<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-75174
'40 Act File No. 811-3338
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 21 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 [x]
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43218
(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 43218-2437
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect
of the Prospectus, Statement of Additional Information, and the Financial
Statements.
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commission. Registrant filed its Rule
24f-2 Notice for the fiscal year ended December 31, 1995, on February 15, 1996.
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NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
- --- ---- ----
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page...................................................................... 3
Item 2. Definitions..................................................................... 5
Item 3. Synopsis or Highlights.......................................................... 12
Item 4. Condensed Financial Information................................................. 13
Item 5. General Description of Registrant, Depositor, and Portfolio Companies........... 16
Item 6. Deductions and Expenses......................................................... 20
Item 7. General Description of Variable Annuity Contracts............................... 22
Item 8. Annuity Period.................................................................. 26
Item 9. Death Benefit and Distributions................................................. 27
Item 10. Purchases and Contract Value.................................................... 31
Item 11. Redemptions..................................................................... 32
Item 12. Taxes........................................................................... 34
Item 13. Legal Proceedings............................................................... 40
Item 14. Table of Contents of the Statement of Additional Information.................... 40
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page...................................................................... 43
Item 16. Table of Contents............................................................... 43
Item 17. General Information and History................................................. 43
Item 18. Services........................................................................ 43
Item 19. Purchase of Securities Being Offered............................................ 43
Item 20. Underwriters.................................................................... 44
Item 21. Calculation of Performance...................................................... 44
Item 22. Annuity Payments................................................................ 47
Item 23. Financial Statements............................................................ 48
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................. 86
Item 25. Directors and Officers of the Depositor........................................ 88
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant..................................................................... 90
Item 27. Number of Contract Owners...................................................... 99
Item 28. Indemnification................................................................ 99
Item 29. Principal Underwriter.......................................................... 99
Item 30. Location of Accounts and Records............................................... 101
Item 31. Management Services............................................................ 101
Item 32. Undertakings................................................................... 101
</TABLE>
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NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE
P.O. BOX 182437
COLUMBUS, OHIO 43218-2437
1-800-451-0070, TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
OF NATIONWIDE LIFE INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
prospectus are flexible Purchase Payment Contracts (collectively referred to as
the "Contracts"). References throughout the prospectus to Contracts shall also
mean "Certificates" issued under Group Flexible Fund Retirement Contracts. For
group Contracts, references to "Contract Owner" shall mean the "Participant"
unless the Plan otherwise permits or requires the Contract Owner to exercise
such 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, (the "Code"). Annuity payments
under the Contracts are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Multi-Flex Variable
Account ("Variable Account"), a separate account of Nationwide Life Insurance
Company (the "Company"). The Variable Account uses its assets to purchase shares
at net asset value in one or more of the following Sub-Accounts of the
underlying Mutual Fund options:
DREYFUS STOCK INDEX FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
- Small Cap Portfolio
- Quality Bond Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- Equity-Income Portfolio
- High Income Portfolio*
NATIONWIDE SEPARATE ACCOUNT TRUST
- Money Market Fund
- Government Bond Fund
- Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
- Balanced Portfolio
STRONG SPECIAL FUND II, INC.
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
- TCI Growth
- TCI Advantage
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- International Fund
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
This prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide Multi-Flex Variable Account before investing. You should read it and
keep it for future reference. A Statement of Additional Information dated May 1,
1996, containing further information about the Contracts and the Nationwide
Multi-Flex Variable Account has been filed with the Securities and Exchange
Commission. You can obtain a copy without charge from Nationwide Life Insurance
Company by calling the number listed above, or writing P. O. Box 182437,
Columbus, Ohio 43218-2437.
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.
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THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 38 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person 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.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under this Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Contract Owner as
set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Annuitant or Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named on the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of the
last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. The Owner's right to name a Contingent Designated Annuitant may be
restricted under the provisions of any retirement or deferred compensation plan
for which this Contract is issued.
CONTINGENT OWNER- The Contingent Owner is named in the application and is
subject to change by the Owner at any time. If the Owner wishes to name a
Contingent Owner, the Owner must do so in writing. The Contingent Owner may be
the recipient of certain rights or benefits under this Contract when the Owner
dies before the Annuitization Date. The Owner's right to name a Contingent Owner
may be restricted under the provisions of the retirement or deferred
compensation plan for which this Contract is issued. For Contracts issued in the
state of New York, references throughout this prospectus to "Contingent Owner"
shall mean "Owner's Beneficiary."
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 on the application, unless changed.
CONTRACT VALUE- The sum of the value of the Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
Fixed Account.
CONTRACT YEAR- Each year commencing with the Date of Issue and each Contract
Anniversary thereafter shall be a Contract Year.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
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DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant.
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.
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. The Designated Annuitant is named on the Data Page,
unless changed. No change of Designated Annuitant may be made without the prior
consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value.
ERISA- Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ACCOUNT CONTRACT VALUE- The sum of the value credited to the Fixed Account
including interest.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
under the Contract is guaranteed to remain the same. For new Purchase Payments
allocated to the Fixed Account or transfers from the Variable Account, this
period begins upon the date of deposit or transfer and ends at the end of the
calendar quarter at least one year from deposit or transfer. At the end of an
Interest Rate Guarantee Period, a new interest rate is declared with an Interest
Rate Guarantee Period starting at the end of the prior period and ending at the
end of the calendar quarter one year later.
MUTUAL FUND (FUND)- The 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 Plan or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
QUALIFIED CONTRACT- A Contract which receives favorable tax treatment under the
provisions of the Code, including those described in Sections 401 and 403(a).
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Mutual Fund shares are allocated and for which Accumulation Units and
Annuity Units are separately maintained.
TAX SHELTERED ANNUITY - An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office is open for business or any other day during which there is a sufficient
degree of trading of the underlying Mutual Fund shares held by the Variable
Account such that the current net asset value of Variable Account Accumulation
Units might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide Multi-Flex Variable Account, a separate
investment account of the Company into which Variable Account Purchase Payments
are allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in shares of a separate mutual fund.
VARIABLE ACCOUNT CONTRACT VALUE- The sum of the value of all Variable Account
Accumulation Units in the Contract.
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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TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS......................................................................................3
SUMMARY OF CONTRACT EXPENSES...................................................................................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES.........................................................................8
SYNOPSIS......................................................................................................10
CONDENSED FINANCIAL INFORMATION...............................................................................11
NATIONWIDE LIFE INSURANCE COMPANY.............................................................................14
THE VARIABLE ACCOUNT..........................................................................................14
Dreyfus Stock Index Fund.............................................................................14
The Dreyfus Socially Responsible Growth Fund, Inc....................................................15
Dreyfus Variable Investment Fund.....................................................................15
Fidelity Variable Insurance Products Fund............................................................15
Nationwide Separate Account Trust....................................................................16
Neuberger & Berman Advisers Management Trust.........................................................16
Strong Special Fund II, Inc......................................................................... 16
Templeton Variable Products Series Fund..............................................................16
TCI Portfolios, Inc., Member of the Twentieth Century Family of Mutual Funds.........................17
Voting Rights........................................................................................17
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS.............................................18
Mortality Risk Charge................................................................................18
Expense Risk Charge..................................................................................18
Contingent Deferred Sales Charge.....................................................................18
Elimination of Contingent Deferred Sales Charge......................................................19
Contract Maintenance Charge and Administration Charge................................................19
Premium Taxes........................................................................................20
Expenses of Variable Account.........................................................................20
Investments of The Variable Account..................................................................20
Right To Revoke......................................................................................20
Transfers............................................................................................20
Assignment...........................................................................................21
Loan Privilege.......................................................................................21
Ownership Provisions.................................................................................22
Contingent Owner and Beneficiary Provisions..........................................................23
Substitution of Securities...........................................................................23
Contract Owner Inquiries.............................................................................24
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT.......................................................................24
Value Of An Annuity Unit.............................................................................24
Assumed Investment Rate..............................................................................24
Frequency And Amount Of Annuity Payments.............................................................24
Annuity Commencement Date............................................................................24
Change In Annuity Commencement Date..................................................................24
Change In Form Of Annuity............................................................................25
Annuity Payment Options..............................................................................25
Death of Contract Owner..............................................................................25
Death Benefit Prior To The Annuitization Date........................................................26
Death Benefit After The Annuitization Date...........................................................26
Required Distribution For Qualified Plans or Tax Sheltered Annuities.................................26
Required Distributions For Individual Retirement Annuities...........................................27
Generation-Skipping Transfers........................................................................28
GENERAL INFORMATION...........................................................................................28
Contract Owner Services..............................................................................28
Statements and Reports...............................................................................29
Allocation Of Purchase Payments And Contract Value...................................................29
Value of a Variable Account Accumulation Unit........................................................29
Net Investment Factor................................................................................30
Valuation Of Assets..................................................................................30
Determining The Contract Value.......................................................................30
Surrender(Redemption)................................................................................30
Surrenders Under A Qualified Plan or Tax Sheltered Annuity Contract..................................31
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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Taxes................................................................................................32
Non-Qualified Contracts..............................................................................32
Diversification......................................................................................33
Charge For Tax Provisions............................................................................34
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and
Tax Sheltered Annuities..........................................................................34
Advertising..........................................................................................34
LEGAL PROCEEDINGS.............................................................................................38
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION......................................................38
APPENDIX......................................................................................................39
</TABLE>
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<PAGE> 9
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 Load
Date of Purchase Payment Percentage
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
ANNUAL CONTRACT MAINTENANCE CHARGE(2).............................. $30
(1) Starting with the second year after a Purchase Payment has been made, 10%
of that Purchase Payment may be withdrawn without imposition of a
Contingent Deferred Sales Charge ("CDSC"). This free withdrawal privilege
is non-cumulative and must be used in the year available. Withdrawals may
be restricted for Contracts issued pursuant to the terms of a Tax
Sheltered Annuity Plan or other Qualified Plan. The Contingent Deferred
Sales Charge is imposed only against Purchase Payments (see "Contingent
Deferred Sales Charge").
(2) The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and in any year in which the entire Contract Value is
surrendered on the date of Surrender (see "Contract Maintenance Charge
and Administration Charge").
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VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges........................... 1.25%
Administration Charge........................................ 0.05%
Total Variable Account Annual Expenses................. 1.30%
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
- -------------------------------------------------------------------------------------------------
Management Fees Other Expenses Total Mutual
Fund Expenses
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund 0.27% 0.12% 0.39%
- -------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund 0.69% 0.58% 1.27%
- -------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund-Quality 0.61% 0.20% 0.81%
Bond Portfolio
- -------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund-Small Cap 0.75% 0.08% 0.83%
Portfolio
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71%
- -------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- -------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
- -------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
- -------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.85% 0.19% 1.04%
Trust-Balanced Portfolio
- -------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- -------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Advantage 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------
Templeton Variable Products Series 0.50% 0.50% 1.00%
Fund-International Fund
- -------------------------------------------------------------------------------------------------
</TABLE>
(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 under the Variable Account. The management
fees and other expenses, some of which are subject to fee waivers or
expense reimbursements, are more fully described in the prospectuses of
each underlying Mutual Fund. The information relating to the underlying
Mutual Fund expenses was provided by the underlying Mutual Fund and was
not independently verified by the Company.
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EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment 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 surrender If you annuitize your
Contract at the end of the your Contract at the end of Contract at the end of the
applicable time period the applicable time period applicable time period
- ---------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index 90 105 131 224 20 60 104 224 * 60 104 224
Fund
- ---------------------------------------------------------------------------------------------------------------
Dreyfus Socially 99 133 177 317 29 88 150 317 * 88 150 317
Responsible Growth
Fund, Inc.
- ---------------------------------------------------------------------------------------------------------------
Dreyfus Variable 94 119 153 270 24 74 126 270 * 74 126 270
Investment
Fund-Quality Bond
Portfolio
- ---------------------------------------------------------------------------------------------------------------
Dreyfus Variable 94 119 154 272 24 74 127 272 * 74 127 272
Investment Fund-
Small Cap Portfolio
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 92 112 143 248 22 67 116 248 * 67 116 248
Equity-Income
Portfolio
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP 93 116 148 259 23 71 121 259 * 71 121 259
Fund-High Income
Portfolio
- ---------------------------------------------------------------------------------------------------------------
NSAT-Government Bond 91 109 137 237 21 64 110 237 * 64 110 237
Fund
- ---------------------------------------------------------------------------------------------------------------
NSAT-Money Market 91 110 138 239 21 65 111 239 * 65 111 239
Fund
- ---------------------------------------------------------------------------------------------------------------
NSAT-Total Return 91 109 137 237 21 64 110 237 * 64 110 237
Fund
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman 96 126 165 293 26 81 138 293 * 81 138 293
Advisers Management
Trust-Balanced
Portfolio
- ---------------------------------------------------------------------------------------------------------------
Strong Special Fund 98 131 173 310 28 86 146 310 * 86 146 310
II, Inc.
- ---------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 96 125 163 289 26 80 136 289 * 80 136 289
TCI Advantage
- ---------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 96 125 163 289 26 80 136 289 * 80 136 289
TCI Growth
- ---------------------------------------------------------------------------------------------------------------
Templeton Variable 96 125 163 289 26 80 136 289 * 80 136 289
Products Series
Fund-International
Fund
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to
assist the Contract Owner in understanding the various costs and expenses that a
will be borne directly or indirectly when investing in the Contract. The
expenses of the Nationwide Multi-Flex Variable Account as well as those of the
underlying Mutual Funds are reflected in the table. For more and complete
descriptions of the expenses of the Variable Account, see "Variable Account
Charges, Purchase Payments, and Other Deductions." For more and complete
information regarding expenses paid out of the assets of a particular
underlying Mutual Fund option, see the underlying Mutual Fund's prospectus.
Deductions for premium taxes may also apply but are not reflected in the
Example shown above (see "Premium Taxes").
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<PAGE> 12
SYNOPSIS
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct from
the Contract 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. The Company will waive the
Contingent Deferred Sales Charge under Tax Sheltered Annuity [403(b)] Contracts
and 401 Contracts when the Contract Owner has participated in the Contract for
10 years with active deferrals, dies, becomes disabled, experiences a hardship,
separates from service and has participated in the Contract for 5 years, or
annuitizes after completing 2 years in the Contract (see "Contingent Deferred
Sales Charge").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge of $30 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 risk
assumed by the Company (see "Mortality Risk Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.45% of the daily net asset value of the Variable Account as compensation for
the Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial 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").
If the Contract Value 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").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable by the Company at the time
Purchase Payments are made, an equal premium tax deduction may be made from the
Contract prior to the allocation of the Purchase Payment to any underlying
Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full, unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of Purchase Payments (see "Right to
Revoke").
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<PAGE> 13
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION NUMBER OF
VALUE UNIT VALUE PERCENT CHANGE ACCUMULATION
AT BEGINNING AT END IN ACCUMULATION UNITS AT END OF
FUND OF PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
================================================================================================================
<S> <C> <C> <C> <C> <C>
Dreyfus Socially 10.039093 13.333625 32.82% 94,479 1995
Responsible Growth -----------------------------------------------------------------------------------
Fund-Q 10.000000 10.039093 0.39% 16,111 1994
================================================================================================================
Dreyfus Stock Index 10.227308 13.807559 35.01% 489,045 1995
Fund-Q -----------------------------------------------------------------------------------
10.271065 10.227308 -0.43% 297,344 1994
-----------------------------------------------------------------------------------
10.000000 10.271065 2.71% 65,529 1993
================================================================================================================
Dreyfus Variable 10.000000 10.493309 4.93% 9,201 1995
Investment Fund-Quality -----------------------------------------------------------------------------------
Bond Portfolio-Q
================================================================================================================
Dreyfus Variable 10.374796 13.249127 27.70% 709,274 1995
Investment Fund-Small -----------------------------------------------------------------------------------
Cap Portfolio-Q 10.000000 10.374796 3.75% 137,041 1994
================================================================================================================
Fidelity VIP Fund-Equity- 10.808255 14.412060 33.34% 2,504,171 1995
Income Portfolio-Q -----------------------------------------------------------------------------------
10.227513 10.808255 5.68% 1,591,113 1994
-----------------------------------------------------------------------------------
10.000000 10.227513 2.28% 345,527 1993
================================================================================================================
Fidelity VIP Fund -High 9.895223 11.779381 19.04% 210,727 1995
Income Portfolio-Q -----------------------------------------------------------------------------------
10.000000 9.895223 -1.05% 33,204 1994
================================================================================================================
Neuberger & Berman 12.077573 14.753402 22.16% 1,697,674 1995
Advisers Management -----------------------------------------------------------------------------------
Trust-Balanced 12.661508 12.077573 -4.61% 1,651,413 1994
Portfolio-Q -----------------------------------------------------------------------------------
12.050347 12.661508 5.07% 1,478,589 1993
-----------------------------------------------------------------------------------
11.299008 12.050347 6.65% 743,274 1992
-----------------------------------------------------------------------------------
10.000000 11.299008 12.99% 13,232 1991
================================================================================================================
NSAT-Money Market 18.790546 19.595876 4.29% 1,618,571 1995
Fund-Q* -----------------------------------------------------------------------------------
18.325918 18.790546 2.54% 1,636,119 1994
-----------------------------------------------------------------------------------
18.069824 18.325918 1.42% 1,647,900 1993
-----------------------------------------------------------------------------------
17.705124 18.069824 2.06% 1,840,923 1992
-----------------------------------------------------------------------------------
16.950132 17.705124 4.45% 2,323,043 1991
-----------------------------------------------------------------------------------
15.891433 16.950132 6.66% 2,678,914 1990
-----------------------------------------------------------------------------------
14.760926 15.891433 7.66% 2,395,888 1989
-----------------------------------------------------------------------------------
13.935064 14.760926 5.93% 2,117,718 1988
-----------------------------------------------------------------------------------
13.264408 13.935064 5.06% 1,894,196 1987
-----------------------------------------------------------------------------------
12.611459 13.264408 5.18% 1,403,782 1986
-----------------------------------------------------------------------------------
11.804454 12.611459 6.84% 1,184,480 1985
-----------------------------------------------------------------------------------
10.818017 11.804454 9.12% 907,023 1984
================================================================================================================
NSAT-Government 25.138302 29.463573 17.21% 3,276,421 1995
Bond Fund-Q -----------------------------------------------------------------------------------
26.318797 25.138302 -4.49% 3,538,336 1994
-----------------------------------------------------------------------------------
24.348055 26.318797 8.09% 3,946,493 1993
-----------------------------------------------------------------------------------
22.869936 24.348055 6.46% 2,650,975 1992
-----------------------------------------------------------------------------------
19.854919 22.869936 15.19% 1,805,156 1991
-----------------------------------------------------------------------------------
18.372987 19.854919 8.07% 1,291,591 1990
-----------------------------------------------------------------------------------
16.331709 18.372987 12.50% 1,182,905 1989
-----------------------------------------------------------------------------------
15.312739 16.331709 6.65% 1,184,100 1988
-----------------------------------------------------------------------------------
15.295126 15.312739 0.12% 1,190,140 1987
-----------------------------------------------------------------------------------
13.449373 15.295126 13.72% 948,476 1986
-----------------------------------------------------------------------------------
11.711200 13.449373 14.84% 487,268 1985
-----------------------------------------------------------------------------------
10.543467 11.711200 11.08% 248,950 1984
================================================================================================================
</TABLE>
*The 7-day yield on the Money Market Fund as of December 31, 1995 was 3.78%.
11
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<PAGE> 14
CONDENSED FINANCIAL INFORMATION (CONTINUED)
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION UNIT ACCUMULATION NUMBER OF
VALUE UNIT VALUE PERCENT CHANGE ACCUMULATION
AT BEGINNING AT END IN ACCUMULATION UNITS AT END OF
FUND OF PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
================================================================================================================
<S> <C> <C> <C> <C> <C>
NSAT-Total Return 40.575816 51.701438 27.42% 5,049,123 1995
Fund-Q -----------------------------------------------------------------------------------
40.671816 40.575816 -0.24% 5,094,417 1994
-----------------------------------------------------------------------------------
37.150744 40.671816 9.48% 4,467,810 1993
-----------------------------------------------------------------------------------
34.794462 37.150744 6.77% 3,578,781 1992
-----------------------------------------------------------------------------------
25.454897 34.794462 36.69% 2,974,227 1991
-----------------------------------------------------------------------------------
28.044760 25.454897 -9.23% 2,734,562 1990
-----------------------------------------------------------------------------------
25.094601 28.044760 11.76% 2,897,067 1989
-----------------------------------------------------------------------------------
21.178453 25.094601 18.49% 2,746,255 1988
-----------------------------------------------------------------------------------
21.612441 21.178453 -2.01% 2,885,264 1987
-----------------------------------------------------------------------------------
18.212306 21.612441 18.67% 2,541,305 1986
-----------------------------------------------------------------------------------
13.771764 18.212306 32.24% 1,607,130 1985
-----------------------------------------------------------------------------------
12.052054 13.771764 14.27% 904,259 1984
================================================================================================================
Strong Special Fund II, 10.000000 10.456863 4.57% 14,374 1995
Inc.-Q -----------------------------------------------------------------------------------
================================================================================================================
TCI Portfolios, Inc.- 11.312248 13.035463 15.23% 513,818 1995
TCI Advantage-Q -----------------------------------------------------------------------------------
11.343435 11.312248 -0.27% 518,729 1994
-----------------------------------------------------------------------------------
10.757355 11.343435 5.45% 467,066 1993
-----------------------------------------------------------------------------------
11.325089 10.757355 -5.01% 319,109 1992
-----------------------------------------------------------------------------------
10.000000 11.325089 13.25% 10,677 1991
================================================================================================================
TCI Portfolios, Inc.- 12.711014 16.447846 29.40% 1,986,887 1995
TCI Growth-Q -----------------------------------------------------------------------------------
13.030369 12.711014 -2.45% 1,855,905 1994
-----------------------------------------------------------------------------------
11.967533 13.030369 8.88% 1,492,249 1993
-----------------------------------------------------------------------------------
12.290177 11.967533 -2.63% 846,374 1992
-----------------------------------------------------------------------------------
10.000000 12.290177 22.90% 18,446 1991
================================================================================================================
Templeton Variable 9.913613 11.329203 14.28% 503,599 1995
Products Series Fund- -----------------------------------------------------------------------------------
International Fund-Q 10.000000 9.913613 -0.86% 161,196 1994
================================================================================================================
Dreyfus Socially 10.039093 13.333625 32.82% 7,847 1995
Responsible Growth -----------------------------------------------------------------------------------
Fund-NQ 10.000000 10.039093 0.39% 1,221 1994
================================================================================================================
Dreyfus Stock Index 10.227308 13.807559 35.01% 210,808 1995
Fund - NQ -----------------------------------------------------------------------------------
10.271065 10.227308 -0.43% 185,724 1994
-----------------------------------------------------------------------------------
10.000000 10.271065 2.71% 100,168 1993
================================================================================================================
Dreyfus Variable 10.000000 10.493309 4.93% 626 1995
Investment Fund-Quality -----------------------------------------------------------------------------------
Bond Portfolio-NQ
================================================================================================================
Dreyfus Variable 10.374796 13.249127 27.70% 57,885 1995
Investment Fund-Small -----------------------------------------------------------------------------------
Cap Portfolio-NQ 10.000000 10.374796 3.75% 21,950 1994
================================================================================================================
Fidelity VIP Fund-Equity- 10.808255 14.412060 33.34% 1,004,513 1995
Income Portfolio-NQ -----------------------------------------------------------------------------------
10.227513 10.808255 5.68% 917,381 1994
-----------------------------------------------------------------------------------
10.000000 10.227513 2.28% 368,492 1993
================================================================================================================
Fidelity VIP-Fund-High 9.895223 11.779381 19.04% 11,249 1995
Income Portfolio-NQ -----------------------------------------------------------------------------------
10.000000 9.895223 -1.05% 2,726 1994
================================================================================================================
Neuberger & Berman 12.077573 14.753402 22.16% 728,876 1995
Advisers Management -----------------------------------------------------------------------------------
Trust-Balanced Portfolio- 12.661508 12.077573 -4.61% 844,181 1994
NQ -----------------------------------------------------------------------------------
12.050347 12.661508 5.07% 927,960 1993
-----------------------------------------------------------------------------------
11.299008 12.050347 6.65% 370,418 1992
-----------------------------------------------------------------------------------
10.000000 11.299008 12.99% 14,765 1991
================================================================================================================
</TABLE>
12
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<PAGE> 15
CONDENSED FINANCIAL INFORMATION (CONTINUED)
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE PERCENT CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNIT UNITS AT END OF
FUND OF PERIOD OF PERIOD VALUE THE PERIOD YEAR
================================================================================================================
<S> <C> <C> <C> <C> <C>
NSAT-Money Market 20.416267 21.291272 4.29% 665,100 1995
Fund-NQ* -----------------------------------------------------------------------------------
19.911440 20.416267 2.54% 831,132 1994
-----------------------------------------------------------------------------------
19.633190 19.911440 1.42% 819,892 1993
-----------------------------------------------------------------------------------
19.236937 19.633190 2.06% 1,117,454 1992
-----------------------------------------------------------------------------------
18.416623 19.236937 4.45% 1,684,322 1991
-----------------------------------------------------------------------------------
17.266332 18.416623 6.66% 2,083,996 1990
-----------------------------------------------------------------------------------
16.038015 17.266332 7.66% 2,127,690 1989
-----------------------------------------------------------------------------------
15.140691 16.038015 5.93% 2,219,382 1988
-----------------------------------------------------------------------------------
14.412005 15.140691 5.06% 2,567,315 1987
-----------------------------------------------------------------------------------
13.702570 14.412005 5.18% 2,840,571 1986
-----------------------------------------------------------------------------------
12.825737 13.702570 6.84% 2,245,672 1985
-----------------------------------------------------------------------------------
11.753956 12.825737 9.12% 2,655,143 1984
================================================================================================================
NSAT-Government Bond 25.147577 29.474435 17.21% 1,618,704 1995
Fund-NQ -----------------------------------------------------------------------------------
26.328516 25.147577 -4.49% 1,893,807 1994
-----------------------------------------------------------------------------------
24.357055 26.328516 8.09% 2,350,137 1993
-----------------------------------------------------------------------------------
22.878402 24.357055 6.46% 1,501,470 1992
-----------------------------------------------------------------------------------
19.862268 22.878402 15.19% 976,874 1991
-----------------------------------------------------------------------------------
18.379796 19.862268 8.07% 750,363 1990
-----------------------------------------------------------------------------------
16.337763 18.379796 12.50% 756,058 1989
-----------------------------------------------------------------------------------
15.318418 16.337763 6.65% 845,602 1988
-----------------------------------------------------------------------------------
15.300795 15.318418 0.12% 1,034,597 1987
-----------------------------------------------------------------------------------
13.454359 15.300795 13.72% 985,017 1986
-----------------------------------------------------------------------------------
11.715541 13.454359 14.84% 585,869 1985
-----------------------------------------------------------------------------------
10.547376 11.715541 11.08% 198,420 1984
================================================================================================================
NSAT-Total Return 39.408735 50.214359 27.42% 2,273,685 1995
Fund-NQ -----------------------------------------------------------------------------------
39.501981 39.408735 -0.24% 2,360,160 1994
-----------------------------------------------------------------------------------
36.082181 39.501981 9.48% 2,184,517 1993
-----------------------------------------------------------------------------------
33.793676 36.082181 6.77% 1,671,604 1992
-----------------------------------------------------------------------------------
24.722750 33.793676 36.69% 1,370,409 1991
-----------------------------------------------------------------------------------
27.238121 24.722750 -9.23% 1,268,584 1990
-----------------------------------------------------------------------------------
24.372817 27.238121 11.76% 1,476,049 1989
-----------------------------------------------------------------------------------
20.569309 24.372817 18.49% 1,458,246 1988
-----------------------------------------------------------------------------------
20.990807 20.569309 -2.01% 1,853,494 1987
-----------------------------------------------------------------------------------
17.688466 20.990807 18.67% 1,823,424 1986
-----------------------------------------------------------------------------------
13.375648 17.688466 32.24% 1,182,002 1985
-----------------------------------------------------------------------------------
11.616965 13.375648 15.14% 715,568 1984
================================================================================================================
Strong Special Fund II, 10.000000 10.456863 4.57% 1,437 1995
Inc.-NQ -----------------------------------------------------------------------------------
================================================================================================================
TCI Portfolios, Inc.-. 11.312248 13.035463 15.23% 209,516 1995
TCI Advantage-NQ -----------------------------------------------------------------------------------
11.343435 11.312248 -0.27% 237,606 1994
-----------------------------------------------------------------------------------
10.757355 11.343435 5.45% 225,188 1993
-----------------------------------------------------------------------------------
11.325089 10.757355 -5.01% 163,922 1992
-----------------------------------------------------------------------------------
10.000000 11.325089 13.25% 3,898 1991
================================================================================================================
TCI Portfolios, Inc.-TCI 11.822996 13.802855 16.75% 25,000 1995
Advantage- -----------------------------------------------------------------------------------
NQ (Depositor Only) 11.701906 11.822996 1.03% 25,000 1994
-----------------------------------------------------------------------------------
10.953160 11.701906 6.84% 25,000 1993
-----------------------------------------------------------------------------------
11.380926 10.953160 -3.76% 25,000 1992
-----------------------------------------------------------------------------------
10.000000 11.380926 13.81% 25,000 1991
================================================================================================================
TCI Portfolios, Inc.- 12.711014 16.447846 29.40% 956,826 1995
TCI Growth-NQ -----------------------------------------------------------------------------------
13.030369 12.711014 -2.45% 1,058,520 1994
-----------------------------------------------------------------------------------
11.967533 13.030369 8.88% 984,830 1993
-----------------------------------------------------------------------------------
12.290177 11.967533 -2.63% 508,166 1992
-----------------------------------------------------------------------------------
10.000000 12.290177 22.90% 25,910 1991
================================================================================================================
Templeton Variable 9.913613 11.329203 14.28% 39,371 1995
Products Series Fund- -----------------------------------------------------------------------------------
International Fund-NQ 10.000000 9.913613 -0.86% 24,273 1994
================================================================================================================
</TABLE>
*The 7-day yield on the Money Market Fund as of December 31, 1995 was 3.78%.
13
15 of 104
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March 1929. The Company is a member of the "Nationwide
Insurance Enterprise," with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43216. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
all states, the District of Columbia, and Puerto Rico.
The Company is ranked and rated by independent financial rating services,
among which are Moody's Standard and 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 in sales literature from time to time.
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 Fund
shares attributable to Accumulation Units under Qualified Contracts and one such
Sub-Account contains the underlying Mutual Fund shares attributable to
Accumulation Units under Non-Qualified Contracts. A summary of investment
objectives is contained in the description of each underlying Mutual Fund option
below. More detailed information may be found in the current prospectus for each
underlying Mutual Fund offered. Such a prospectus for the underlying Mutual Fund
option(s) being considered must accompany this prospectus and should be read in
conjunction herewith. A copy of each prospectus may be obtained without charge
from Nationwide Life Insurance Company by calling 1-800-325-6434, TDD
1-800-238-3035 or writing P.O. Box 182437, Columbus, Ohio 43218-2437.
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 Funds or Mutual Funds which are
involved in the conflict.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund is an open-end, non-diversified, management
investment company. It was incorporated under Maryland law on January 24, 1989,
and commenced operations on September 29, 1989. Wells Fargo Nikko Investment
Advisors serves as the Fund's index fund manager. As of May 1, 1994, the Dreyfus
Life and Annuity Index Fund began doing business as the Dreyfus Stock Index
Fund.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
14
16 of 104
<PAGE> 17
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under Maryland
law on July 20, 1992, and commenced operations on October 7, 1993. The Dreyfus
Corporation serves as the Fund's investment advisor. Tiffany Capitol Advisors,
Inc. serves as the Fund's sub-investment adviser and provides day-to-day
management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of the
Fund's management, not only meet traditional investment standards, but
which also show evidence that they conduct their business in a manner
that contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, diversified management
investment company, known as a mutual fund, that is intended to be a funding
vehicle for variable annuity contracts and variable life insurance policies to
be offered by the separate accounts of life insurance companies. The Dreyfus
Corporation serves as the Fund's investment adviser.
- - THE DREYFUS QUALITY BOND PORTFOLIO
Investment Objective: To provide the maximum amount of current income to
the extent consistent with the preservation of capital and the
maintenance of liquidity. The Quality Bond Portfolio invests in debt
obligations of corporations, the U.S. Government and its agencies and
instrumentalities, and major U.S. banking institutions. At least 80% of
the value of the Series net assets will consist of obligation of
securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities and corporations which,
at the time of purchase by the Series, are rated at least A by Moody's or
Standard & Poor's, or determined to be of comparable quality by The
Dreyfus Corporation. The Quality Bond Portfolio also may invest in
Municipal Obligations. In addition, at least 65% of the value of the
Series assets (except when maintaining a temporary defensive position)
will be invested in bond, debentures and other debt instruments.
- - SMALL CAP PORTFOLIO
Investment Objective: Seeks to maximize capital appreciation. The
portfolio invests principally in common stocks. This portfolio will be
particularly alert to companies which The Dreyfus Corporation considers
to be emerging smaller-sized companies which are believed to be
characterized by new or innovative products, services or processes which
should enhance prospects for growth in future earnings.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981. The funds
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. Fidelity Management & Research Company ("FMR")
is the fund's manager.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
index.
- - HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower-rated, high-yielding,
fixed-income securities, while also considering growth of capital. The
Portfolio manager will seek high current income normally by investing the
Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired
as part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or
lower by Moody's; BB or lower by Standard & Poor's and may be deemed to
be of a speculative nature. The Portfolio may also purchase lower-quality
bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which
provide poor protection for payment of
15
17 of 104
<PAGE> 18
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.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company organized under the laws of Massachusetts by a
Declaration of Trust dated June 30, 1981, as subsequently amended. The Trust
offers shares in three separate underlying Mutual Funds listed below, each with
its own investment objectives. Currently, shares of the Trust will be sold only
to life insurance company separate accounts to fund the benefits under variable
life insurance policies or variable annuity Contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide Financial Services,
Inc. of One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of
Nationwide Life Insurance Company.
- - 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.
- - GOVERNMENT BOND FUND
Investment Objective: The investment objective of the Government Bond
Fund is 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.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
- - BALANCED PORTFOLIO
Investment Objective: To provide long-term capital growth and reasonable
current income without undue risk to principal. The Balanced Portfolio
will seek to achieve its objective through investment of a portion of its
assets in common stocks and a portion of its assets in debt securities.
The Investment Adviser anticipates that the Balanced Portfolio's
investments will normally be managed so that approximately 60% of the
Portfolio's total assets will be invested in common stocks and the
remaining assets will be invested in debt securities. However, depending
on the Investment Adviser's views regarding current market trends, the
common stock portion of the Portfolio's investments may be adjusted
downward to as low as 50% or upward to as high as 70%. At least 25% of
the Portfolio's assets will be invested in fixed income senior
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.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is an open-end, diversified
management investment company organized as a business trust under the laws of
Massachusetts on February 25, 1988. The Trust was organized
16
18 of 104
<PAGE> 19
primarily as an investment vehicle for use in connection with variable annuity
contracts and variable life insurance policies offered by life insurance
companies The investment manager is Templeton Investment Counsel, Inc.
- - INTERNATIONAL FUND
Investment Objective: Seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be
incidental.
TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It
is a diversified, open-end management company, designed only to provide
investment vehicles for variable annuity and variable life insurance products of
insurance companies. A member of the Twentieth Century Family of Mutual Funds,
TCI Portfolios is managed by Investors Research Corporation.
- - TCI 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.
- - TCI ADVANTAGE
Investment Objective: Current income and capital growth. The fund will
seek to achieve its objective by investing in three types of securities.
The fund's investment manager intends to invest approximately (i) 20% of
the fund's assets in securities of the United States government and its
agencies and instrumentalities and repurchase agreements collateralized
by such securities with a weighted average maturity of six months or
less, i.e., cash or cash equivalents; (ii) 40% of the fund's assets in
fixed income securities of the United States government and its agencies
and instrumentalities with a weighted average maturity of three to ten
years; and (iii) 40% of the fund's assets in equity securities that are
considered by management to have better-than-average prospects for
appreciation. Assets will be purchased or sold, as the case may be, as is
necessary in response to changes in market value to maintain the asset
mix of the Fund's portfolio at approximately 60% cash, cash equivalents
and fixed income securities and 40% equity securities. There can be no
assurance that the Fund will achieve its investment objective.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc. refers to redemptions of securities in kind under
certain conditions, all surrendering or redeeming Contract Owners will
receive cash from the Company.)
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from Contract Owners whose Contract
Value is measured by Accumulation Units in the Variable Account. However, if the
Investment Company Act of 1940 or any Regulation thereunder should be amended or
if the present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the underlying Mutual
Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of underlying Mutual Fund shares attributable to each
Contract Owner is determined by dividing the Contract Owner's interest in each
respective Sub-Account of the Variable Account by the net asset value of the
underlying Mutual Fund corresponding to the Sub-Account.
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The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account which is an amount computed on a daily basis,
which is equal on an annual rate of 0.80% of the daily net asset value of the
Variable Account. The deduction of the Mortality Risk Charge is made from each
Sub-Account in the same proportion that the Contract Value in each Sub-Account
bears to the total Contract Value in the Variable Account. 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 deduction of the Expense Risk
Charge is made from each Sub-Account in the same proportion that the Contract
Value in each Sub-Account bears to the total Contract Value in the Variable
Account. The Company expects to generate a profit through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions, (see "Elimination 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 gross Distribution allowance which may be paid on the sale of these
Contracts is 6.0% of Purchase Payments.
If part or all of the Contract Value is surrendered, a Contingent
Deferred Sales Charge will be deducted by the Company. For purposes of the
Contingent Deferred Sales Charge, surrenders under a Contract come first from
the Purchase Payments which have been on deposit under the Contract for the
longest time period. For tax purposes, a surrender is usually treated as a
withdrawal of earnings first. This charge will apply in the amounts set forth
below to Purchase Payments within the time periods set forth. In no event will
any Contingent Deferred Sales Charge be deducted against any values which have
been held under the Contract for at least 84 months, or to commencement of an
annuity payout under Contracts which have been in effect for at least two years
or upon the death of the Designated Annuitant.
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The Contingent Deferred Sales Charge applies to Purchase Payments as follows:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED YEARS CONTINGENT DEFERRED SALES NUMBER OF COMPLETED YEARS CONTINGENT DEFERRED SALES
FROM DATE OF PURCHASE CHARGE PERCENTAGE FROM DATE OF PURCHASE CHARGE PERCENTAGE
PAYMENT PAYMENT
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
Starting with the second year after a Purchase Payment has been made
under the Contract, 10% of that Purchase Payment may be withdrawn each year
without imposition of the Contingent Deferred Sales Charge. This free withdrawal
privilege is non-cumulative and must be used in the year available. Withdrawals
may be restricted for Contracts issued pursuant to the terms of a Tax Sheltered
Annuity or other Qualified Plan. No sales charges are deducted on redemption
proceeds that are transferred to the Fixed Account. The Contract Owner may be
subject to a tax penalty if the Contract Owner withdraws Purchase Payments prior
to age 59 1/2.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The Company will waive the Contingent Deferred Sales Charges under Tax
Sheltered Annuities and Qualified Contracts and SEP-IRA Contracts when:
1. The Plan Participant has participated in the Contract for 10 years of
active deferrals;
2. The Plan Participant dies;
3. The Plan Participant experiences a hardship (as defined by 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;
4. The Plan Participant annuitizes after completing 2 years in the Contract;
5. The Plan Participant has separated from service (as defined in Code
Section 401(k)(2)(B)) and participated in this Contract for 5 years; or
6. The Plan Participant becomes disabled (within the meaning of Code Section
72(m)(7)).
For Non-Qualified Contracts and IRA Contracts other than SEP-IRA
Contracts, the Company will waive the Contingent Deferred Sales Charge when:
1. the Designated Annuitant dies; or
2. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this prospectus is exchanged for another
Contract issued by the Company, or any of its affiliated insurance companies, of
the type and class which the Company determined is eligible for such exchange,
the Company will waive the Contingent Deferred Sales Charge on the first
Contract. Sales without commissions or other standard Distribution expenses can
result in the elimination of Contingent Deferred Sales Charge.
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where prohibited by state law.
CONTRACT MAINTENANCE CHARGE AND ADMINISTRATION CHARGE
Each year on the Contract Anniversary, the Company deducts an annual
Contract Maintenance Charge of $30 from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. The Contract Maintenance Charge will be allocated between the Fixed
Account and Variable Account in the same percentages as the Purchase Payment
investment allocations are to the Fixed Account and Variable Account. 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 Contract Value in each Sub-Account bears to the total Contract Value in the
Variable Account. These charges are designed only to reimburse the Company for
administrative expenses and the Company will monitor these charges to ensure
that they do not exceed annual administration expenses.
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In any Contract Year when a Contract is surrendered for its full value on
any day 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. The amount of the
Contract Maintenance Charge may, however, be decreased or eliminated by the
Company when the Company determines that multiple purchases would result in
reduced administrative expenses. 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.
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) in those states
which require, at the time Purchase Payments are made to the Contract.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses:
(1) administration 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.
Deductions from and expenses paid out of the assets of the underlying
Mutual Fund options are described in each of the underlying Mutual Funds'
prospectuses. The Company deducts from the assets of the Variable Account the
types of expenses covered by the charges described above. These total expenses
for the fiscal year ended December 31, 1995, were 1.59% of average net assets.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have Purchase
Payments attributable to his or her participation in the Variable Account
allocated among one or more of the Sub-Accounts which consist of shares in the
underlying Mutual Funds. Shares of the respective underlying Mutual Funds
specified by the Contract Owner are purchased at net asset value for the
respective Sub-Account(s) and converted into Accumulation Units. At the time of
application, the Contract Owner designates the underlying Mutual Funds to which
he or she desires to have Purchase Payments attributable to his or her Contract
allocated. Such election is subject to any minimum Purchase Payment limitations
which may be imposed by the underlying Mutual Funds designated. The election as
to allocation of Purchase Payments or as to transfers of the Contract Value from
one Sub-Account to another may be changed by the Contract Owner pursuant to such
terms and conditions applicable to such transactions as may be imposed by each
of the underlying Mutual Fund options, in addition to those set forth in the
Contracts.
RIGHT TO REVOKE
Any Contract Owner may revoke the Contract at any time between the date
of application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of Purchase
Payments. In order to revoke the Contract, the Contract must be mailed or
delivered to the Home Office of the Company at the mailing address shown on page
1 of this prospectus. Mailing or delivery must occur on or before 10 days after
receipt of the Contract for revocation to be effective. In order to revoke the
Contract, if it has not been received, written notice must be mailed or
delivered to the Home Office of the Company at the mailing address shown on page
1 of this prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Owner may request a transfer of up to 100% of the Contract Value from
the Variable Account to the Fixed Account without penalty or adjustment. All
amounts transferred to the Fixed Account must remain on
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deposit in the Fixed Account until the expiration of the 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 expires on the final day of a calendar quarter during which the
one year anniversary of the allocation to the Fixed Account occurs. Transfers
must also be made prior to the Annuitization Date. The Owner's value in each
Sub-Account will be determined as of the date the transfer request is received
in the Home Office in good order. The Company reserves the right to restrict
transfers from the Variable Account to the Fixed Account to 25% of the Contract
Value for any 12 month period. The 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 (see "Interest Rate Guarantee Period"). Transfers from the
Fixed Account must be made within 45 days after the expiration date of the then
current Interest Rate Guarantee Period. The maximum percentage that may be
transferred from the Fixed Account to the Variable Account will be determined by
the Company at its sole discretion, but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing and will be declared
upon the expiration date of the then current Interest Rate Guarantee Period. The
specific percentage will be declared upon the expiration date of the guaranteed
period. Owners who have entered into a Dollar Cost Averaging Agreement with the
Company (see "Dollar Cost Averaging") may transfer from the Guaranteed Interest
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 their having to elect the privilege. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include any or all
of the following, or such other procedures as the Company may, from time to
time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security Number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Contract Owner and any agent of record, at the last address
of record. The Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. Any
losses incurred pursuant to actions taken by the Company in reliance on
telephone instructions reasonably believed to be genuine shall be borne by the
Contract Owner. The Company may withdraw the telephone exchange privilege upon
30 days' written notice to Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all of the rights
under the Contract at any time during the lifetime of the Designated Annuitant
prior to the Annuitization Date. Such assignment will take effect upon receipt
by the Company of a written notice thereof executed by the Contract Owner. The
Company assumes no responsibility for the validity or sufficiency of any
assignment. The Company shall not be liable as to any payment or other
settlement made by the Company before receipt of the assignment. Where necessary
for the proper administration of the terms of the Contract, an assignment will
not be recorded until the Company has received sufficient direction from the
Contract Owner and assignee as to the proper allocation of Contract rights under
the assignment. Individual Retirement Annuities, Tax Sheltered Annuities and
Qualified Contracts may not be assigned, pledged or otherwise transferred except
under such conditions as may be allowed by applicable law.
If this Contract is a Non-Qualified Contract, any portion of 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 assigned or
pledged. In addition, any contract values assigned may, under certain
conditions, be subject to a tax penalty equal to 10% of the assigned amount
which is included in gross income. Assignment of the entire Contract Value may
cause the portion of the Contract Value which exceeds the total investment in
the Contract to be included in gross income each year that the assignment is in
effect.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity may receive a loan from their Contract Value, subject to the
terms of the Contract, the Plan, and the Code, which 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
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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 balance 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.
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 Account and Variable Account in
the same proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue.
A grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, then
that payment, which may be a single periodic payment or payment of the entire
loan, will be treated as a deemed Distribution, as permitted by law, may be
taxable to the borrower, and may be subject to the early withdrawal tax penalty.
Interest which subsequently accrues on defaulted amounts may also be treated as
additional deemed Distributions each year. Any defaulted amounts, plus accrued
interest, will be deducted from the Contract when the Participant becomes
eligible for a Distribution of at least that amount, and this amount may again
be treated as a Distribution where required by law. Additional loans may not be
available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under
the terms of the employer's plan. Loans permitted under this Contract may still
be taxable in whole or part if the Participant has additional loans from other
plans or contracts. The Company will calculate the maximum nontaxable loan based
on the information provided by the Participant or the Employer.
Loan repayments must be identified as such or else they will be treated
as Purchase Payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures associated with the loan in the event of a change in the laws or
regulations relating to the treatment of loans. The Company also reserves the
right to assess a loan processing fee. Individual Retirement Annuities, Non
Qualified Contracts and SEP-IRA accounts are not eligible for loans.
OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS OWNER,
THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. The Designated Annuitant
may become the Contract Owner on and
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after the Annuitization Date subject to the terms elected at Annuitization.
Ownership rights under this Contract may be restricted under the provisions of
the retirement or deferred compensation plan for which this Contract may be
issued.
If the Owner dies prior to the Annuitization Date, contract ownership
will be determined in accordance with the "Death of Contract Owner" provision.
If the Designated Annuitant does not survive the Contract Owner or if the
Designated Annuitant and the Owner are the same person, Contract ownership will
be determined in accordance with the "Death Benefit Prior To The Annuitization
Date" provision. After the Annuitization Date, ownership will be determined
based on the Annuity Payment Option.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner or Contingent Owner at any time, but such change may be subject
to state and federal gift taxes, and may be treated as an assignment of the
Contract for income tax purposes. Such an assignment would result in a deemed
Distribution of the value of the Contract. Any new choice of Contract Owner or
Contingent Owner will automatically revoke any prior choice of Contract Owner or
Contingent Owner. Any request for change must be: (1) made in writing; and (2)
received by the Company at its Home Office. A request for change of Contract
Owner or Contingent Owner must be a "proper written application" and may include
a signature guarantee as specified in the "Surrender" section. The change will
become effective as of the date the written request is signed. A new choice of
Contract Owner or Contingent Owner will not apply to any payment made or action
taken by the Company prior to the time it was received and recorded.
The Contract Owner may request a change in the Designated Annuitant or
Contingent Designated Annuitant before the Annuitization Date under the
following conditions: (1) request for such change must be made by the Contract
Owner; (2) request must be made in writing on a form acceptable to the Company;
(3) request must be signed by the Contract Owner; and (4) such change is subject
to underwriting and approval by the Company.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person (or persons) who may receive certain
benefits under the Contract if the Contract Owner dies before the Annuitization
Date. If more than one Contingent Owner survives the Contract Owner, each will
share equally unless otherwise specified in the Contingent Owner designation. If
a Contingent Owner is not named or predeceases the Contract Owner, all rights
and interest of the Contingent Owner will vest in the Contract Owner's estate.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner from time to time prior to the Annuitization Date by
written notice to the Company. The change, upon receipt and recording by the
Company at its Home Office, will take effect as of the time the written notice
was signed, whether or not the Contract Owner is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change. Unless the Contingent Owner (or Joint
Owner) is also the named Beneficiary (or Contingent Beneficiary, if applicable),
the Contingent Owner (or Joint Owner) shall have no rights in the Contract if
the Contract Owner/Annuitant dies. If a Contract Owner/Annuitant dies,
disposition of the Contract shall be determined based on the "Death Benefit
Prior to the Annuitization Date" provisions.
The Beneficiary is the person or persons who may receive certain benefits
under the Contract in the event the Designated Annuitant dies prior to the
Annuitization Date. If more than one Beneficiary survives the Designated
Annuitant, each will share equally unless otherwise specified in the Beneficiary
designation. If no Beneficiary survives the Annuitant, all rights and interest
of the Beneficiary shall vest in the Contingent Beneficiary, and if more than
one Contingent Beneficiary survives, each will share equally unless otherwise
specified in the Contingent Beneficiary designation. If a Contingent Beneficiary
is not named or predeceases the Designated Annuitant, all rights and interest of
the Contingent Beneficiary will vest with the Contract Owner or the Contract
Owner's estate. Subject to the terms of any existing assignment, the Contract
Owner may change the Beneficiary or Contingent Beneficiary from time to time
during the lifetime of the Designated Annuitant, by written notice to the
Company. The change, upon receipt by the Company at its Home Office, will take
effect as of the time the written notice was signed, whether or not the
Designated Annuitant is living at the time of recording, but without further
liability as to any payment or settlement made by the Company before receipt of
such change.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds described in this prospectus
should no longer be available for investment by the Variable Account or if, in
the judgment of the Company's management, further investment in such underlying
Mutual Fund shares should become inappropriate in view of the purposes of the
Contract, the Company may eliminate Sub-Accounts, combine two or more
Sub-Accounts or substitute one or
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more underlying Mutual Funds for other underlying Mutual Funds. No substitution
of securities in the Variable Account may take place without prior approval of
the Securities and Exchange Commission, and under such requirements as it may
impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 182437, Columbus, Ohio 43218-2437, or calling
1-800-325-6434, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected, and the amounts 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. Once
Variable Annuity payments begin, the Owner may exchange amounts among the
Sub-Account options once per year.
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
less frequently than annually.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. No further changes in the Designated Annuitant will be permitted under
the Contract. The amount of the Death Benefit will be limited to the Contract
Value if
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the Annuity Commencement Date is postponed beyond the first day of the calendar
month after the Annuitant's 75th birthday or such other Annuity Commencement
Date provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE DESIGNATED
ANNUITANT TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE
THE SECOND ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED
BEFORE THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second person
and continuing thereafter during the lifetime of the survivor. AS IS THE
CASE UNDER OPTION 1 OF THIS PROVISION, 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 Designated 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 payee, any guaranteed annuity payments will be
continued during the remainder of the selected period to the
Beneficiary or the Beneficiary may, at any time, elect to have the
present value of the guaranteed number of annuity payments
remaining paid in a lump sum as specified in section (2) below.
(2) If a Beneficiary is payee, the present value, computed as of the
date on which notice of death is received by the Company at its
Home Office, of the guaranteed number of annuity payments
remaining after receipt of such notice and to which the deceased
would have been entitled had he or she not died, computed at the
Assumed Investment Rate effective in determining the Annuity
Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states.
The Owner may request an alternative non-guaranteed option by giving notice in
writing prior to Annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity
Payment Option, the Contract Value will continue to accumulate. Contracts issued
in connection with Qualified Plans, Tax Sheltered Annuities and Individual
Retirement Annuities are subject to the minimum Distribution requirements set
forth in the Plan, Contract, or Code.
Any Annuity Payment Option not set forth in the Contract which is
satisfactory to both the Company and the Annuitant may be selected.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts issued on or after January 19, 1985, in the
event the Contract Owner dies, the following rules will apply:
(1) In the event the Contract Owner dies prior to the Annuitization
Date, the entire interest in the Contract less any applicable
deductions (which may include Contingent Deferred Sales Charge),
must be distributed within 5 years. Such Distribution will be paid
to the Designated Annuitant unless the Owner has named a
Contingent Owner or estate to receive the Distribution. In the
alternative, the Designated Annuitant or Contingent Owner (where
one is named) may elect to receive Distribution in the form of a
life annuity or an annuity for a period certain not exceeding the
Designated Annuitant's life expectancy and such annuity must begin
within one year following the date of the Contract Owner's death.
In the event the Designated Annuitant is the Contract Owner's
spouse, the Contract may be continued by such Designated
Annuitant, treating the spouse as the Contract Owner. In the event
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the Designated Annuitant does not survive the Contract Owner or if
the Designated Annuitant and the Contract Owner are the same
person, a Distribution will be made in accordance with the "Death
Benefit Prior To The Annuitization Date" provision, provided,
however, that all Distributions made as a result of the death of
the Contingent Owner shall be made within the time limits set
forth in this paragraph. If the Contract Owner and the Designated
Annuitant are not the same, no Death Benefit is payable upon the
death of the Contract Owner.
(2) In the event the Contract Owner/Designated Annuitant dies on or
after the Annuitization Date, Distribution, if any, must be made
to the Beneficiary at least as rapidly as under the method of
Distribution being used as of the date of the Contract
Owner/Designated Annuitant's death.
If the Contract Owner is not a natural person, the death of the
Annuitant (or a change of the Annuitant) will be treated like a death of the
Contract Owner and will result in a Distribution pursuant to Section (1) above,
regardless of whether a Contingent Annuitant has also been named. The
Distribution will take the form of either:
(a) the Death Benefit described below (if the Annuitant has died and
there is no Contingent Annuitant), or, in all other cases,
(b) the benefit described in Section (1) of this provision, except
that in the event of a change of Annuitant, the benefit will be
paid to the Contract Owner if the Annuitant is still living, or to
the Beneficiary upon the death of the Annuitant (and the
Contingent Annuitant, if any) prior to the expiration of the
period described in Section (1) of this provision.
B. Contracts issued in connection with Qualified Plans, Individual
Retirement Annuities, or Tax Sheltered Annuities will be subject to
specific rules, set forth in the Plan, Contract or Code concerning
Distributions upon the death of the Owner/Designated Annuitant (see
"Required Distribution For Qualified Plans or Tax Sheltered Annuities").
DEATH BENEFIT PRIOR TO THE ANNUITIZATION DATE
The Death Benefit is payable to the Beneficiary unless the Owner has
named a Contingent Designated Annuitant. In such case, the Death Benefit is
payable to the Beneficiary upon the death of the last survivor of the Designated
Annuitant and Contingent Designated Annuitant. The value of the Death Benefit
will be determined as of the Valuation Date coincident with or next following
the date the Company receives both 1) due proof of death and 2) an election for
a) a single sum payment or b) Annuity Payment Option.
If a single sum settlement is requested, payment will be made in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is desired, election may be made by
the Beneficiary during the 90-day period commencing with the date written notice
is received by the Company. If no election has been made by the end of such
90-day period, the Death Benefit will be paid to the Beneficiary in a single
sum. If the Designated Annuitant dies prior to the first day of the calendar
month after his or her 75th birthday, the amount of the Death Benefit will be
the greater of (i) the sum of all Purchase Payments, increased at an annual rate
of 5% simple interest from the date of each Purchase Payment, for each full year
the payment has been in force, less any amounts surrendered, or (ii) the
Contract Value.
The amount of the Death Benefit will be equal to the Contract Value if
the Contract Owner has requested an Annuity Commencement Date later than the
first day of the calendar month after the Designated Annuitant's 75th birthday,
the Company has approved the request, and the Designated Annuitant dies after
such date.
The Death Benefit described above is not allowable in certain states.
Insurance regulation in the states of New York and North Carolina do not permit
the Death Benefit as described in this provision. For Contracts issued in the
states of New York and North Carolina the amount of the Death Benefit will be
the greater of (i) the sum of all Purchase Payments, less any amounts
surrendered, or (ii) the Contract Value. The amount of the Death Benefit will be
limited to the Contract Value if the Annuity Commencement Date is deferred
beyond the Designated Annuitant's 75th birthday.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of
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Section 401(a)(9) of the Code and regulations thereunder, as applicable, and
will be paid, notwithstanding anything else contained herein, to the
Owner/Annuitant under the Annuity Payments Option selected, over a period not
exceeding:
A. the life of the Owner/Annuitant or the lives of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary; or
B. a period not extending beyond the life expectancy of the Owner/Annuitant
or the life expectancy of the Owner/Annuitant and the Owner/Annuitant's
designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan (as defined in Code Section 414(d)), or
church plan (as defined in Code Section 401(a)(9)(C)), the Required Beginning
Date will be the later of the dates determined under the preceding sentence or
April 1 of the calendar year following the calendar year in which the Annuitant
retires.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the calendar year which includes the fifth
anniversary of his or her death occurs, unless:
(a) In the case of a Tax Sheltered Annuity, Owner names his or her surviving
spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his
or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
Beneficiary elects to receive a Distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner/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
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distributions 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. Distributions may be accepted in a lump sum or in nearly
equal payments over: (a) the Owner's life or the lives of the Owner and his
spouse or 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 IRA must be distributed by December 31 of the calendar year
which includes 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
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exceeding his or her life expectancy) commencing not later than December
31 of the year following the year in which the Owner dies.
If the Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except to the extent that a surviving spouse Beneficiary may elect to
treat the Contract as his or her own, in the same manner as is described in
section (a)(i) of this provision.
If the amounts distributed do not satisfy the Distribution rules
mentioned above, a penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income tax
rates. The portion of the Distribution which is taxable is based on the ratio
between the amount by which non-deductible Purchase Payments exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Owner must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all Individual Retirement Accounts and
Annuities.
IRA Distributions will not receive the benefit of the tax treatment of a
lump sum Distribution from a Qualified Plan. If the Owner dies prior to the time
Distribution of his or her interest in the annuity is completed, the balance
will also be included in his or her gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the Code,
and the amount of the tax on the generation-skipping transfer resulting from
such direct skip. If applicable, such payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer from the Money Market Sub-Account or the Fixed Account to
any other Sub-Account within the Variable Account on a monthly basis. This
service is intended to allow the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time. The Company makes no guarantees that Dollar Cost
Averaging, will result in a profit or protect against loss in a declining
market. To qualify for Dollar Cost Averaging, there must be a minimum total
Contract Value of $5,000. Transfers for purposes of Dollar Cost Averaging can
only be made from the Money Market Sub-Account or the Fixed Account. The minimum
monthly Dollar Cost Averaging transfer is $100.
In addition, Dollar Cost Averaging monthly transfers from the Fixed
Account must be equal to or less than 1/30th of the Fixed Account value when the
Dollar Cost Averaging program is requested. Transfers out of the Fixed Account,
other than for Dollar Cost Averaging, may be subject to certain additional
restrictions (see "Transfers"). A written election of this service, on a form
provided by the Company, must be completed by the Contract Owner in order to
begin transfers. Once elected, transfers from the Money Market Sub-Account or
the Guaranteed Interest Account will be processed monthly until either the value
in the Money Market Sub-Account or the Fixed Account is completely depleted or
the Contract Owner instructs the Company in writing to cancel the monthly
transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners, however, such
discontinuation will not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all Sub-Accounts in
which the Contract Owner has an interest, and the Fixed Account. A Contingent
Deferred Sales Charge may apply to Systematic Withdrawals in accordance with the
considerations set forth in the "Contingent Deferred Sales Charge" section. Each
Systematic
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Withdrawal is subject to federal income taxes on the taxable portion. In
addition, a 10% federal penalty tax may be assessed on Systematic Withdrawals if
the Contract Owner is under age 59-1/2. If directed by the Contract Owner, the
Company will withhold federal income taxes from each Systematic Withdrawal. The
Contract Owner may discontinue Systematic Withdrawals at any time by notifying
the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners, however, such
discontinuation will not affect Systematic Withdrawal programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional Purchase Payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed at the end of each calendar
quarter detailing the Contract activity during the calendar quarter. Instead of
receiving an immediate confirmation of transactions made pursuant to some types
of periodic payment plans (such as a dollar cost averaging program) or salary
reduction arrangement, the Contract Owner may receive confirmation of such
transactions in their quarterly statements. The Contract Owner should review the
information in these statements carefully. All errors or corrections must be
reported to the Company immediately to assure proper crediting to the Owner's
Contract. The Company will assume all transactions are accurately reported in
quarterly statements or confirmation statements unless the Contract Owner
notifies the Company otherwise within 30 days after receipt of the statement.
The Company will also send to Contract Owners each year an annual report and a
semi-annual report containing financial statements for the Variable Account, as
of December 31 and June 30, respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year Purchase Payment must be at least $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. Purchase Payments, if any, after the first Contract
Year must be at least $10 each. The Company, however, reserves the right to
lower this $10 Purchase Payment minimum for employer sponsored deduction
programs. The Contract Owner may increase or decrease Purchase Payments or
change the frequency of payment. The Contract Owner is not obligated to continue
Purchase Payments in the amount or at the frequency elected. There are no
penalties for failure to continue Purchase Payments.
The cumulative total of all Purchase Payments under Contracts issued on
the life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
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 not later than 2 business days after receipt of
an order to purchase, if the application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and the
Company may retain the Purchase Payment for up to 5 business days while
attempting to complete an incomplete application. If the application cannot be
made complete within 5 days, the prospective purchaser will be informed of the
reasons for the delay and the Purchase Payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the Purchase Payment until the application is made complete. Thereafter,
subsequent Purchase Payments will be priced on the basis of the Accumulation
Unit Value next computed for the appropriate Sub-Account after the additional
Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-Account
was arbitrarily set initially at $10 when the underlying Mutual Fund shares in
that Sub-Account were available for purchase. The value for
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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 NSAT Money Market Fund), the Net
Investment Factor allows for the monthly reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge and Administration
Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each Sub-Account
are determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit Value for the Sub-Account for the Valuation Period during
which the Purchase Payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and the Fixed Account bears to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner, deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper written application" means that the surrender must be
requested in writing by the Contract Owner, and the Company may require that the
signature(s) be guaranteed by a member firm of the New York, American, Boston,
Midwest, Philadelphia, or Pacific Stock Exchange, or by a commercial bank or
savings and loan, which is a member of the Federal Deposit Insurance
Corporation. In some cases (for example, requests by a corporation, partnership,
agent, fiduciary, surviving joint owner or other eligible guarantor as defined
by the federal securities laws), the Company will require additional
documentation of a customary nature.
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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, and also in the case of a full
surrender, less the Contract Maintenance Charge (see "Contingent Deferred Sales
Charge" and "Contract Maintenance Charge and Administration 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.
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. A participant will not, therefore,
be entitled to 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 period of
participation in the Optional Retirement Program. The Company issues this
Contract to participants in the Optional Retirement Program in reliance upon,
and in compliance with, Rule 6c-7 of the Investment Company Act of 1940.
SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code(403(b)(7) Custodial Accounts),
may be executed only-
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case
of hardship may not include any income attributable to salary
reduction contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any Distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties of a Qualified Contract
or Tax Sheltered Annuity.
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A premature Distribution may not be eligible for rollover treatment. To assist
in preventing disqualification in the event of a ten-day free look, the Company
will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Code, upon proper direction by the
Contract Owner. The foregoing is the Company's understanding of the withdrawal
restrictions which are currently applicable under 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 a Qualified
Domestic Relations Order will not be considered to be in violation of
restrictions stated in this provision.
The surrender provisions may also be modified pursuant to the plan terms and
Code tax provisions when the Contract is issued to fund a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A
PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts. Contract Owners should
consult with their financial or tax advisor to discuss in detail their
particular tax situation and the use of their Contract.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for: (1) Qualified Contracts; (2) Individual
Retirement Annuities and Individual Retirement Accounts; (3) Tax Sheltered
Annuities; or (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to Participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned by
Individual Retirement Accounts are also generally taxed when received. The
portion of each such payment which is excludable is based on the ratio between
the amount by which nondeductible Purchase Payments to all such Contracts
exceeds prior non-taxable Distributions from such Contracts, and the total
account balances in such Contracts, at the time of the Distribution. The Owner
of such Individual Retirement Annuities or the Annuitant under Contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service the amount of nondeductible Purchase Payments, the amount of any
Distribution, the amount by which nondeductible Purchase Payments for all years
exceed non-taxable Distributions for all years, and the total balance in all
Individual Retirement Annuities and Accounts.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Designated Annuitant dies prior to excluding
from income the entire investment in the Contract, the Designated Annuitant's
final tax return may reflect a deduction for the balance of the investment in
the Contract.
Distributions made from the Contract prior to Annuitization 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, or any portion of the
Contract which is assigned or pledged; and 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
Designated 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 Annuitization 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 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 Qualified
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Contracts, Individual Retirement Annuities and Tax Sheltered Annuities,
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, it will generally be considered to have been purchased on the purchase
date of the Contract given up in the exchange.
Section 72 of the Code also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59-1/2, the death or disability of the Contract Owner.
The penalty does not apply if the Distribution is one of a series of
substantially equal periodic payments made over the life or life expectancy (or
joint lives or life expectancies) of the Designated Annuitant (and the
Designated Annuitant's Beneficiary), or is made from an immediate annuity, or is
allocable to an investment in the Contract before August 14, 1982. A Contract
Owner wishing to begin taking Distributions to which the 10% tax penalty does
not apply should forward a written request to the Company. Upon receipt of a
written request from the Contract Owner, the Company will inform the Contract
Owner of the procedures pursuant to Company Policy and subject to limitations of
the Contract including but not limited to first year withdrawals. If the
Contract Owner or Designated Annuitant selects an annuity for life or life
expectancy, or begins a predefined series of withdrawals based on a life
expectancy, and changes the method of payment before the expiration of 5 years
and the attainment of age 59-1/2, the early withdrawal penalty will apply. The
penalty will be equal to that which would have been imposed had no exception
applied from the outset, and the Contract Owner or Designated Annuitant will
also pay interest on the amount of the penalty from the date it would have
originally applied until it is actually paid.
In order to qualify as an annuity contract under Section 72 of the Code,
the Contract must provide for Distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the Distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year of the death of
the Contract Owner. If the Contract Owner's beneficiary is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. In the event the Contract
Owner dies on or after the Annuitization Date and before the entire interest has
been distributed, the remaining portion must be distributed at least as rapidly
as under the method of Distribution being used as of the date of the Contract
Owner's death. If the Contract Owner is not an individual, the death of the
Annuitant (or a change in the Annuitant) will result in a Distribution pursuant
to these rules, regardless of whether a Contingent Annuitant has been named (see
"Required Distribution For Qualified Plans or Tax Sheltered Annuities").
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such Distribution, but may be subject to penalties in the event insufficient
federal income tax is withheld during a calendar year.
Generally, the taxable portion of any Distribution from a Contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the Owner or the Company pays an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the Owner if the income, for the period the contract was
not diversified, had been received by the Owner. If the failure to diversify is
not corrected in this manner, the Owner of an annuity contract will be deemed
the Owner of the underlying securities and will be taxed on the earnings of his
account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
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Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in the area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of underlying
Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual Funds such
that the Contract would no longer qualify as an annuity under Section 72 of the
Code, the Company will take whatever steps are available to remain in
compliance.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of Purchase Payments, and tax consequences on
Distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans, Individual Retirement Accounts, or Individual
Retirement Annuities. Most Distributions from Tax Sheltered Annuities may be
rolled into another Tax Sheltered Annuity, an Individual Retirement Account, or
an Individual Retirement Annuity. Distributions which may not be rolled over
are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary, or c) for a
specified period of ten years or more, or;
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred directly
to an appropriate plan as described in this provision.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater of
the cash value of the Contract or the sum of all Purchase Payments (less any
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of the Employee Retirement Income Security Act (ERISA). It is the
responsibility of the plan and its fiduciaries to determine and satisfy section
404(c) requirements.
ADVERTISING
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 will 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
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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.
A "yield" and "effective yield" may also be advertised for the Nationwide
Separate Account Trust Money Market Fund Sub-Account. "Yield" is a measure of
the net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage of
the offering price of the Sub-Account's units. Yield is an annualized figure,
which means that it is assumed that the Sub-Account generates the same level of
net income over a 52-week period. The "effective yield" is calculated similarly
but includes the effect of assumed compounding calculated under rules prescribed
by the Securities and Exchange Commission. The effective yield will be slightly
higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying Mutual 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, Columbus Dispatch,
Investor's Daily, and Standard & Poor's Outlook. In addition, Variable Annuity
Research & Data Service (The VARDS Report), is an independent rating service
that ranks over 500 variable annuity funds based upon total return performance.
These rating services and publications rank the performance of the underlying
Mutual Funds against all underlying Mutual Funds over specified periods and
against underlying Mutual Funds in specified categories. The rankings may or may
not include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
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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Below are quotations of standardized average annual total return and
non-standardized average annual total return for each of the Sub-Accounts
available within the Variable Account.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SUB-ACCOUNT OPTIONS 1 Year to 5 Years to Life of Fund to Date Fund
12/31/95 12/31/95 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Socially Responsible 24.42% N/A 11.26% 10-06-93
Growth Fund
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 26.61% 11.80% 7.61% 09-29-89
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 10.46% 6.81% 6.13% 09-01-95
Fund-Quality Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 19.30% 54.17% 49.66% 08-31-90
Fund-Small Cap Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP 24.94% 17.36% 9.02% 10-09-86
Fund-Equity-Income Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income 10.64% 15.11% 7.61%* 09-19-85
Portfolio
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 13.76% 6.74% 6.62% 02-28-89
Management Trust-Balanced
Portfolio
- ------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 8.81% 5.26% 5.78%* 11-08-82
- ------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund -4.11% -0.42% 1.81%* 11-10-81
- ------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 19.02% 12.73% 8.79%* 11-08-82
- ------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 15.79% N/A 14.12% 09-01-95
- ------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 6.83% N/A 2.32% 08-01-91
Advantage
- ------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 21.00% 10.77% 8.65% 11-20-87
- ------------------------------------------------------------------------------------------------------------------
Templeton Variable Products 5.88% N/A 7.66% 05-01-92
Series Fund-International Fund
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12-31-95.
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NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
SUB-ACCOUNT OPTIONS 1 Year to 5 Years to Life of Fund to Date Fund
12/31/95 12/31/95 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Socially Responsible 32.52% N/A 16.74% 10-06-93
Growth Fund
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 34.71% 14.24% 10.57% 09-29-89
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 18.56% 9.44% 9.16% 09-01-95
Fund-Quality Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 27.40% 57.75% 53.70% 08-31-90
Fund-Small Cap Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP 33.04% 19.54% 11.61% 10-09-86
Fund-Equity-Income Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income 18.74% 17.21% 9.81%* 09-19-85
Portfolio
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 21.85% 9.35% 9.02% 02-28-89
Management Trust-Balanced
Portfolio
- ------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 16.91% 7.96% 7.94%* 11-08-82
- ------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 3.99% 2.66% 4.26%* 11-10-81
- ------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 27.12% 15.01% 10.79%* 11-08-82
- ------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 23.89% N/A 17.34% 09-01-95
- ------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 14.93% N/A 5.87% 08-01-91
Advantage
- ------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 29.10% 13.16% 11.12% 11-20-87
- ------------------------------------------------------------------------------------------------------------------
Templeton Variable Products 13.98% N/A 11.24% 05-01-92
Series Fund-International Fund
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12-31-95.
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LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History............................................................................ 1
Services................................................................................................... 1
Purchase of Securities Being Offered....................................................................... 1
Underwriters............................................................................................... 2
Calculation of Performance................................................................................. 2
Underlying Mutual Fund Performance Summary................................................................. 3
Annuity Payments........................................................................................... 5
Financial Statements....................................................................................... 6
</TABLE>
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APPENDIX
Purchase Payments under the guaranteed interest 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 Fixed Account 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 Multi-Flex Variable Account and any other
segregated asset account. Fixed Account Purchase Payments will be allocated to
the Fixed Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum rate
as stated in the Contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR.
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. 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 amount of the Fixed Account
that is maturing and will be declared upon the expiration date of the then
current Interest Rate Guarantee Period (see "Interest Rate Guarantee Period").
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.
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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.
ANNUITY TABLES AND ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
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<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 1996. The
prospectus may be obtained from Nationwide Life Insurance Company by writing
P.O. Box 182437, One Nationwide Plaza, Columbus, Ohio 43218-2437, or calling
1-800-325-6434, TDD 1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History..................................................................................... 1
Services............................................................................................................ 1
Purchase of Securities Being Offered................................................................................ 1
Underwriters........................................................................................................ 2
Calculation of Performance.......................................................................................... 2
Underlying Mutual Fund Performance History.......................................................................... 3
Annuity Payments.................................................................................................... 5
Financial Statements................................................................................................ 6
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Multi-Flex Variable Account is a separate investment
account of Nationwide Life Insurance Company ("Company"). The Company is a
member of the Nationwide Insurance Enterprise and all of the Company's common
stock is owned by Nationwide Corporation. The Nationwide Insurance Enterprise is
one of America's largest insurance and financial services family of companies,
with combined assets of over $57 billion as of December 31, 1995. The Company is
the largest annuity provider in the United States for public sector deferred
compensation programs, and has received the exclusive endorsement to provide
annuity products in connection with the deferred compensation programs sponsored
by the National Association of Counties (NACo) and the United States Conference
of Mayors (USCM). In addition, the Company is the only annuity provider for the
National Education Association (NEA) members endorsed by the NEA.
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 Fund options. The Company, or affiliates of the Company, have
entered into agreements with either the investment adviser or distributor for
several of the underlying Mutual Funds. The agreements relate to administrative
services provided by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular underlying Mutual Funds.
These fees in no way affect the net asset value of the underlying Mutual Funds
or fees paid by the Contract Owner.
The financial statements and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the
authority of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may transfer up to 100% of the Contract Value from the
Variable Account to the Fixed Account. However, the Company, reserves the right
to restrict transfers to the Fixed Account to 25% for any 12 month period.
Contract Owners may 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
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<PAGE> 44
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 (see "Interest Rate Guarantee Period" located in
the prospectus). Transfers under this provision must be made within 45 days
after the expiration date of the guarantee period.
Transfers must also be made prior to the Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43218, a wholly owned subsidiary of the Company. During the fiscal years
ended December 31, 1995, 1994, and 1993, no underwriting commissions were paid
by the Company to NFS.
CALCULATION OF PERFORMANCE
All performance advertising shall include quotations of standardized
average annual total return, calculated in accordance with standard method
prescribed by rules of the Securities and Exchange Commission, to facilitate
comparison with standardized total return advertised by other variable annuity
separate accounts. 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. 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" located in the Prospectus). No deduction is made for
premium taxes which may be assessed by certain states.
Nonstandardized average annual total return may also be advertised, and
is calculated in a manner similar to standardized average annual total return
except the nonstandardized average annual 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 a
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
total return will be based on the rolling calendar quarters and will cover at
least periods of one, five, and ten years, or a period covering the time the
underlying Mutual Fund option held in the Sub-Account has been in existence, if
the underlying Mutual Fund option has not been in existence for one of the
prescribed periods. For those underlying Mutual Fund options which have not been
held as Sub-Accounts within the Variable Account for one of the quoted periods,
the average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Fund options would have
achieved (reduced by the applicable charges) had they been held as Sub-Accounts
within the Variable Account for the period quoted.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, therefore,
should 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 the quotations of standardized average annual total return and
non-standardized average annual total return, calculated as described above, for
each of the Sub-Accounts available within the Variable Account.
2
44 of 104
<PAGE> 45
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
================================================================================================================
SUB-ACCOUNT OPTIONS 1 Year to 5 Years to Life of Fund to Date Fund
12/31/95 12/31/95 12/31/95 Effective
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Socially Responsible 24.42% N/A 11.26% 10-06-93
Growth Fund
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 26.61% 11.80% 7.61% 09-29-89
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 10.46% 6.81% 6.13% 09-01-95
Fund-Quality Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 19.30% 54.17% 49.66% 08-31-90
Fund-Small Cap Portfolio
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP 24.94% 17.36% 9.02% 10-09-86
Fund-Equity-Income Portfolio
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income 10.64% 15.11% 7.61%* 09-19-85
Portfolio
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 13.76% 6.74% 6.62% 02-28-89
Management Trust-Balanced
Portfolio
- ----------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 8.81% 5.26% 5.78%* 11-08-82
- ----------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund -4.11% -0.42% 1.81%* 11-10-81
- ----------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 19.02% 12.73% 8.79%* 11-08-82
- ----------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 15.79% N/A 14.12% 09-01-95
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 6.83% N/A 2.32% 08-01-91
Advantage
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 21.00% 10.77% 8.65% 11-20-87
- ----------------------------------------------------------------------------------------------------------------
Templeton Variable Products 5.88% N/A 7.66% 05-01-92
Series Fund-International Fund
================================================================================================================
</TABLE>
*Represents 10 years to 12-31-95.
3
45 of 104
<PAGE> 46
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
================================================================================================================
SUB-ACCOUNT OPTIONS 1 Year to 5 Years to Life of Fund to Date Fund
12/31/95 12/31/95 12/31/95 Effective
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Socially Responsible 32.52% N/A 16.74% 10-06-93
Growth Fund
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 34.71% 14.24% 10.57% 09-29-89
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 18.56% 9.44% 9.16% 09-01-95
Fund-Quality Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 27.40% 57.75% 53.70% 08-31-90
Fund-Small Cap Portfolio
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP 33.04% 19.54% 11.61% 10-09-86
Fund-Equity-Income Portfolio
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income 18.74% 17.21% 9.81%* 09-19-85
Portfolio
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 21.85% 9.35% 9.02% 02-28-89
Management Trust-Balanced
Portfolio
- ----------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 16.91% 7.96% 7.94%* 11-08-82
- ----------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 3.99% 2.66% 4.26%* 11-10-81
- ----------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 27.12% 15.01% 10.79%* 11-08-82
- ----------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 23.89% N/A 17.34% 09-01-95
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 14.93% N/A 5.87% 08-01-91
Advantage
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 29.10% 13.16% 11.12% 11-20-87
- ----------------------------------------------------------------------------------------------------------------
Templeton Variable Products 13.98% N/A 11.24% 05-01-92
Series Fund-International Fund
================================================================================================================
</TABLE>
*Represents 10 years to 12-31-95.
Any current yield quotations of the Nationwide Separate Account Trust
Money Market Fund Sub-Accounts, subject to Rule 482 of the Securities Act of
1933, shall consist of a seven calendar day historical yield, carried at least
to the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, exclusive of capital changes, in the value of
hypothetical pre-existing account having a balance of one accumulation unit at
the beginning of the base period, subtracting a hypothetical charge reflecting
deductions from Contract Owner accounts, and dividing the net change in account
value by the value of the account at the beginning of the period to obtain a
base period return, and multiplying the base period return by (365/7) or (366/7)
in a leap year. The Nationwide Separate Account Trust Money Market Fund
Sub-Account's effective yield is computed similarly but includes the effect of
assumed compounding on an annualized basis of the current yield quotations of
the Fund. For the period ended December 31, 1995, the Nationwide Separate
Account Trust Money Market Fund Sub-Account's unit value yield and effective
unit value yield were 3.78% and 3.86%, respectively.
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
4
46 of 104
<PAGE> 47
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 or another method of calculation is used.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
5
47 of 104
<PAGE> 48
<PAGE> 1
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide Multi-Flex Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Multi-Flex Variable Account as of December
31, 1995, and the related statements of operations and changes in contract
owners' equity and schedules of changes in unit value for each of the years in
the three year period then ended. These financial statements and schedules of
changes in unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide Multi-Flex Variable Account as of December 31, 1995, and
the results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
78,822 shares (cost $1,252,048)............................. $ 1,364,403
Dreyfus Stock Index Fund (DryStkIx)
561,820 shares (cost $7,968,697)............................ 9,663,302
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
8,731 shares (cost $102,951)................................ 103,115
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
220,339 shares (cost $9,089,948)............................ 10,164,253
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
2,624,158 shares (cost $41,441,185)......................... 50,567,526
Fidelity VIP - High Income Portfolio (FidHiInc)
216,993 shares (cost $2,448,997)............................ 2,614,767
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
2,632,477 shares (cost $28,987,804)......................... 35,485,789
Nationwide SAT - Government Bond Fund (NWGvtBd)
12,713,763 shares (cost $142,631,773)....................... 144,428,349
Nationwide SAT - Money Market Fund (NWMyMkt)
45,825,142 shares (cost $45,825,142)........................ 45,825,142
Nationwide SAT - Total Return Fund (NWTotRet)
32,544,844 shares (cost $304,605,445)....................... 375,567,496
Neuberger & Berman - Balanced Portfolio (NBBal)
2,043,380 shares (cost $30,526,160)......................... 35,800,020
Strong VIP-Strong Special Fund II, Inc. (StSpec2)
9,703 shares (cost $161,870)................................ 165,335
TCI Portfolios - TCI Advantage (TCIAdv)
1,579,029 shares (cost $8,612,430).......................... 9,774,190
TCI Portfolios - TCI Growth (TCIGro)
4,014,784 shares (cost $35,810,661)......................... 48,418,300
Templeton VPS - Templeton International Fund (TemIntFd)
406,574 shares (cost $5,624,503)............................ 6,151,470
------------
Total investments....................................... 776,093,457
Accounts receivable............................................. 150,546
------------
Total assets............................................ 776,244,003
ACCOUNTS PAYABLE.................................................. 156,206
------------
CONTRACT OWNERS' EQUITY........................................... $776,087,797
============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Contracts in accumulation phase:
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified...................................... 94,479 $13.333625 $ 1,259,748
Non-tax qualified.................................. 7,847 13.333625 104,629
Dreyfus Stock Index Fund:
Tax qualified...................................... 489,045 13.807559 6,752,518
Non-tax qualified.................................. 210,808 13.807559 2,910,744
Dreyfus VIF - Quality Bond Portfolio:
Tax qualified...................................... 9,201 10.493309 96,549
Non-tax qualified.................................. 626 10.493309 6,569
Dreyfus VIF - Small Cap Portfolio:
Tax qualified...................................... 709,274 13.249127 9,397,261
Non-tax qualified.................................. 57,885 13.249127 766,926
Fidelity VIP - Equity-Income Portfolio:
Tax qualified...................................... 2,504,171 14.412060 36,090,263
Non-tax qualified.................................. 1,004,513 14.412060 14,477,102
Fidelity VIP - High Income Portfolio:
Tax qualified...................................... 210,727 11.779381 2,482,234
Non-tax qualified.................................. 11,249 11.779381 132,506
Nationwide SAT - Capital Appreciation Fund:
Tax qualified...................................... 1,711,709 14.442619 24,721,561
Non-tax qualified.................................. 739,691 14.442619 10,683,075
Nationwide SAT - Government Bond Fund:
Tax qualified...................................... 3,276,421 29.463573 96,535,069
Non-tax qualified.................................. 1,618,704 29.474435 47,710,386
Nationwide SAT - Money Market Fund:
Tax qualified...................................... 1,618,571 19.595876 31,717,317
Non-tax qualified.................................. 665,100 21.291272 14,160,825
Nationwide SAT - Total Return Fund:
Tax qualified...................................... 5,049,123 51.701438 261,046,920
Non-tax qualified.................................. 2,273,685 50.214359 114,171,635
Neuberger & Berman - Balanced Portfolio:
Tax qualified...................................... 1,697,674 14.753402 25,046,467
Non-tax qualified.................................. 728,876 14.753402 10,753,401
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified...................................... 14,374 10.456863 150,307
Non-tax qualified.................................. 1,437 10.456863 15,027
TCI Portfolios - TCI Advantage:
Tax qualified...................................... 513,818 13.035463 6,697,856
Non-tax qualified.................................. 209,516 13.035463 2,731,138
Initial Funding by Depositor (note 1a)............. 25,000 13.802855 345,071
TCI Portfolios - TCI Growth:
Tax qualified...................................... 1,986,887 16.447846 32,680,011
Non-tax qualified.................................. 956,826 16.447846 15,737,727
Templeton VPS - Templeton International Fund:
Tax qualified...................................... 503,599 11.329203 5,705,375
Non-tax qualified.................................. 39,371 11.329203 446,042
======== =========
Reserves for annuity contracts in payout phase:
Tax qualified...................................... 285,200
Non-tax qualified.................................. 270,338
------------
$776,087,797
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends............. $ 46,393,801 29,703,314 20,461,444
------------ ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares.. 88,238,390 76,838,985 38,515,569
Cost of mutual fund shares sold.................. (75,818,878) (73,196,125) (36,994,402)
------------ ----------- -----------
Realized gain (loss) on investments.............. 12,419,512 3,642,860 1,521,167
Change in unrealized gain (loss) on investments.. 96,906,383 (34,476,283) 20,137,926
------------ ----------- -----------
Net gain (loss) on investments................. 109,325,895 (30,833,423) 21,659,093
------------ ----------- -----------
Net investment activity...................... 155,719,696 (1,130,109) 42,120,537
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners.... 83,073,876 116,273,060 185,254,645
Redemptions........................................ (77,469,618) (60,979,679) (31,928,233)
Annuity benefits................................... (70,923) (64,720) (87,623)
Adjustments to maintain reserves................... (11,132) (9,850) (1,896)
------------ ----------- -----------
Net equity transactions...................... 5,522,203 55,218,811 153,236,893
------------ ----------- -----------
EXPENSES (NOTE 2):
Contract charges................................... (10,351,310) (9,137,529) (7,053,075)
Contingent deferred sales charges.................. (817,609) (948,537) (535,109)
------------ ----------- -----------
Total expenses............................... (11,168,919) (10,086,066) (7,588,184)
------------ ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 150,072,980 44,002,636 187,769,246
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD.......... 626,014,817 582,012,181 394,242,935
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $776,087,797 626,014,817 582,012,181
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 5
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Multi-Flex Variable Account (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. On August 21,
1991, the Company (the Depositor) transferred to the Account 50,000 shares of
the TCI Portfolios, Inc. - TCI Advantage fund for which the Account was credited
with 25,000 accumulation units. The value of the accumulation units purchased by
the Company on August 21, 1991 was $250,000.
The Company offers tax qualified and non-tax qualified Individual Deferred
Variable Annuity Contracts through the Account. The primary distributions for
the contracts is through Company Agents and an affiliated sales organization;
however, other distributors may be 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 payout phase may invest in any of the
following:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity
Index Fund, Inc. (DLAI))
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
Fidelity VIP - High Income Portfolio (FidHiInc)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolio of the Neuberger & Berman Advisers Management Trust (Neuberger
& Berman);
Neuberger & Berman - Balanced Portfolio (NBBal)
Funds of the Strong Variable Insurance Products Funds (Strong VIP);
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Advantage (TCIAdv)
TCI Portfolios - TCI Growth (TCIGro)
Portfolio of the Templeton Variable Products Series Fund (Templeton
VPS);
Templeton VPS - Templeton International Fund (TemIntFd)
<PAGE> 6
At December 31, 1995, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain contract expenses (see
note 2). The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1995. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge. For
contracts issued prior to February 1, 1989, 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 February 1, 1989, the Company will
deduct a contingent deferred sales charge not to exceed 7% of the lesser of
purchase payments or the amount surrendered, such charge declining 1% per year,
to 0%, after the purchase payment has been held in the contract for 84 months.
No sales charges are deducted on redemptions used to purchase units in the fixed
investment options of the Company.
The following administrative charges are deducted by the Company: (a) an
annual contract maintenance charge of $30, with certain exceptions, which is
satisfied by surrendering units; and (b) for contracts issued prior to February
1, 1989, a charge for mortality and expense risk assessed through the daily unit
value calculation equal to an annual rate of 0.80% and 0.50%, respectively; for
contracts issued on or after February 1, 1989, 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. No charges were deducted from the initial funding, or from
earnings thereon.
<PAGE> 7
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented for each
series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to capital
gains and dividend distributions from the underlying mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration charge
discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
- --------------------------------------------------------------------------------
<PAGE> 8
- --------------------------------------------------------------------------------
SCHEDULE I
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryQualBd DrySmCap FidEqinc FidHilnc NWCapApp
-------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.039093 10.227308 10.000000 10.374796 10.808255 9.895223 11.311683
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .367042 .366275 .300901 .305817 .845166 .716438 .642190
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.080069 3.371719 .235955 2.722323 2.923160 1.310923 2.653706
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.152579) (.157743) (.043547) (.153809) (.164521) (.143203) (.164960)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.333625 13.807559 10.493309 13.249127 14.412060 11.779381 14.442619
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 33% 35% 5%(b) 28% 33% 19% 28%
====================================================================================================================
1994
Beginning unit value - Jan. 1 $10.000000 10.271065 ** 10.000000 10.227513 10.000000 11.564256
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .258763 .287154 .168745 .767502 .000000 .182737
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.132737) (.197934) .294439 (.048719) (.018339) (.286833)
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.086933) (.132977) (.088388) (.138041) (.086438) (.148477)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.039093 10.227308 10.374796 10.808255 9.895223 11.311683
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0%(b) 0% 4%(b) 6% (1)%(b) (2)%
====================================================================================================================
1993
Beginning unit value - Jan. 1 ** $10.000000 ** ** 10.000000 ** 10.689287
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.574735 .059299 .260100
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.266407) .205206 .755961
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.037263) (.036992) (.141092)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.271065 10.227513 11.564256
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 3%(b) 2%(b) 8%
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWGvtBd NWGvtBd
Qual Non-Qual
------- --------
<S> <C> <C>
1995
Beginning unit value - Jan. 1 25.138302 25.147577
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.778825 1.779480
- ------------------------------------------------------
Unrealized gain (loss) 2.904595 2.905666
- ------------------------------------------------------
Contract charges (.358149) (.358288)
- ------------------------------------------------------
Ending unit value - Dec. 31 29.463573 29.474435
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 17% 17%
======================================================
1994
Beginning unit value - Jan. 1 26.318797 26.328516
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.651042 1.651652
- ------------------------------------------------------
Unrealized gain (loss) (2.499476) (2.500401)
- ------------------------------------------------------
Contract charges (.332061) (.332190)
- ------------------------------------------------------
Ending unit value - Dec. 31 25.138302 25.147577
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (4)% (4)%
======================================================
1993
Beginning unit value - Jan. 1 24.348055 24.357055
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.555308 1.555884
- ------------------------------------------------------
Unrealized gain (loss) .753100 .753371
- ------------------------------------------------------
Contract charges (.337666) (.337794)
- ------------------------------------------------------
Ending unit value - Dec. 31 26.318797 26.328516
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 8% 8%
======================================================
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not utilized or was not available.
<PAGE> 9
SCHEDULE I, CONTINUED
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NWMyMkt NWMyMkt NWTotRet NWTotRet
Qual Non-Qual Qual Non-Qual NBBal StSpec2
1995 ------- -------- -------- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $18.790546 20.416267 40.575816 39.408735 12.077573 10.000000
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.056381 1.147773 4.020137 3.904506 .307323 .046668
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 7.711672 7.489864 2.548627 .453424
- -------------------------------------------------------------------------------------------------------
Contract charges (.251051) (.272768) (.606187) (.588746) (.180121) (.043229)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $19.595876 21.291272 51.701438 50.214359 14.753402 10.456863
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 4% 4% 27% 27% 22% 5%(b)
=======================================================================================================
1994
Beginning unit value - Jan. 1 $18.325918 19.911440 40.671816 39.501981 12.661508 **
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .706658 .767804 2.052197 1.993171 .493737
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 (1.612762) (1.56637) (.91770)
- -------------------------------------------------------------------------------------------------------
Contract charges (.242030) (.262977) (.535435) (.520043) (.160502)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.790546 20.416267 40.575816 39.408735 12.077573
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 3% 3% 0% 0% (5)%
=======================================================================================================
1993
Beginning unit value - Jan. 1 $18.069824 19.633190 37.150744 36.082181 12.050347 **
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .494501 .537285 1.515648 1.472053 .185739
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 2.516539 2.444160 .585239
- -------------------------------------------------------------------------------------------------------
Contract charges (.238407) (.259035) (.511115) (.496413) (.159817)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.325918 19.911440 40.671816 39.501981 12.661508
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 1% 1% 9% 9% 5%
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TCIAdv TCIGro TemIntFd TCIAdv+
1995 ------ ------ -------- -------
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 11.312248 12.711014 9.913613 11.822996
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .409891 .014626 .112246 .431938
- ------------------------------------------------------------------------------
Unrealized gain (loss) 1.472626 3.917671 1.440756 1.547921
- ------------------------------------------------------------------------------
Contract charges (.159302) (.195465) (.137412) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.035463 16.447846 11.329203 13.802855
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 15% 29% 14% 17%
==============================================================================
1994
Beginning unit value - Jan. 1 11.343435 13.030369 10.000000 11.701906
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .297949 .001393 .000000 .309969
- ------------------------------------------------------------------------------
Unrealized gain (loss) (.181282) (.154144) .001766 (.188879)
- ------------------------------------------------------------------------------
Contract charges (.147854) (.166604) (.088153) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.312248 12.711014 9.913613 11.822996
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0% (2)% (1)%(b) 1%
==============================================================================
1993
Beginning unit value - Jan. 1 10.757355 11.967533 ** 10.953160
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .224725 .032511 .230690
- ------------------------------------------------------------------------------
Unrealized gain (loss) .506277 1.193545 .518056
- ------------------------------------------------------------------------------
Contract charges (.144922) (.163220) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.343435 13.030369 11.701906
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 5% 9% 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 utilized for the entire year indicated.
**This investment option was not utilized or was not available.
+For Depositor, see note 1a.
See note 3.
<PAGE> 49
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. The
Company mitigates this risk by offering a wide range of products and
by operating throughout the United States, thus reducing its exposure
to any single product or jurisdiction, and also by employing
underwriting practices which identify and minimize the adverse impact
of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes this
risk by adhering to a conservative investment strategy, by maintaining
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This change
in rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent
that liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amounts of
revenues and expenses for the reporting period. Actual results could differ
significantly from those estimates.
The most significant estimates include those used in determining deferred
policy acquisition costs, valuation allowances for mortgage loans on real
estate and real estate investments and the liability for future policy benefits
and claims. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
(a) CONSOLIDATION POLICY
The December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. All
significant intercompany balances and transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities and
equity securities as either held-to-maturity, available-for-sale or
trading. Fixed maturity securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity and are stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains
and losses, net of adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs
that would have been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed maturity
securities classified as held-to-maturity or trading as of
December 31, 1995.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. The measurement of impaired loans is based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the fair value of the collateral, if
the loan is collateral dependent. Loans in foreclosure and loans considered
to be impaired are placed on non-accrual status. Interest received on
non-accrual status mortgage loans on real estate are included in interest
income in the period received.
Real estate is carried at cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on the equity basis,
adjusted for valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life and certain annuities with life contingencies. Premiums for
traditional life insurance products are recognized as revenue when due.
Benefits and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This association
is accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of asset fees, cost of insurance, policy administration
and surrender charges that have been earned and assessed against policy
account balances during the period. Policy benefits and claims that are
charged to expense include benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable agency expenses have been deferred. For traditional life and
individual health insurance products, these deferred policy acquisition
costs are predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio of actual
annual premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same assumptions as
were used for computing liabilities for future policy benefits. For
universal life and investment products, deferred policy acquisition costs
are being amortized with interest over the lives of the policies in
relation to the present value of estimated future gross profits from
projected interest margins, asset fees, cost of insurance, policy
administration and surrender charges. For years in which gross profits are
negative, deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs are
adjusted to reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
insurance policies have been calculated using a net level premium method
based on estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the time the
policies were issued, rather than the assumptions prescribed by state
regulatory authorities. See note 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to be realized.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits and
claims incurred are deducted from the respective income and expense
accounts. Assets and liabilities related to reinsurance ceded are reported
on a gross basis.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</TABLE>
An analysis of realized gains (losses) on investments, net of
valuation allowances, by investment type follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 to available-for-sale
securities due to evidence of a significant deterioration in the issuer's
creditworthiness. The transfer of those fixed maturity securities resulted in
a gross unrealized loss of $4,285.
As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published tables,
modified for the Company's actual experience.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
of the total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument as
the amount at which the financial instrument could be exchanged in a
current transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using present
value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could cause these
estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets
and,in many cases, could not be realized in the immediate settlement of
the instruments. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services or,
in the case of private placements, is estimated by discounting
expected future cash flows using a current market rate applicable to
the yield, credit quality and maturity of the investments. The fair
value for equity securities is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of
assets held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage
loans on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations. Fair
value for mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the amount
payable on demand. Also included are disclosures for the Company's
limited payment policies, which the Company has used discounted cash
flow analyses similar to those used for investment contracts with
known maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to
financial instruments with off-balance-sheet risk in the normal course of
business through management of its investment portfolio. These financial
instruments include commitments to extend credit in the form of loans. These
instruments involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are agreements
to lend to a borrower, and are subject to conditions established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a deposit. Commitments
extended by the Company are based on management's case-by-case credit
evaluation of the borrower and the borrower's loan collateral. The
underlying mortgage property represents the collateral if the commitment is
funded. The Company's policy for new mortgage loans on real estate is to
lend no more than 80% of collateral value. Should the commitment be funded,
the Company's exposure to credit loss in the event of nonperformance by the
borrower is represented by the contractual amounts of these commitments less
the net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments. Commitments on
mortgage loans on real estate of $361,974 extending into 1996 were
outstanding as of December 31, 1995.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the United
States. The Company has a diversified portfolio with no more than 20% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) PENSION PLAN
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least one
thousand hours of service within a twelve-month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last ten
years of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost of
the enhanced benefit was borne by NMIC and certain of its property and
casualty insurance company affiliates.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual Insurance
Company Employees' Retirement Plan and the Wausau Insurance Companies
Pension Plan to form the Nationwide Insurance Enterprise Retirement
Plan. Immediately prior to the merger, the plans were amended to provide
consistent benefits for service after January 1, 1996. These amendments had
no significant impact on the accumulated benefit obligation or projected
benefit obligation as of December 31, 1995.
Pension costs charged to operations by the Company during the years ended
December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement health
care benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. In addition, there are caps
on the Company's portion of the per-participant cost of the postretirement
health care benefits. These caps can increase annually, but not more than
three percent. The Company's policy is to fund the cost of health care
benefits in amounts determined at the discretion of management. Plan
assets are invested primarily in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. Certain affiliated companies elected to amortize their
initial transition obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of
December 31, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company participates in intercompany repurchase agreements with
affiliates whereby the seller will transfer securities to the buyer at a
stated value. Upon demand or a stated period, the securities will be
repurchased by the seller at the original sales price plus a price
differential. Transactions under the agreements during 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) CONTINGENCIES
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to be
material to the Company's financial position or results of operations.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 26
Schedule I
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Summary of Investments - Other Than Investments in Related Parties
December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
----------------- --------------- ------------------
Column B Column C Column D
----------------- --------------- ---------------
Amount at which
shown in the
consolidated
Cost Market value balance sheet
----------------- ---------------- -------------------
<S> <C> <C> <C>
Fixed maturities available-for-sale:
Bonds and notes:
U.S. Government and government agencies and authorities $ 3,913,961 4,116,744 4,116,744
States, municipalities and political subdivisions 9,742 10,993 10,993
Foreign governments 162,442 172,016 172,016
Public utilities 2,053,701 2,146,000 2,146,000
All other corporate 7,298,784 7,721,624 7,721,624
----------------- ---------------- -------------------
Total fixed maturities available-for-sale 13,438,630 14,167,377 14,167,377
----------------- ---------------- -------------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 26,037 32,474 32,474
Non-redeemable preferred stock 1,325 1,244 1,244
----------------- ---------------- -------------------
Total equity securities available-for-sale 27,362 33,718 33,718
----------------- ---------------- -------------------
Mortgage loans on real estate 4,838,432 4,786,599*
Real estate:
Investment properties 213,340 171,739*
Acquired in satisfaction of debt 82,930 67,350*
Policy loans 370,908 370,908
Other long-term investments 73,190 67,280#
Short-term investments 45,732 45,732
----------------- -------------------
Total investments $19,090,524 19,710,703
================= ===================
</TABLE>
* Difference from Column B is primarily due to accumulated depreciation
and valuation allowances due to impairments on real estate and
valuation allowances due to impairments on mortgage loans on real
estate. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations and note 5 to the consolidated
financial statements.
# Difference from Column B is primarily due to operating losses of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 27
Schedule III
------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplementary Insurance Information
December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
Segment acquisition claims and Unearned premiums benefits payable Premium
costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
1995: Long-term savings $ 668,784 14,847,449 455 -
Life insurance 416,209 2,494,344 408,990 274,957
Accident and health
insurance 9,202 858,335 15,264 509,658
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,094,195 18,200,128 424,709 784,615
============== ===================== ================== ===============
1994: Long-term savings 663,696 13,300,015 240 -
Life insurance 387,486 2,245,375 397,174 209,538
Accident and health
insurance 12,977 776,071 13,414 324,524
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,064,159 16,321,461 410,828 534,062
============== ===================== ================== ===============
1993: Long-term savings 506,243 11,308,024 1,262 -
Life insurance 291,683 2,047,844 378,788 215,715
Accident and health
insurance 14,018 736,387 14,595 312,655
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $ 811,944 14,092,255 394,645 528,370
============== ===================== ================== ===============
- ----------------------------------- -------------- -------------------- ------------------ ----------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Net Amortization Other
investment Benefits, claims, of deferred operating
Segment income losses and policy expenses Premiums
(3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
1995: Long-term savings $1,124,207 1,009,632 51,998 210,525
Life insurance 202,285 267,123 34,124 94,461
Accident and health
insurance 22,725 379,532 6,922 153,984 473,513
Corporate 133,763 - - -
-------------- -------------------- ------------------- ------------------
Total $1,482,980 1,656,287 93,044 458,970
============== ==================== =================== ==================
1994: Long-term savings 945,318 807,756 56,236 171,038
Life insurance 183,933 237,125 33,394 90,535
Accident and health
insurance 21,020 234,882 5,114 90,829 315,688
Corporate 139,230 - - -
-------------- -------------------- ------------------- ------------------
Total $1,289,501 1,279,763 94,744 352,402
============== ==================== =================== ==================
1993: Long-term savings 897,639 800,385 43,291 157,046
Life insurance 178,978 227,786 35,220 89,496
Accident and health
insurance 27,108 208,735 23,623 82,854 263,117
Corporate 100,701 - - -
-------------- -------------------- ------------------- ------------------
Total $1,204,426 1,236,906 102,134 329,396
============== ==================== =================== ==================
<FN>
(1) Unearned premiums are included in Column C amounts. (3) Allocations of net investment income and certain general
(2) Column E agrees to the sum of the consolidated balance expenses are based on a number of assumptions and
sheet captions, "Policyholders' dividend estimates, and reported operating results would
accumulations" and "Other policyholder funds". change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
Schedule IV
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
------------------- ------------------ ----------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Life insurance in force $51,613,116 6,865,011 742,451 45,490,556 1.6%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 281,687 12,817 6,087 274,957 2.2%
Accident and health
insurance 427,943 73,131 154,846 509,658 30.4%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 709,630 85,948 160,933 784,615 20.5%
=================== ================== ================= ================== ===============
1994:
Life insurance in force $46,262,595 5,289,259 819,799 41,793,135 2.0%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 209,918 7,551 7,171 209,538 3.4%
Accident and health
insurance 389,573 69,095 4,046 324,524 1.2%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 599,491 76,646 11,217 534,062 2.1%
=================== ================== ================= ================== ===============
1993:
Life insurance in force $39,417,116 4,352,071 180,739 35,245,784 0.5%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 218,764 6,161 3,112 215,715 1.4%
Accident and health
insurance 398,289 88,506 2,872 312,655 0.9%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 617,053 94,667 5,984 528,370 1.1%
=================== ================== ================= ================== ===============
</TABLE>
See accompanying independent auditors' report.
<PAGE> 29
Schedule V
----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ---------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1995:
Valuation allowances - fixed maturity securities $ - 10,153 - 10,153 -
Valuation allowances - mortgage loans on real
estate 47,892 7,653 - 4,850 50,695
Valuation allowances - real estate 27,330 (1,080) - - 26,250
Valuation allowances - other long-term
investments - 457 - - 457
1994:
Valuation allowances - fixed maturity securities 6,680 (6,680) - - -
Valuation allowances - mortgage loans on real
estate 42,350 21,672 - 16,130 47,892
Valuation allowances - real estate 31,357 (4,027) - - 27,330
1993:
Valuation allowances - fixed maturity securities 5,746 934 - - 6,680
Valuation allowances - mortgage loans on real
estate 31,872 28,241 - 17,763 42,350
Valuation allowances - real estate 35,471 (4,114) - - 31,357
Valuation allowances - other long-term
investments 700 (700) - - -
<FN>
(1) Amounts represent direct write-downs charged against the valuation
allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 50
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 (File No. 2-75174),
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 (File No. 2-75174),
and hereby incorporated by reference.
(4) The form of the variable annuity contract -
Filed previously with the Registration Statement
(File No. 2-75174), and hereby
incorporated by reference.
(5) Variable Annuity Application - Filed
previously with the Registration Statement
(File No. 2-75174), and hereby incorporated
by reference.
(6) Articles of Incorporation of Depositor -
Filed previously with the Registration
Statement (File No. 2-75174), and hereby incorporated
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement (File No. 2-75174) 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 (File No. 2-75174) and
hereby incorporated by reference.
87 of 104
<PAGE> 51
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel
1647 Falls Road
Clarks Summit, PA 18411 Director
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
88 of 104
<PAGE> 52
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
89 of 104
<PAGE> 53
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
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
90 of 104
<PAGE> 54
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Investment Securities Agent
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies placed
through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
</TABLE>
91 of 104
<PAGE> 55
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Self-Insurance Administration Claims
Nevada Examinations and Data Processing
Services
Gates, McDonald & Company of New York Workers Compensation Claims
New York, Inc. Administration
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates Managed Care Delivery
System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Cash Management Company Ohio Investment Securities Agent
</TABLE>
92 of 104
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons,
associations, corporations, domestic or
foreign and to form or acquire the control
of other corporations
Nationwide Development Company Ohio Owns, leases and manages commercial real
Nationwide Financial Institution Delaware estate Insurance Agency
Distributors Agency, Inc.
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Property and Ohio Insurance Company
Casualty Insurance Company
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and deals in Real
Property
</TABLE>
93 of 104
<PAGE> 57
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Public Employees Benefit Services Delaware Marketing and Administration of Deferred
corporation Employee Compensation Plans for Public
Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
</TABLE>
94 of 104
<PAGE> 58
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
Wausau Business Insurance Company Illinois Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
95 of 104
<PAGE> 59
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
</TABLE>
96 of 104
<PAGE> 60
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
Page 1A
97 of 104
<PAGE> 61
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
Page 1B
<PAGE> 62
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
Page 2A
99 of 104
<PAGE> 63
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| NATIONWIDE CORPORATION (NW Corp) |
| Common Stock: Control: |
| ------------- ------- |
| 13,642,432 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
Page 2B
100 of 104
<PAGE> 64
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2C
98 of 104
<PAGE> 65
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 22, 1996 was 20,322 and 643,
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, NACo Variable Account and
the Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, Ohio 43215
D. Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
</TABLE>
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<PAGE> 66
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Robert J. Woodward Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager and Treasurer
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
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<PAGE> 67
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Code, is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
no-action letter to the American Council of Life Insurance
(publicly available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC Section
403(b)(11).
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<PAGE> 68
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Multi-Flex Variable Account
Individual Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1996
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<PAGE> 69
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Multi-Flex Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated February 26, 1996, included the related financial statement
schedules as of December 31, 1995, and for each of the years in the three-year
period ended December 31, 1995, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
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<PAGE> 70
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE
MULTI-FLEX VARIABLE ACCOUNT, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
and has caused this Post-Effective Amendment to be signed on its behalf in the
City of Columbus, and State of Ohio, on this 26th day of April, 1996.
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
-------------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-------------------------------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
-------------------------------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 26th
day of April, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- ------------------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- ------------------------------------------
Henry S. Holloway
Chairman and Chief Executive Officer -- Nationwide
D. RICHARD MCFERSON Insurance Enterprise and Director
- ------------------------------------------
D. Richard McFerson
DAVID O. MILLER Director
- ------------------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President- Chief Financial Officer
- ------------------------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By /s/ JOSEPH P. RATH
- ------------------------------------------ ------------------------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- ------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------------------
Harold W. Weihl
</TABLE>
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<PAGE> 71
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1993, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the MFS Variable Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account and
Nationwide Variable Account-8; and the registration of fixed interest rate
options subject to a market value adjustment offered under some or all of the
aforementioned individual Variable Annuity Contracts in connection with the
Nationwide Multiple Maturity Separate Account, and the registration of Group
Flexible fund Retirement Contracts in connection with the Nationwide DC
Variable Account, Nationwide DCVA III, and the NACo Variable Account; and the
registration of Group Common Stock Variable Annuity Contracts in connection
with Separate Account No. 1; and the registration of variable life insurance
policies in connection with the Nationwide VLI Separate Account, Nationwide
VLI Separate Account-2, Nationwide VLI Separate Account-3 of Nationwide Life
Insurance Company, hereby constitutes and appoints D. Richard McFerson, Joseph
J. Gasper, Gordon E. McCutchan, W. Sidney Druen, and Joseph P. Rath, and each
of them with power to act without the others, his/her attorney, with full power
of substitution and resubstitution, for and in his/her name, place and stead,
in any and all capacities, to approve, and sign such Registration Statements
and any and all amendments thereto, with power to affix the corporate seal of
said corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument
may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 4th day of April, 1996.
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------- -------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard P. Engel /s/ Robert A. Oakley
- ------------------------------------- -------------------------------------
Willard P. Engel, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director -------------------------------------
James F. Patterson, Director
/s/ Charles L. Fuellgraf
- ------------------------------------- /s/ Arden L. Shisler
Charles L. Fuellgraf, Director -------------------------------------
Arden L. Shisler, Director
/s/ Joseph J. Gasper
- ------------------------------------- /s/ Robert L. Stewart
Joseph J. Gasper, President and Chief -------------------------------------
Operating Officer and Director Robert L. Stewart, Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------- -------------------------------------
Henry S. Holloway, Chairman of the Nancy C. Thomas, Director
Board, Director
/s/ Harold W. Weihl
/s/ D. Richard McFerson -------------------------------------
- ------------------------------------- Harold W. Weihl, Director
D. Richard McFerson, Chairman and
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
