................................... 4,681 10.142340 47,476
Non-tax qualified ....................................... 10,752 10.142340 109,050
Van Eck - Gold and Natural Resources Fund:
Tax qualified ........................................... 1,203,386 13.331794 16,043,294
Non-tax qualified ....................................... 1,997,123 13.331794 26,625,232
Van Eck - Worldwide Bond Fund:
Tax qualified ........................................... 1,142,334 11.597396 13,248,100
Non-tax qualified ....................................... 1,639,285 11.597396 19,011,437
Van Eck - Worldwide Emerging Markets Fund:
Tax qualified ........................................... 343,730 10.077608 3,463,976
Non-tax qualified ....................................... 353,687 10.077608 3,564,319
Van Kampen American Capital LIT - Real Estate Securities Fund:
Tax qualified ........................................... 1,646,291 14.908696 24,544,052
Non-tax qualified ....................................... 2,361,457 14.908696 35,206,245
Warburg Pincus - International Equity Portfolio:
Tax qualified ........................................... 4,575,313 11.554772 52,866,699
Non-tax qualified ....................................... 7,026,060 11.554772 81,184,521
Warburg Pincus - Post Venture Capital Portfolio:
Tax qualified ........................................... 258,812 10.163549 2,630,448
Non-tax qualified ....................................... 266,629 10.163549 2,709,897
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified ........................................... 3,578,020 13.952718 49,923,104
Non-tax qualified ....................................... 5,095,747 13.952718 71,099,521
--------- ---------
Reserves for annuity contracts in payout phase:
Tax qualified ........................................... 2,554,123
Non-tax qualified ....................................... 2,710,327
----------------
$ 12,929,349,155
================
</TABLE>
<PAGE> 14
SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT-II
The BEST OF AMERICA(R)
NATIONWIDE INSURANCE ENTERPRISE ANNUITY CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DRYGROINC DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR FIDVIPHI
- ------------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 $10.000000 10.330490 10.575706 10.729806 9.643317 10.155366
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .536263 .457726 .495196 .693009 .926355
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.010213) 1.647572 1.914712 1.030017 .719991 .492885
- ------------------------------------------------------------------------------------------------------------
Contract charges (.001759) (.091290) (.093253) (.091225) (.083864) (.087282)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $ 9.988028 12.423035 12.854891 12.163794 10.972453 11.487324
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 0%(b) 20% 22% 13% 14% 13%
============================================================================================================
1995
Beginning unit value -
Jan. 1 ** $10.000000 10.000000 10.000000 10.000000 10.000000
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .284361 .133565 .055400 .000000 .000000
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .059585 .455824 .688141 (.343684) .168653
- ------------------------------------------------------------------------------------------------------------
Contract charges (.013456) (.013683) (.013735) (.012999) (.013287)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.330490 10.575706 10.729806 9.643317 10.155366
- ------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3%(b) 6%(b) 7%(b) (4)%(b) 2%(b)
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD
- --------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 10.484931 10.533861 10.207482 10.763065 10.262495
- --------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .258087 .693290 .096225 .560736 .636972
- --------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.121390 .837636 2.068018 2.239869 (.282546)
- --------------------------------------------------------------------------------------------
Contract charges (.089099) (.089585) (.088783) (.096267) (.081983)
- --------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 11.775309 11.975202 12.282942 13.467403 10.534938
- --------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 12% 14% 20% 25% 3%
============================================================================================
1995
Beginning unit value -
Jan. 1 10.000000 10.000000 10.000000 ** 10.000000
- --------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .000000 .131621 .160077
- --------------------------------------------------------------------------------------------
Unrealized gain (loss) .498416 .547401 .089202 .115777
- --------------------------------------------------------------------------------------------
Contract charges (.013485) (.013540) (.013341) (.013359)
- --------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.484931 10.533861 10.207482 10.262495
- --------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 5%(b) 5%(b) 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.
** This investment option was not being utilized or was not available.
<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
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART
- ------------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 $10.076854 11.411037 10.500717 9.971367 10.180593 10.570046
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .513543 .133865 .702739 .904925 .857039 .430854
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 2.461847 1.579762 .002333 (.421520) 2.680302
- ------------------------------------------------------------------------------------------------------------
Contract charges (.083050) (.103406) (.091880) (.083343) (.082563) (.095650)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.507347 13.903343 12.691338 10.795282 10.533549 13.585552
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 4% 22% 21% 8% 3% 29%
============================================================================================================
1995
Beginning unit value -
Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .090135 .017460 .616695 .000000 .000000 .000000
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.407776 (.102353) (.015308) .193905 .583646
- ------------------------------------------------------------------------------------------------------------
Contract charges (.013281) (.014199) (.013625) (.013325) (.013312) (.013600)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.076854 11.411037 10.500717 9.971367 10.180593 10.570046
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 1%(b) 14%(b) 5%(b) 0%(b) 2%(b) 6%(b)
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OPPBDFD OPPGLSEC OPPMULT STSPEC2 STDISC2
- ---------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 10.287129 10.087683 10.302692 10.587949 10.468286
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .661948 .000000 .785088 .498307 2.134313
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) (.172176) 1.787331 .804123 1.414208 (2.052747)
- ---------------------------------------------------------------------------------------------
Contract charges (.083100) (.087276) (.088381) (.091499) (.081899)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.693801 11.787738 11.803522 12.408965 10.467953
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 4% 17% 15% 17% 0%
=============================================================================================
1995
Beginning unit value -
Jan. 1 10.000000 10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .170891 .000000 .105143 .031024 .134105
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) .129602 .100810 .210984 .570573 .347815
- ---------------------------------------------------------------------------------------------
Contract charges (.013364) (.013127) (.013435) (.013648) (.013634)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.287129 10.087683 10.302692 10.587949 10.468286
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 3%(b) 1%(b) 3%(b) 6%(b) 5%(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.
** This investment option was not being utilized or was not available.
<PAGE> 16
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT-II
The BEST OF AMERICA(R)
NATIONWIDE INSURANCE ENTERPRISE ANNUITY CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
STINTSTK2 TCIBAL TCIGRO TCIINT TCIVALUE VEGOLDNR VEWRLDBD
- ----------------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 $10.176527 10.216536 9.880281 10.355977 10.000000 11.060595 10.113918
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .050845 .483345 1.108725 .246392 .000000 .234696 .275985
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.003660 .758083 (1.532596) 1.237834 .145456 1.758754 (.023506)
- ----------------------------------------------------------------------------------------------------------------
Contract charges (.088295) (.086275) (.079142) (.087610) (.001775) (.100424) (.080581)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.142737 11.371689 9.377268 11.752593 10.143681 12.953621 10.285816
- ----------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 9% 11% (5)% 13% 1%(b) 17% 2%
================================================================================================================
1995
Beginning unit value -
Jan. 1 ** ** $10.000000 10.000000 ** 10.000000 10.000000
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .000000 .53476 .187333
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.106657) .369293 1.021372 (.060143)
- ----------------------------------------------------------------------------------------------------------------
Contract charges (.013062) (.013316) (.014253) (.013272)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $ 9.880281 10.355977 11.060595 10.113918
- ----------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (1)%(b) 4%(b) 11%(b) 1%(b)
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEWRLDEMKT VKACRESEC WPLNTEQ WPPVENCAP WPSMCOGR
- ------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 10.000000 10.597781 10.363169 10.000000 11.154927
- ------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .284217 .220456 .000000 .000000
- ------------------------------------------------------------------------------------------
Unrealized gain (loss) .080700 3.985795 .811087 .166654 1.546684
- ------------------------------------------------------------------------------------------
Contract charges (.001756) (.094132) (.088469) (.001763) (.097367)
- ------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.078944 14.773661 11.306243 10.164891 12.604244
- ------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 1%(b) 39% 9% 2%(b) 13%
==========================================================================================
1995
Beginning unit value -
Jan. 1 ** 10.000000 10.000000 ** 10.000000
- ------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .090508 .075167 .000000
- ------------------------------------------------------------------------------------------
Unrealized gain (loss) .520696 .301322 1.168850
- ------------------------------------------------------------------------------------------
Contract charges (.013423) (.013320) (.013923)
- ------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.597781 10.363169 11.154927
- ------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 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.
** This investment option was not being utilized or was not available.
<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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
AVISGRO+ AVISHIYLD+ AVISGVT+ DRYGROINC DRYSRGRO DRYSTKIX
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $21.880052 20.729452 18.077072 10.000000 14.239508 13.619180
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.871220 1.958372 1.351206 .000000 .735635 .587282
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.027121 .758000 (.798218) (.010207) 2.266421 2.459091
- ------------------------------------------------------------------------------------------------------------
Contract charges (.299211) (.284998) (.234629) (.002868) (.204452) (.195121)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $24.479182 23.160826 18.395431 9.986925 17.037112 16.470432
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 12% 12% 2% 0%(b) 20% 21%
===========================================================================================================
1995
Beginning unit value -
Jan. 1 $16.632869 17.247186 15.872495 ** 10.721141 10.087774
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.970200 1.862872 1.241711 .391978 .361278
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.537128 1.870069 1.184664 3.289326 3.325716
- ------------------------------------------------------------------------------------------------------------
Contract charges (.260145) (.250675) (.221798) (.162937) (.155588)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $21.880052 20.729452 18.077072 14.239508 13.619180
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 32% 20% 14% 33% 35%
===========================================================================================================
1994
Beginning unit value -
Jan. 1 $16.767635 18.696382 16.810323 ** 10.702195 10.130946
- ------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .539769 1.648226 1.072204 .276343 .283238
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.458197) (2.863015) (1.799954) (.117315) (.195244)
- ------------------------------------------------------------------------------------------------------------
Contract charges (.216338) (.234407) (.210078) (.140082) (.131166)
- ------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $16.632869 17.247186 15.872495 10.721141 10.087774
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (1)% (8)% (6)% 0% 0%
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPEI FIDVIPGR FIDVIPHI FIDVIPOV FIDVIPAM
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 24.863579 34.006052 21.817076 14.832631 18.056027
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.146951 2.442671 1.989184 .364935 1.187807
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.376638 2.528836 1.052032 1.580901 1.428293
- ---------------------------------------------------------------------------------------------
Contract charges (.343492) (.480521) (.304742) (.204791) (.249505)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 28.043676 38.497038 24.553550 16.573676 20.422622
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 13% 13% 13% 12% 13%
=============================================================================================
1995
Beginning unit value -
Jan. 1 18.646331 25.451479 18.327364 13.701507 15.641016
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.458073 .140639 1.326946 .104797 .328525
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.043000 8.817717 2.428014 1.210063 2.303674
- ---------------------------------------------------------------------------------------------
Contract charges (.283825) (.403783) (.265248) (.183736) (.217188)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 24.863579 34.006052 21.817076 14.832631 18.056027
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 33% 34% 19% 8% 15%
=============================================================================================
1994
Beginning unit value -
Jan. 1 17.644458 25.790764 18.859652 13.646118 16.874276
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.324090 1.551366 1.728139 .070437 .820188
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) (.084066) (1.565204) (2.016825) .168983 (1.841072)
- ---------------------------------------------------------------------------------------------
Contract charges (.238151) (.325447) (.243602) (.184031) (.212376)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 18.646331 25.451479 18.327364 13.701507 15.641016
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 6% (1)% (3)% 0% (7)%
=============================================================================================
</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> 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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NSATGVTBD NSATGVTBD
FIDVIPCON NSATCAPAP QUAL NON-QUAL NSATMYMKT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $11.071500 14.442619 29.663756 29.585401 21.334141
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .104321 .749106 1.835340 1.830491 1.084427
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.235809 2.998126 (.817100) (.814933) .000000
- -----------------------------------------------------------------------------------------------
Contract charges (.156473) (.209884) (.385071) (.384053) (.285745)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $13.255157 17.979967 30.296925 30.216906 22.132823
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 20% 24% 2% 2% 4%
===============================================================================================
1995
Beginning unit value -
Jan. 1 $10.000000 11.311683 25.309101 25.242252 20.457373
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .142778 .642190 1.790910 1.786181 1.150096
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) .998371 2.653706 2.924333 2.916602 .000000
- -----------------------------------------------------------------------------------------------
Contract charges (.069649) (.164960) (.360588) (.359634) (.273328)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.071500 14.442619 29.663756 29.585401 21.334141
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 11%(b) 28% 17% 17% 4%
===============================================================================================
1994
Beginning unit value -
Jan. 1 ** $11.564256 26.497619 26.427634 19.951530
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .182737 1.662261 1.657870 .769331
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) (.286833) (2.516459) (2.509816) .000000
- -----------------------------------------------------------------------------------------------
Contract charges (.148477) (.334320) (.333436) (.263488)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.311683 25.309101 25.242252 20.457373
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (2)% (4)% (4)% 3%
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
NSATTOTRE NSATTOTRE
NSATSMCO QUAL NON-QUAL NBAMTGRO NBAMTLMAT NBAMTPART
- -----------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 11.410135 52.147953 50.805130 27.626244 16.311479 13.494251
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .133283 3.474445 3.384976 2.505038 1.372002 .549587
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.456383 7.826655 7.625118 .001295 (.677039) 3.410729
- -----------------------------------------------------------------------------------------------------------
Contract charges (.167988) (.741419) (.722335) (.375218) (.214972) (.198416)
- -----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 13.831813 62.707634 61.092889 29.757359 16.791470 17.256151
- -----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 21% 20% 20% 8% 3% 28%
===========================================================================================================
1995
Beginning unit value -
Jan. 1 10.000000 40.926247 39.872391 21.247525 14.896724 10.017795
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .017459 4.054856 3.950443 .751645 .827026 .081856
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.418317 7.778269 7.577969 5.960166 .791918 3.550121
- -----------------------------------------------------------------------------------------------------------
Contract charges (.025641) (.611419) (.595673) (.333092) (.204189) (.155521)
- -----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 11.410135 52.147953 50.805130 27.626244 16.311479 13.494251
- -----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 14%(b) 27% 27% 30% 9% 35%
===========================================================================================================
1994
Beginning unit value -
Jan. 1 ** 41.023082 39.966728 22.656907 15.115753 10.000000
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.069920 2.016621 2.730116 .638336 .000000
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.626696) (1.584802) (3.855326) (.662388) .072563
- -----------------------------------------------------------------------------------------------------------
Contract charges (.540059) (.526156) (.284172) (.194977) (.054768)
- -----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 40.926247 39.872391 21.247525 14.896724 10.017795
- -----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 0% 0% (6)% (1)% 0%(b)
===========================================================================================================
</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) CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
OPPBDFD OPPGISEC OPPMULT STSPEC2
- ---------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C>
Beginning unit value -
Jan. 1 $16.781326 11.411200 15.831164 18.071722
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.076598 .000000 1.203421 .849258
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) (.281316) 2.015955 1.231538 2.405366
- ---------------------------------------------------------------------------------------------
Contract charges (.220298) (.160400) (.220648) (.253782)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $17.356310 13.266755 18.045475 21.072564
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 3% 16% 14% 17%
=============================================================================================
1995
Beginning unit value -
Jan. 1 $14.531774 11.307851 13.216172 14.551898
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.000174 .297358 1.064619 .752969
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.454423 (.045704) 1.742703 2.978530
- ---------------------------------------------------------------------------------------------
Contract charges (.205045) (.148305) (.192330) (.211675)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $16.781326 11.411200 15.831164 18.071722
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 15% 1% 20% 24%
=============================================================================================
1994
Beginning unit value -
Jan. 1 $15.013579 12.151882 13.655607 14.230988
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .845781 .214070 .695235 .407882
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.135198) (.900281) (.959283) .103551
- ---------------------------------------------------------------------------------------------
Contract charges (.192388) (.157820) (.175387) (.190523)
- ---------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $14.531774 11.307851 13.216172 14.551898
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (3)% (7)% (3)% 2%
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
STDISC2 STINTSTK2 TCIBAL TCIGRO TCIINT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 16.212409 10.226470 12.912980 25.074858 10.402550
- -------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.300022 .050935 .609851 2.810305 .247026
- -------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (3.176638) 1.007473 .954518 (3.881210) 1.239063
- -------------------------------------------------------------------------------------------------------------
Contract charges (.206105) (.144196) (.177179) (.326402) (.143000)
- -------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 16.129688 11.140682 14.300170 23.677551 11.745639
- -------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (1)% 9% 11% (6)% 13%
=============================================================================================================
1995
Beginning unit value -
Jan. 1 12.143604 10.000000 10.801286 19.378026 9.392316
- -------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .211635 .041084 .305744 .022298 .000000
- -------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.041557 .209464 1.961261 5.972516 1.136498
- -------------------------------------------------------------------------------------------------------------
Contract charges (.184387) (.024078) (.155311) (.297982) (.126264)
- -------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 16.212409 10.226470 12.912980 25.074858 10.402550
- -------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 34% 2%(b) 20% 29% 11%
=============================================================================================================
1994
Beginning unit value -
Jan. 1 13.003747 ** 10.876699 19.864882 10.000000
- -------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .971108 .260548 .002124 .000000
- -------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.670219) (.194362) (.235006) (.554314)
- -------------------------------------------------------------------------------------------------------------
Contract charges (.161032) (.141599) (.253974) (.053370)
- -------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 12.143604 10.801286 19.378026 9.392316
- -------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (7)% (1)% (2)% (6)%(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.
** This investment option was not being utilized or was not available.
<PAGE> 20
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
TCIVALUE VEGOLDNR VEWRLDBD VEWRLDEMKT VKACRESEC WPINTEQ WPPVENCAP WPSMCOGR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $10.000000 13.944310 14.433345 10.000000 10.765351 10.661059 10.000000 12.430073
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .295267 .393026 .000000 .287350 .225703 .000000 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .145460 2.214346 (.035238) .080692 4.033978 .833419 .166646 1.720113
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.002895) (.205724) (.186852) (.002862) (.155376) (.147887) (.002874) (.176297)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.142565 16.248199 14.604281 10.077830 14.931303 11.572294 10.163772 13.973889
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 1%(b) 17% 1% 1%(b) 39% 9% 2%(b) 12%
===================================================================================================================================
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)%
===================================================================================================================================
</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> 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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
DRYGROINC DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $10.000000 13.462638 13.549203 14.333670 13.458405
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .694830 .583832 .661147 .966633
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) (.010207) 2.141897 2.445129 1.368948 1.000033
- -----------------------------------------------------------------------------------------------
Contract charges (.003089) (.208168) (.209044) (.213258) (.204806)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $ 9.986704 16.091197 16.369120 16.150507 15.220265
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 0%(b) 20% 21% 13% 13%
===============================================================================================
1995
Beginning unit value -
Jan. 1 ** $10.146464 10.046079 10.760332 10.082986
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .370596 .359517 .841191 .055711
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.111650 3.310456 2.908537 3.491973
- -----------------------------------------------------------------------------------------------
Contract charges (.166072) (.166849) (.176390) (.172265)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $13.462638 13.549203 14.333670 13.458405
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 33% 35% 33% 33%
===============================================================================================
1994
Beginning unit value -
Jan. 1 ** $10.138790 10.099271 10.192462 10.227729
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .261532 .282153 .764674 .615160
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) (.110944) (.194528) (.048662) (.620912)
- -----------------------------------------------------------------------------------------------
Contract charges (.142914) (.140817) (.148142) (.138991)
- -----------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.146464 10.046079 10.760332 10.082986
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 0% (1)% 6% (1)%
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 11.707151 11.394419 11.038610 11.065996 12.811228 11.196001
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.067306 .280317 .726101 .104260 .663900 .692273
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .563776 1.213612 .872284 2.233243 2.658151 (.308425)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.176096) (.169420) (.164265) (.168424) (.200504) (.156518)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 13.162137 12.718928 12.472730 13.235075 15.932775 11.423331
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 12% 12% 13% 20% 24% 2%
==========================================================================================================
1995
Beginning unit value -
Jan. 1 9.844496 10.536141 9.571852 10.000000 10.044095 9.562079
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .712698 .080579 .201029 .142710 .569727 .676196
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.303393 .929853 1.408870 .998320 2.355148 1.104438
- ----------------------------------------------------------------------------------------------------------
Contract charges (.153436) (.152154) (.143141) (.075034) (.157742) (.146712)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 11.707151 11.394419 11.038610 11.065996 12.811228 11.196001
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 19% 8% 15% 11%(b) 28% 17%
==========================================================================================================
1994
Beginning unit value -
Jan. 1 10.140663 10.504149 10.337032 ** 10.278752 10.021251
- ---------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .929117 .054214 .502389 .162311 .628252
- ---------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.084223) .130333 (1.127465) (.254834) (.951262)
- ---------------------------------------------------------------------------------------------------------
Contract charges (.141061) (.152555) (.140104) (.142134) (.136162)
- ---------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 9.844496 10.536141 9.571852 10.044095 9.562079
- ---------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (3)% 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.
<PAGE> 22
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $10.683538 11.408018 12.801951 12.286164 10.786223
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .542750 .133144 .852193 1.113872 .907105
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 2.454868 1.920473 .000119 (.447926)
- -----------------------------------------------------------------------------------------------
Contract charges (.154083) (.180872) (.196012) (.179706) (.153089)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.072205 13.815158 15.378605 13.220449 11.092313
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 4% 21% 20% 8% 3%
===============================================================================================
1995
Beginning unit value -
Jan. 1 $10.254838 10.000000 10.057257 9.458916 9.860649
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .576257 .017456 .995563 .334560 .547347
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418186 1.910936 2.652367 .523785
- -----------------------------------------------------------------------------------------------
Contract charges (.147557) (.027624) (.161805) (.159679) (.145558)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.683538 11.408018 12.801951 12.286164 10.786223
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value*(a) 4% 14%(b) 27% 30% 9%
===============================================================================================
1994
Beginning unit value -
Jan. 1 $10.011385 ** 10.091256 10.096549 10.015749
- -----------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .385849 .508763 1.216477 .422915
- -----------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.399693) (1.717723) (.438889)
- -----------------------------------------------------------------------------------------------
Contract charges (.142396) (.143069) (.136387) (.139126)
- -----------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.254838 10.057257 9.458916 9.860649
- -----------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 2% 0% (6)% (2)%
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
NBAMTPART OPPBDFD OPPGISEC OPPMULT STSPEC2 STDISC2
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 13.474969 11.228877 10.479380 11.763879 13.287288 13.432714
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .548709 .719951 .000000 .893804 .624234 2.733315
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.403649 (.188311) 1.850267 .914532 1.767320 (2.631584)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.213357) (.158726) (.158642) (.176576) (.200949) (.183898)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 17.213970 11.601791 12.171005 13.395639 15.477893 13.350547
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 28% 3% 16% 14% 16% (1)%
==========================================================================================================
1995
Beginning unit value -
Jan. 1 10.013591 9.733460 10.394970 9.830640 10.710138 10.071698
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .081808 .669514 .273289 .791531 .553997 .175352
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.546970 .973805 (.042048) 1.295766 2.190922 3.350345
- ----------------------------------------------------------------------------------------------------------
Contract charges (.167400) (.147902) (.146831) (.154058) (.167769) (.164681)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 13.474969 11.228877 10.479380 11.763879 13.287288 13.432714
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value*(a) 35% 15% 1% 20% 24% 33%
==========================================================================================================
1994
Beginning unit value -
Jan. 1 10.000000 10.066342 11.182167 10.167774 10.484543 10.796000
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .566682 .196942 .517326 .300283 .805515
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .072593 (.760661) (.827742) (.713828) .076473 (1.385836)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.059002) (.138903) (.156397) (.140632) (.151161) (.143981)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.013591 9.733460 10.394970 9.830640 10.710138 10.071698
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 0%(b) (3)% (7)% (3)% 2% (7)%
==========================================================================================================
</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> 23
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
STINTSTK2 TCIBAL TCIGRO TCIINT TCIVALUE VEGOLDNR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 $10.224570 11.914266 12.792935 10.387676 10.000000 11.453100
- ------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .050894 .562489 1.433431 .246577 .000000 .242414
- ------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.007035 .880033 (1.979303) 1.236426 .145458 1.818253
- ------------------------------------------------------------------------------------------------------
Contract charges (.155247) (.176049) (.179337) (.153778) (.003118) (.181973)
- ------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.127252 13.180739 12.067726 11.716901 10.142340 13.331794
- ------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 9% 11% (6)% 13% 1%(b) 16%
======================================================================================================
1995
Beginning unit value -
Jan. 1 $10.000000 9.975959 9.896469 9.388381 ** 10.464922
- ------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .041077 .282199 .011387 .000000 .103018
- ------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .209428 1.810577 3.048970 1.135219 1.036957
- ------------------------------------------------------------------------------------------------------
Contract charges (.025935) (.154469) (.163891) (.135924) (.151797)
- ------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.224570 11.914266 12.792935 10.387676 11.453100
- ------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 2%(b) 19% 29% 11% 9%
======================================================================================================
1994
Beginning unit value -
Jan. 1 ** $10.055760 10.155359 10.000000 ** 11.147499
- ------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .240728 .001086 .000000 .055957
- ------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.179560) (.120150) (.554133) (.585405)
- ------------------------------------------------------------------------------------------------------
Contract charges (.140969) (.139826) (.057486) (.153129)
- ------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $ 9.975959 9.896469 9.388381 10.464922
- ------------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) (1)% (3)% (6)%(b) (6)%
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEWRLDBD VEWRLDEMKT VKACRESEC WPLNTEQ WPPVENCAP WPSMCOGR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value -
Jan. 1 11.473340 10.000000 10.759998 10.655759 10.000000 12.423899
- ----------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .312292 .000000 .286935 .225373 .000000 .000000
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.028284) .080691 4.028984 .832826 .166644 1.718585
- ----------------------------------------------------------------------------------------------------
Contract charges (.159952) (.003083) (.167221) (.159186) (.003095) (.189766)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 11.597396 10.077608 14.908696 11.554772 10.163549 13.952718
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease)
in unit value* (a) 1% 1%(b) 39% 8% 2%(b) 12%
====================================================================================================
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)%
====================================================================================================
</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 3.
<PAGE> 71
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers throughout the
United States. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded
in the consolidated financial statements. The Company mitigates
this risk by offering a wide range of products and by operating
throughout the United States, thus reducing its exposure to any
single product or jurisdiction, and also by employing underwriting
practices which identify and minimize the adverse impact of this
risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life products,
these deferred policy acquisition costs are predominantly being
amortized with interest over the premium paying period of the
related policies in proportion to the ratio of actual annual
premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred but
unreported claims. The impact of reserve discounting is not
material. Future policy benefits and claims on other group health
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded at
amortized cost. The effect as of January 1, 1994 has been recorded as a
direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------------- --------------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of
$3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995 the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
WITHDRAWALS: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on
published tables, modified for the Company's actual
experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(SFAS 107) requires disclosure of fair value information about existing
on and off-balance sheet financial instruments. SFAS 107 defines the
fair value of a financial instrument as the amount at which the
financial instrument could be exchanged in a current transaction
between willing parties. In cases where quoted market prices are not
available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts is provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $327,456 extending into
1997 were outstanding as of December 31, 1996.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds pension costs accrued for
direct employees plus an allocation of pension costs accrued for
employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan. Immediately prior to the merger, the plans were
amended to provide consistent benefits for service after January 1,
1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
---------------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. NLIC transferred fixed maturity securities and cash with
a fair value of $155,000 to WSC on December 28, 1994, which resulted in
a realized loss of $19,239 on the disposition of the securities. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share home
office, other facilities, equipment and common management and
administrative services with WSC. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Contingencies
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 25
<TABLE>
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Summary of Investments -
Other Than Investments in Related Parties
As of December 31, 1996
($000's omitted)
<CAPTION>
- --------------------------------------------------------------- --------------- -------------- -----------------
Column A Column B Column C Column D
- --------------------------------------------------------------- --------------- -------------- -----------------
Amount at which
shown in the
consolidated
Type of Investment Cost Market value balance sheet
- --------------------------------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 3,757,887 3,834,762 3,834,762
States, municipalities and political subdivisions 6,242 6,690 6,690
Foreign governments 100,656 101,940 101,940
Public utilities 1,798,736 1,843,938 1,843,938
All other corporate 6,307,357 6,517,309 6,517,309
--------------- -------------- -----------------
Total fixed maturity securities available-for-sale 11,970,878 12,304,639 12,304,639
--------------- -------------- -----------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 43,501 50,405 50,405
Non-redeemable preferred stock 389 8,726 8,726
--------------- -------------- -----------------
Total equity securities available-for-sale 43,890 59,131 59,131
--------------- -------------- -----------------
Mortgage loans on real estate, net 5,327,317 5,272,119 (1)
Real estate, net:
Investment properties 253,383 217,611 (1)
Acquired in satisfaction of debt 57,933 48,148 (1)
Policy loans 371,816 371,816
Other long-term investments 27,370 28,668 (2)
Short-term investments 4,789 4,789
--------------- ----------------
Total investments $18,057,376 18,306,921
=============== ================
<FN>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 5 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains of investments
in limited partnerships.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplemental Insurance Information
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
- ----------------------------------- -------------- ------------------ ----------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- ------------------ ----------------- ----------------- ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
acquisition claims and Unearned premiums benefits payable Premium
Segment costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- ------------------ ----------------- ---------------- --------------
<C> <C> <C> <C> <C> <C>
1996: Variable Annuities $ 791,611 - - -
Fixed Annuities 242,421 14,952,877 687 24,030
Life Insurance 414,417 1,995,802 395,739 174,612
Corporate and Other (81,940) 230,381 25,048 -
-------------- ------------------ ---------------- --------------
Total $1,366,509 17,179,060 421,474 198,642
============== ================== ================ ==============
1995: Variable Annuities 571,283 - - -
Fixed Annuities 221,111 14,221,622 455 32,774
Life Insurance 366,876 1,898,641 383,983 166,332
Corporate and Other (138,914) 238,351 28,886 -
-------------- ------------------ ---------------- --------------
Total $1,020,356 16,358,614 413,324 199,106
============== ================== ================ ==============
1994: Variable Annuities 395,397 - - -
Fixed Annuities 198,639 12,633,253 240 20,134
Life Insurance 327,079 1,806,762 371,984 156,524
Corporate and Other 74,445 233,569 26,927 -
-------------- ------------------ ---------------- --------------
Total $ 995,560 14,673,584 399,151 176,658
============== ================== ================ ==============
<CAPTION>
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Net Amortization Other
investment Benefits, claims, of deferred operating
income losses and policy expenses Premiums
Segment (3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- ------------------- ----------------- ----------------- --------------
1996: Variable Annuities $ (21,449) 4,624 57,412 132,357
Fixed Annuities 1,050,557 838,533 38,635 79,737
Life Insurance 174,002 211,386 37,347 78,965
Corporate and Other 154,649 106,037 - 51,335
-------------- ------------------- ----------------- -----------------
Total $1,357,759 1,160,580 133,394 342,394
============== =================== ================= =================
1995: Variable Annuities (17,640) 2,881 26,264 109,089
Fixed Annuities 1,002,718 804,980 29,499 80,260
Life Insurance 171,255 201,986 31,021 68,832
Corporate and Other 137,700 105,646 (4,089) 14,773
-------------- ------------------- ----------------- -----------------
Total $1,294,033 1,115,493 82,695 272,954
============== =================== ================= =================
1994: Variable Annuities (13,415) 2,277 22,135 83,701
Fixed Annuities 903,572 702,082 29,849 69,975
Life Insurance 166,329 191,006 29,495 69,861
Corporate and Other 154,325 97,302 4,089 17,115
-------------- ------------------- ----------------- -----------------
Total $1,210,811 992,667 85,568 240,652
============== =================== ================= =================
<FN>
- ----------
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the Balance Sheet captions, Policyholders'
dividend accumulations and Other policyholder funds.
(3) Allocations of net investment income and certain general expenses are based
on a number of assumptions and estimates, and reported operating results
would change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Column A Column B Column C Column D Column E Column F
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
----------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
Life insurance in force $47,071,264 6,633,567 288,593 40,726,290 0.7%
================= ================= ================ ================ ===============
Premiums:
Life insurance 225,615 29,282 2,309 198,642 1.2%
Accident and health insurance 291,871 305,789 13,918 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 517,486 335,071 16,227 198,642 8.2%
================= ================= ================ ================ ===============
1995:
Life Insurance in force $41,087,025 8,935,743 391,174 32,542,456 1.2%
================= ================= ================ ================ ===============
Premiums:
Life insurance 221,257 24,360 2,209 199,106 1.1%
Accident and health insurance 298,058 313,036 14,978 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 519,315 337,396 17,187 199,106 8.6%
================= ================= ================ ================ ===============
1994:
Life Insurance in force $35,926,633 7,550,623 829,742 29,205,752 2.8%
================= ================= ================ ================ ===============
Premiums:
Life insurance 198,705 24,912 2,865 176,658 1.6%
Accident and health insurance 303,435 321,696 18,261 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 502,140 346,608 21,126 176,658 12.0%
================= ================= ================ ================ ===============
<FN>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on invesment products and universal life insurance
products.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1996:
Valuation allowances - mortgage loans on real
estate $49,128 4,497 - 2,587 51,038
Valuation allowances - real estate 25,819 (10,600) - - 15,219
------------ ------------ -------------- ------------ -------------
Total $74,947 (6,103) - 2,587 66,257
============ ============ ============== ============ =============
1995:
Valuation allowances - fixed maturity securities - 8,908 - 8,908 -
Valuation allowances - mortgage loans on real
estate 46,381 7,433 - 4,686 49,128
Valuation allowances - real estate 27,330 (1,511) - - 25,819
------------ ------------ -------------- ------------ -------------
Total $73,711 14,830 - 13,594 74,947
============ ============ ============== ============ =============
1994:
Valuation allowances - fixed maturity securities 4,800 (4,800) - - -
Valuation allowances - mortgage loans on real
estate 42,150 20,445 - 16,214 46,381
Valuation allowances - real estate 31,357 (4,027) - - 27,330
------------ ------------ -------------- ------------ -------------
Total $78,307 11,618 - 16,214 73,711
============ ============ ============== ============ =============
<FN>
- ----------
(1) Amounts represent direct write-downs charged against the valuation allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 72
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial statements and schedule included Page
in Prospectus
(Part A):
Condensed Financial Information. 18
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 70
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. 70
Statement of Assets, Liabilities and Contract 71
Owners' Equity as of December 31, 1996.
Statements of Operations and Changes in 72
Contract Owners' Equity for the years ended
December 31, 1996, 1995 and 1994.
Notes to Financial Statements. 74
Schedule I 83
Nationwide Life Insurance Company:
Independent Auditors' Report. 93
Consolidated Balance Sheets as of December 93
31, 1996 and 1995.
Consolidated Statements of Income for the 95
years ended December 31, 1996, 1995 and
1994.
Consolidated Statements of Shareholder's 96
Equity for the years ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Cash Flows for 97
the years ended December 31, 1996, 1995
and 1994.
Notes to Consolidated Financial Statements. 98
Schedule I - Consolidated Summary of Investments - Other
Than Investments in Related Parties 135
Schedule III - Supplementary Insurance Information 136
Schedule IV - Reinsurance 137
Schedule V - Valuation and Qualifying Accounts 138
117 of 139
<PAGE> 73
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant - Filed
previously with the Registration Statement, and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between the
Registrant and Principal Underwriter - Filed previously
with the Registration Statement, and hereby incorporated
by reference.
(4) The form of the variable annuity contract - Filed
previously with the Registration Statement, and hereby
incorporated by reference
(5) Variable Annuity Application
Filed previously with the Registration Statement, and
hereby incorporated by reference.
(6) Articles of Incorporation of Depositor Filed previously
with the Registration Statement, and hereby incorporated
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement, and hereby incorporated by
reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with the
Registration Statement, and hereby
incorporated by reference.
118 of 139
<PAGE> 74
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address With Depositor
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, 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 and Director
Darlington, MD 21034
Dimon Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
119 of 139
<PAGE> 75
Name and Principal Positions and Offices
Business Address With Depositor
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operation
Columbus, OH 43215
120 of 139
<PAGE> 76
Name and Principal Positions and Offices
Business Address With Depositor
Matthew S. Easley Vice President - Marketing,
One Nationwide Plaza Innovation and Compliance
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Applications Service
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, OH 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath Vice President
One Nationwide Plaza
Columbus, OH 43215
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
121 of 139
<PAGE> 77
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Ohio Life Insurance Agency
Inc.
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
American Marine Florida Underwriting Manager
Underwriters, Inc.
Auto Direkt Insurance Germany Insurance Company
Company
The Beak and Wire Ohio Radio Tower Joint Venture
Corporation
California Cash California Investment Securities Agent
Management Company
Colonial County Mutual Texas Insurance Company
insurance Company
Colonial Insurance California Insurance Company
Company of California
Columbus Insurance Germany Insurance Broker
Brokerage and Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency California Insurance Broker
Insurance Services of
California
Companies Agency of Alabama Insurance Broker
Alabama, Inc.
Companies Agency of Idaho Insurance Broker
Idaho, Inc.
Companies Agency of Illinois Acts as Collection Agent
Illinois, Inc. for Policies placed through
Brokers
Companies Agency of Kentucky Insurance Broker
Kentucky, Inc.
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
Companies Agency of New New York Insurance Broker
York, Inc.
Companies Agency of Pennsylvania Insurance Broker
Pennsylvania, Inc.
Companies Agency of Arizona Insurance Broker
Phoenix, Inc.
Companies Agency of Texas Insurance Broker
Texas, Inc.
Companies Annuity Agency Texas Insurance Broker
of Texas, Inc.
Countrywide Services Delaware Products Liability,
Corporation Investigative and Claims
Management Services
Employers Insurance of Wisconsin Insurance Company
Wausau A Mutual Company
** Employers Life Insurance Wisconsin Life Insurance Company
Company of Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Iowa Insurance Company
Company
</TABLE>
122 of 139
<PAGE> 78
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C>
Financial Horizons Alabama Life Insurance Agency
Distributors Agency of
Alabama, Inc.
Financial Horizons Ohio Life Insurance Agency
Distributors Agency of
Ohio, Inc.
Financial Horizons Oklahoma Life Insurance Agency
Distributors Agency of
Oklahoma, Inc.
Financial Horizons Texas Life Insurance Agency
Distributors Agency of
Texas, Inc.
* Financial Horizons Massachusetts Investment Company
Investment Trust
Financial Horizons Oklahoma Broker Dealer
Securities Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company Nevada Self-Insurance
of Nevada Administration Claims
Examinations and Data
Processing Services
Gates, McDonald & Company New York Workers Compensation Claims
of New York, Inc. Administration
Gates, McDonald Health Ohio Managed Care Organization
Ohio Plus, Inc.
Greater La Crosse Health Wisconsin Writes Commercial Health
Plans, Inc. and Medicare Supplement
Insurance
Insurance Intermediaries, Ohio Insurance Broker and
Inc. Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial New York Life Insurance Agency
Services of New York, Inc.
Leben Direkt Insurance Germany Life Insurance Company
Company
Lone Star General Agency, Texas Insurance Agency
Inc.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company Great Britain Insurance Company
of America, Ltd.
** National Premium and Delaware Insurance Administrative
Benefit Administration Services
Company
** Nationwide Advisory Ohio Registered Broker-Dealer,
Services, Inc. Investment Manager and
Administrator
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Iowa Insurance Company
Insurance Company
* Nationwide Asset Massachusetts Investment Company
Allocation Trust
Nationwide Cash Ohio Investment Securities Agent
Management Company
Nationwide Ohio Radio Broadcasting Business
Communications, Inc.
Nationwide Community Ohio Redevelopment of blighted
Urban Redevelopment areas within the City of
Corporation Columbus, Ohio
</TABLE>
123 of 139
<PAGE> 79
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C>
Nationwide Corporation Ohio Organized for the purpose
of acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts
of other persons,
associations, corporations,
domestic or foreign and to
form or acquire the control
of other corporations
* Nationwide Development Ohio Owns, leases and manages
Company commercial real estate
Nationwide Financial Delaware Insurance Agency
Institution Distributors
Agency, Inc.
Nationwide Financial Delaware Holding Company
Services, Inc.
Nationwide General Ohio Insurance Company
Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance
Organization
* Nationwide Indemnity Ohio Reinsurance Company
Company
Nationwide Insurance Ohio Membership Non-Profit
Enterprise Foundation Corporation
Nationwide Insurance Golf Ohio Membership Non-Profit
Charities, Inc. Corporation
Nationwide Investing Michigan Investment Company
Foundation
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Oklahoma Registered Broker-Dealer in
Services Corporation Deferred Compensation Market
Nationwide Investors Ohio Stock Transfer Agent
Services, Inc.
** Nationwide Life and Ohio Life Insurance Company
Annuity Insurance Company
** Nationwide Life Insurance Ohio Life Insurance Company
Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Ohio Develops and operates
Systems, Inc. Managed Care Delivery
System
Nationwide Mutual Fire Ohio Insurance Company
Insurance Company
Nationwide Mutual Ohio Insurance Company
Insurance Company
Nationwide Properties, Ohio Develops, owns, and
Ltd. operates real estate and
real estate investments
Nationwide Property and Ohio Insurance Company
Casualty Insurance Company
Nationwide Realty Ohio Develops, owns, and
Investors, Ltd. operates real estate and
real estate investments
* Nationwide Separate Massachusetts Investment Company
Account Trust
</TABLE>
124 of 139
<PAGE> 80
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C>
NEA Valuebuilder Investor Delaware Life Insurance Agency
Services, Inc.
NEA Valuebuilder Investor Alabama Life Insurance Agency
Services of Alabama, Inc.
NEA Valuebuilder Investor Arizona Life Insurance Agency
Services of Arizona, Inc.
NEA Valuebuilder Investor Montana Life Insurance Agency
Services of Montana, Inc.
NEA Valuebuilder Investor Nevada Life Insurance Agency
Services of Nevada, Inc.
NEA Valuebuilder Investor Ohio Life Insurance Agency
Services of Ohio, Inc.
NEA Valuebuilder Investor Oklahoma Life Insurance Agency
Services of Oklahoma, Inc.
NEA Valuebuilder Investor Texas Life Insurance Agency
Services of Texas, Inc.
NEA Valuebuilder Investor Wyoming Life Insurance Agency
Services of Wyoming, Inc.
NEA Valuebuilder Services Massachusetts Life Insurance Agency
Insurance Agency, Inc.
Neckura General Insurance Germany Insurance Company
Company
Neckura Holding Company Germany Administrative Service for
Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Germany Life Insurance Company
Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Massachusetts Markets and Administers
Insurance Agency, Inc. Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Pension Associates of Wisconsin Pension plan
Wausau, Inc. administration, record
keeping and consulting and
compensation consulting
Physicians Plus Insurance Wisconsin Health Maintenance
Corporation Organization
Prevea Health Insurance Wisconsin Health Maintenance
Plan, Inc. Organization
Public Employees Benefit Delaware Markets and Administers
Services corporation Deferred Compensation Plans
for Public Employees
Public Employees Benefit Alabama Markets and Administers
Services Corporation of Deferred Compensation Plans
Alabama for Public Employees
Public Employees Benefit Arkansas Markets and Administers
Services Corporation of Deferred Compensation Plans
Arkansas for Public Employees
</TABLE>
125 of 139
<PAGE> 81
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C>
Public Employees Benefit Montana Markets and Administers
Services Corporation of Deferred Compensation Plans
Montana for Public Employees
Public Employees Benefit New Mexico Markets and Administers
Services Corporation of Deferred Compensation Plans
New Mexico for Public Employees
Scottsdale Indemnity Ohio Insurance Company
Company
Scottsdale Insurance Ohio Excess and Surplus Lines
Company Insurance Company
Scottsdale Surplus Lines Arizona Excess and Surplus Lines
Insurance Company Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura
Insurance Group Insurance Group
Wausau Business Insurance Wisconsin Insurance Company
Company
Wausau General Insurance Illinois Insurance Company
Company
Wausau Insurance Company United Kingdom Insurance and Reinsurance
(U.K.) Limited Company
Wausau International California Special Risks, Excess and
Underwriters Surplus Lines Insurance
Underwriting Manager
** Wausau Preferred Health Wisconsin Insurance and Reinsurance
Insurance Company Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Wisconsin Insurance Company
Insurance Company
** West Coast Life Insurance California Life Insurance Company
Company
</TABLE>
126 of 139
<PAGE> 82
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(see Attached Chart)
STATE unless otherwise
OF ORGANIZATION indicated
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide DC Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide DCVA II Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Multi-Flex Ohio Nationwide Life Issuer of Annuity
Variable Account Separate Account Contracts
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity
Account-A Annuity Separate Contracts
Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity
Account-B Annuity Separate Contracts
Account
Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity
Account-C Annuity Separate Contracts
Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity
Account-Q Annuity Separate Contracts
Account
* Nationwide Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-II Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-3 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-4 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-5 Separate Account Contracts
* Nationwide Fidelity Ohio Nationwide Life Issuer of Annuity
Advisor Variable Account Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-6 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-8 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-9 Seperate Account Contracts
* Nationwide VL Separate Ohio Nationwide Life and Issuer of Life
Account-A Annuity Separate Insurance Policies
Account
* Nationwide VL Separate Ohio Nationwide Life and Issuer of Life
Account-B Annuity Separate Insurance Policies
Account
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account Separate Account Insurance Policies
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-2 Separate Account Insurance Policies
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-3 Separate Account Insurance Policies
</TABLE>
127 of 139
<PAGE> 83
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate | | |------------ Shares | | |------------ Shares |
|----------- Cost | | | Cost | | | Cost |
| ---- | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | -------------------------------- | --------------------------------
| | |
- -------------------------------- | -------------------------------- | --------------------------------
| F & B, INC. | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | COMPANY OF CALIFORNIA | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | (COLONIAL) | | | |
|------------ | |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | |------------ Shares | | |------------ Shares |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $10 | | |Casualty-100% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
|------------ Shares | | | Cost |
| Cost | | | ---- |
| ---- | | |Casualty-90% $9,000 |
|Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
-------------------------------- | --------------------------------
|| |
-------------------------------- | --------------------------------
| COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| INSURANCE COMPANY | | | MANAGEMENT |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $58,070,003 | | | NW Life--100% $5,996,261 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life--100% $529,728 | | | COMMON LAW TRUST | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
(Center)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|
----------------------------------------------------------------------------------------------------------------------
| | | |
--------------------------- -------------------------- ----------------------------- ----------------------------
| NATIONWIDE FINANCIAL | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $500 | || | NEA--100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP.--100% $25,683,532 | | | NW CORP.--100% $126,509,480 | | | NW CORP.--100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Partnership Interest -- Dotted Line
March 6, 1997
Page 2
</TABLE>
<PAGE> 89
Item 27. Number of Contract Owners
The number of contract Owners of Qualified and Non-Qualified
Contracts as of May 31, 1997 was 254,683 and 97,227 respectively.
Item 28. Indemnification
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation Law
of the State of Ohio, for indemnification by the Company of any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of
the fact that such person is or was a director, officer or employee
of the Company, against expenses, including 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 Advisory Services, Inc. ("NAS") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide DC
Variable Account, Nationwide DCVA II, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide Variable
Account-9 Nationwide VA Separate Account-A, Nationwide VA
Separate Account-B, Nationwide VA Separate Account-C,
Nationwide VL Separate Account-A, Nationwide VL Separate
Account-B, Nationwide VLI Separate Account-2, Nationwide VLI
Separate Account-3, NACo Variable Account and Nationwide
Variable Account, all of which are separate investment
accounts of the Company or its affiliates.
NAS also acts as principal underwriter for Nationwide Investing
Foundation, Nationwide Separate Account Trust, Financial
Horizons Investment Trust, Nationwide Asset Allocation Trust
and Nationwide Investing Foundation II, which are open-end
management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
Positions and offices
Name and Business Address with Underwriter
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon Richard McFerson Chairman of the Board of Directors
One Nationwide Plaza and 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
130 of 139
<PAGE> 90
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
Robert A. Oakley Executive Vice President - Chief
One Nationwide Plaza Financial Officer and Director
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief
One Nationwide Plaza Investment Officer and Director
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President - General
One Nationwide Plaza Manager & Acting Treasurer
Columbus, OH 43215
Edwin P. Mc Causland Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Rae M. Pollina Secretary
One Nationwide Plaza
Columbus, OH 43215
(c) Name Of Net Underwriting Compensation On
Principal Discounts and Redemption Or Brokerage
Underwriter Commissions Annuitization Commissions Compensation
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
131 of 139
<PAGE> 91
Item 30. Location of Accounts and Records
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
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 postcard 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 represents that any of the Contracts which are issued
pursuant to Section 403(b) of the Code is issued by the Company
through the Registrant in reliance upon, and in compliance with, a
no-action letter issued by the Staff of the Securities and Exchange
Commission to the American Council of Life Insurance (publicly
available November 28, 1988) permitting withdrawal restrictions to
the extent necessary to comply with Section 403(b)(11) of the Code.
The Company represents that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the services
rendered, the expenses expected to be incurred and risks assumed by
the Company.
132 of 139
<PAGE> 92
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Variable Account - II
Individual Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1997
133 of 139
<PAGE> 93
Accountants' Consent and Independent Auditors' Report on
Financial Statement Schedules
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of the Nationwide Variable Account-II:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 31, 1997 included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
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 22, 1997
134 of 139
<PAGE> 94
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-II, certifies that it meets
the requirements of Securities Act Rule 485(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 27th
day of June, 1997.
NATIONWIDE VARIABLE ACCOUNT-II
---------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
---------------------------------------
Joseph P. Rath
Vice President
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 27th day
of June, 1997.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
LEWIS J. ALPHIN Director
- --------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- --------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- --------------------------------
Willard J. Engel
FRED C. FINNEY Director
- --------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- --------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- --------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- --------------------------------
Henry S. Holloway
Chairman and Chief Executive Officer -
D. RICHARD MCFERSON Nationwide Insurance Enterprise and Director
- --------------------------------
D. Richard McFerson
DAVID O. MILLER Director
- --------------------------------
David O. Miller
C. RAY NOECKER Director
- --------------------------------
C. Ray Noecker
Executive Vice President-
ROBERT A. OAKLEY Chief Financial Officer
- --------------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By /s/ JOSEPH P. RATH
- -------------------------------- ------------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- --------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- --------------------------------
Robert L. Stewart
Director
NANCY C. THOMAS
- --------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- --------------------------------
Harold W. Weihl
</TABLE>
139 of 139
<PAGE> 95
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B,
Nationwide VA Separate Account-C and Nationwide VA Separate Account-Q; and the
registration of fixed interest rate options subject to a market value adjustment
offered under some or all of the aforementioned individual Variable Annuity
Contracts in connection with Nationwide Multiple Maturity Separate Account and
Nationwide Multiple Maturity Separate Account-A, and the registration of Group
Flexible Fund Retirement Contracts in connection with Nationwide DC Variable
Account, Nationwide DCVA-II, and NACo Variable Account; and the registration of
Group Common Stock Variable Annuity Contracts in connection with Separate
Account No. 1; and the registration of variable life insurance policies in
connection with Nationwide VLI Separate Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VL Separate Account-A
and Nationwide VL Separate Account-B, hereby constitutes and appoints Dimon
Richard McFerson, Joseph J. Gasper, W. Sidney Druen, Mark R. Thresher, and
Joseph P. Rath, and each of them with power to act without the others, his/her
attorney, with full power of substitution and resubstitution, for and in his/her
name, place and stead, in any and all capacities, to approve, and sign such
Registration Statements and any and all amendments thereto, with power to affix
the corporate seal of said corporation thereto and to attest said seal and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the U.S. Securities and Exchange Commission, hereby granting
unto said attorneys, and each of them, full power and authority to do and
perform all and every act and thing requisite to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming that which
said attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 22nd day of May, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
