<PAGE> 1
As filed with the Securities and Exchange Commission
'33 Act Registration No. 33-33425
'40 Act Registration No. 811-5999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 9 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [X]
NACO VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect
of the Prospectus, Statement of Additional Information, and the Financial
Statements.
It is Proposed that this filing will become effective (check appropriate space)
immediately upon filing pursuant to paragraph (b) of Rule 485
- ----------
on (date), pursuant to paragraph (b) of Rule 485
- ----------
X 60 days after filing pursuant to paragraph (a)(1) of Rule 485 on
- ----------
(date) pursuant to paragraph (a)(1) of Rule 485
- ----------
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.
================================================================================
1 of 101
<PAGE> 2
NACO VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page............................................................ 3
Item 2. Definitions........................................................... 4
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............................................... 17
Item 7. General Description of the Variable Annuity Contract.................. 18
Item 8. Annuity Period........................................................ 22
Item 9. Death Benefit......................................................... 22
Item 10. Purchases and Contract Value.......................................... 21
Item 11. Redemptions........................................................... 21
Item 12. Taxes................................................................. 27
Item 13. Legal Proceedings..................................................... 27
Item 14. Table of Contents of the Statement of Additional Information.......... 27
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page............................................................ 32
Item 16. Table of Contents..................................................... 32
Item 17. General Information and History....................................... 32
Item 18. Services.............................................................. 32
Item 19. Purchase of Securities Being Offered.................................. 33
Item 20. Underwriters.......................................................... 33
Item 21. Calculation of Performance............................................ 33
Item 22. Annuity Payments...................................................... 35
Item 23. Financial Statements.................................................. 36
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..................................... 76
Item 25. Directors and Officers of the Depositor............................... 78
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant...................................... 80
Item 27. Number of Contract Owners............................................. 89
Item 28. Indemnification....................................................... 89
Item 29. Principal Underwriters................................................ 89
Item 30. Location of Accounts and Records...................................... 90
Item 31. Management Services................................................... 90
Item 32. Undertakings.......................................................... 90
</TABLE>
2 of 101
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P. O. Box 16766
One Nationwide Plaza
Columbus, Ohio 43216
1-800-545-4730, (T.T.Y. 1-800-848-0833)
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED BY THE NACO VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
The Group Flexible Fund Retirement Contracts (the "Contract" or
"Contracts") described in this prospectus are designed for use in connection
with deferred compensation Plans adopted by Member Counties under the NACo
Program. Such Plans generally qualify for favorable tax treatment under Section
457 of the Internal Revenue Code ("Code"). The assets of such Plans are part of
the general assets of the Member County, subject to the claims of the Member
County's creditors. The Participants have a contractual claim against the Member
County for the benefits promised by such Plans. The Participants are generally
not subject to tax until Distributions are received from the Plan. Purchase
Payments made at any time by or on behalf of any Participant must be at least
$20 per month.
Purchase Payments are allocated to the NACo Variable Account. NACo Variable
Account is a unit investment trust with 28 Sub-Accounts of unit values, each
reflecting investment results of a different management investment company.
Amounts equivalent to the obligations of Nationwide Life Insurance Company ("the
Company") under each Sub-Account will be invested in the specified management
investment company (see Appendix of Participating Underlying Mutual Funds).
This prospectus provides you with the basic information you should know
about the Group Flexible Fund Retirement Contracts issued by NACo Variable
Account before investing. You should read it and keep it for future reference. A
Statement of Additional Information dated NOVEMBER 2, 1996 containing further
information about the Contracts and NACo Variable Account has been filed with
the Securities and Exchange Commission. You can obtain a copy without charge
from the Company by calling the number listed above, or writing P.O. Box 16766,
One Nationwide Plaza, Columbus, Ohio 43216.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED NOVEMBER 2, 1996, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 25 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 2, 1996.
1
3 of 101
<PAGE> 4
GLOSSARY OF TERMS
ACCUMULATION UNIT - A statistical index measuring the net investment results of
each Sub-Account of the NACo Variable Account. It is the unit of measurement
used to determine the value of a Contract and each Participant Account.
ACTUARIAL RISK FEE - The charge made for mortality and expense risk and
administration of the NACo Variable Account. It is computed on a daily basis and
is equal to an annual rate of 0.95% of the daily net asset value of the NACo
Variable Account.
ANNUITANT - The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
ANNUITIZATION - The date on which annuity payments are actually received.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are scheduled to
commence.
BENEFICIARY - The person named on the application to receive certain benefits
under the Contract upon the death of the designated Annuitant. The Beneficiary
can be changed by the Contract Owner as set forth in the Contract.
CODE - The Internal Revenue Code of 1986, as amended.
COMPANY - Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY - The person named on the application to be the
Beneficiary if the named Beneficiary is not living at the time of the death of
the designated Annuitant.
CONTRACT - The group flexible fund retirement contract issued by the Company to
the Owner under which the Company invests Purchase Payments made by the Owner
and assists the Owner in making Retirement Income Payments at specified dates.
CONTRACT DATE - The Contract Date is the date shown on the Contract.
CONTRACT YEAR - Each period starting with either (1) the Contract Date or (2) a
Contract Anniversary. The Contract Year ends immediately prior to the next
Contract Anniversary.
CONTRACT ANNIVERSARY - An anniversary of the Contract Date.
DISTRIBUTION - Any payment by the Company of part or all of the Contract Value
under the Contract.
GENERAL ACCOUNT - An account comprised of all assets of the Company other than
those in any segregated asset account (the NACo Variable Account).
MEMBER COUNTY - A county which is a member of the National Association of
Counties ("NACo") or an entity approved by the President of NACo for
participation under the NACo Program.
NACO PROGRAM - The deferred compensation program established and administered
pursuant to Section 457 of the Code for the benefit of Member Counties of NACo.
NACO VARIABLE ACCOUNT - A segregated investment account established by the
Company in which amounts equivalent to the Company's obligations under the
Contract are held for all Participants, and for those Participants during
retirement who have annuitized.
OWNER - The Member County to which the Contract is issued.
PARTICIPANT - An eligible employee, member, or other person who is entitled to
benefits under the Plan. Such persons are determined and reported to the Company
by the Owner.
2
4 of 101
<PAGE> 5
PARTICIPANT ACCOUNT - An account established for each Participant in which all
financial transactions occurring with respect to a Participant, other than the
purchase and payment of an annuity, are recorded.
PARTICIPANT ACCOUNT YEAR - For each Participant, this is each one year period
starting with either the Participant Effective Date or a Participant
Anniversary, as reported to the Company by the Owner or its authorized
representative.
PARTICIPANT ANNIVERSARY - An anniversary of the Participant Effective Date.
PARTICIPANT EFFECTIVE DATE - For each Participant, this is the first date
Accumulation Units are credited to the Participant's Account on behalf of such
Participant under the Contract.
PLAN - A Member County's Code Section 457 deferred compensation plan established
and administered under the auspices of the NACo Program. The Plan document is
referred to in the contract schedule as the Plan. The assets of the Plan are
part of the general assets of the Member County, subject to the claims of the
Member County's creditors. The Participants have a contractual claim against the
Member County for the benefits promised by the Plan.
PURCHASE PAYMENTS - Amounts paid to the Company, pursuant to the Contract, in
order to provide retirement income benefits.
RETIRED PARTICIPANT - A Participant for whom payments under an Optional
Retirement Income Form are being made.
RETIREMENT INCOME PAYMENTS- Periodic payments of the Participant Account made to
the Participant or to a designated Beneficiary during the Distribution period.
RETIREMENT COMMENCEMENT DATE- The date upon which Retirement Income Payments
commence.
SUB-ACCOUNTS - Separate and distinct divisions of the NACo Variable Account to
which specific Underlying Mutual Fund shares are allocated and for which
Accumulation Units are separately maintained.
UNDERLYING MUTUAL FUND - The registered management investment company, specified
on the Contract application, in which the assets of a Sub-Account of the
Variable Account will be invested.
VALUATION DATE - Each day the New York Stock Exchange and the Company's home
office are open for business or any other day during which there is a sufficient
degree of trading of the NACo Variable Account's Underlying Mutual Fund shares
that the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD - The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
3
5 of 101
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS...............................................................................................2
SUMMARY OF CONTRACT EXPENSES....................................................................................5
SYNOPSIS.......................................................................................................10
CONDENSED FINANCIAL INFORMATION................................................................................11
NATIONWIDE LIFE INSURANCE COMPANY..............................................................................14
THE NACo VARIABLE ACCOUNT......................................................................................14
Voting Rights.........................................................................................14
PERIODIC REPORTS...............................................................................................14
NACo VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS
AND OTHER DEDUCTIONS...........................................................................................15
Contingent Deferred Sales Charge......................................................................15
Mortality and Expense Risk and Administration Charges.................................................15
Premium Taxes.........................................................................................16
Experience Credits....................................................................................16
Expenses of the NACo Variable Account.................................................................16
DESCRIPTION OF THE CONTRACTS...................................................................................16
Purpose of the Contracts..............................................................................16
Modification of the Contract..........................................................................17
Exchange Privilege....................................................................................17
Assignments...........................................................................................17
Suspension and Termination............................................................................17
Application of Purchase Payments......................................................................18
Additional Purchase Payment Prior to Commencement of Annuity Payments.................................18
Crediting Accumulation Units..........................................................................18
NACo Variable Account Accumulation Unit Value.........................................................18
Allocation of Purchase Payments.......................................................................19
Valuation of an Account...............................................................................19
Redemption of Participant Accounts (Termination)......................................................19
DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD).......................................................20
Retirement Income Payments............................................................................20
Election of Income Form and Date......................................................................20
Allocation of Retirement Income.......................................................................20
Fixed Dollar Annuity..................................................................................20
Minimum Payment.......................................................................................20
Death Benefit Before Retirement.......................................................................20
Optional Retirement Income Forms......................................................................20
Death of Retired Participant..........................................................................21
Withdrawal............................................................................................21
Frequency of Payment..................................................................................21
Determination of Payments Under Options A1 and A2.....................................................21
Determination of Payments Under Options B1 and B2.....................................................21
Determination of Amount of Variable Monthly Payments For First Year...................................22
Determination of Amount of Variable Monthly Payments For the Second
and Subsequent Years................................................................................22
Alternate Assumed Interest Rate.......................................................................22
GENERAL INFORMATION............................................................................................23
Substitution of Securities............................................................................23
Performance Advertising...............................................................................23
Contract Owner Inquiries..............................................................................24
Net Investment Factor.................................................................................24
Valuation of Assets...................................................................................24
Federal Tax Status....................................................................................25
Contracts Issued Under the New York Model Plan........................................................25
LEGAL PROCEEDINGS..............................................................................................25
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................................25
APPENDIX.......................................................................................................26
</TABLE>
4
6 of 101
<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1) .................................. 4 %
------------
(as a percentage of Purchase Payments)
ANNUAL CONTRACT MAINTENANCE CHARGE(2) .............................................. $0
------------
NACO VARIABLE ACCOUNT ANNUAL EXPENSES(3)
(as a percentage of average account value)
Mortality and Expense Risk Fees .............................................. 0.50 %
------------
Administration Charge ........................................................ 0.45 %
------------
Total NACo Variable Account Annual Expenses .................................. 0.95 %
------------
</TABLE>
The fees and charges deducted under the Contract in the aggregate are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by the Company.
(1)Imposed only when it is applicable (see "Contingent Deferred Sales Charge").
(2)Effective July 1, 1992, the Annual Contract Fee was eliminated.
(3)If total assets of a Plan under the NACo Program as of December 31 of each
year exceed $10 million, the 0.45% Administration charge and the total NACo
Variable Account Annual Expense ("Actuarial Risk Fee") will be reduced on a
sliding scale on May 1 of each succeeding year as follows:
<TABLE>
<CAPTION>
============================================================================================================================
ADMINISTRATION CHARGE
ASSETS (AS A PORTION OF THE ACTUARIAL RISK FEE) TOTAL ACTUARIAL RISK FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than $10 million but less than 0.40% 0.90%
or equal to $25 million
- ----------------------------------------------------------------------------------------------------------------------------
Greater than $25 million but less than 0.30% 0.80%
or equal to $50 million
- ----------------------------------------------------------------------------------------------------------------------------
Greater than $50 million but less than 0.20% 0.70%
or equal to $150 million
- ----------------------------------------------------------------------------------------------------------------------------
Greater than $150 million 0.15% 0.65%
============================================================================================================================
</TABLE>
The Administration Charge and Actuarial Risk Fee shall be determined as of
December 31 of such calendar year and reduced according to the sliding scale, if
applicable, effective the next succeeding May 1. For new Contracts after the
effective date of the sliding scale, the Administration Charge and Actuarial
Risk Fee shall be determined in accordance with the above table at the issuance
of the Contract and thereafter each year at the time and in the manner described
above.
5
7 of 101
<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
=====================================================
Management Other Total Underlying
Mutual Fund
Fees Expenses Annual Expenses
==================================================================================================
<S> <C> <C> <C>
The Bond Fund of AmericaSM , Inc.(2) 0.35% 0.34% 0.69%
- --------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 0.75% 0.37% 1.12%
- --------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund - Class Y 0.98% 0.21% 1.19%
- --------------------------------------------------------------------------------------------------
Federated U.S. Government Securities: 2-5 0.40% 0.18% 0.58%
Years - Institutional Shares
- --------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.44% 0.24% 0.68%
- --------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 0.70% 0.30% 1.00%
- --------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.70% 0.27% 0.97%
- --------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 0.75% 0.22% 0.97%
- --------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 0.51% 0.30% 0.81%
- --------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.52% 0.77% 1.29%
- --------------------------------------------------------------------------------------------------
The Investment Company of America(R)(2) 0.26% 0.34% 0.60%
- --------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 0.38% 0.11% 0.49%
- --------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund-Class A(2) 0.43% 0.54% 0.97%
- --------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A(2) 0.45% 0.65% 1.10%
- --------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock 0.31% 0.52% 0.83%
Fund-Class A(2)
- --------------------------------------------------------------------------------------------------
Nationwide(R)Fund 0.50% 0.13% 0.63%
- --------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 0.50% 0.16% 0.66%
- --------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 0.45% 0.17% 0.62%
- --------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 0.72% 0.12% 0.84%
- --------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A(2) 0.61% 0.38% 0.99%
- --------------------------------------------------------------------------------------------------
Putnam Voyager Fund -Class A 0.53% 0.54% 1.07%
- --------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 0.15% 0.10% 0.25%
- --------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A(2) 0.49% 0.51% 1.00%
- --------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury 0.63% 0.26% 0.89%
Portfolio - Institutional Class
- --------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 0.69% 0.20% 0.89%
- --------------------------------------------------------------------------------------------------
Templeton Foreign Fund(2)- Class I 0.63% 0.52% 1.15%
- --------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 1.00% 0.00% 1.00%
- --------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 1.00% 0.00% 1.00%
==================================================================================================
<FN>
(1) The Mutual Fund expenses shown above are assessed at the Underlying Mutual
Fund level and are not direct charges against the NACo 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 NACo
Variable Account's unit value. There are no front-end load fees (sales
charges) at the Underlying Mutual Fund level. The management fees and other
expenses, some of which are subject to fee waivers or expenses
reimbursement, are more fully described in the prospectus for 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.
(2) A 12b-1 fee is included in the calculation of "Other Expenses."
</TABLE>
6
8 of 101
<PAGE> 9
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming total NACo Variable Account annual expenses of
0.95%, a $1,000 initial Purchase Payment and 5% annual return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
=====================================================================================================================
<S> <C> <C> <C> <C>
The Bond Fund of America SM, Inc. 57 93 132 240
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 62 107 155 287
- ---------------------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund - Class V 62 109 159 295
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 56 89 124 223
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 57 93 131 239
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 60 102 147 271
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 60 102 147 271
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 58 97 138 253
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 64 112 164 305
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 56 90 127 230
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 55 87 121 217
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund- Class A 60 102 147 271
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 62 106 154 285
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund-Class A 59 98 139 256
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 57 91 129 233
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 57 92 130 237
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 56 91 128 232
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 59 98 141 258
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 60 103 148 273
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 61 105 152 282
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 53 79 108 189
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 59 100 143 262
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 60 100 144 264
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 62 108 157 290
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
(continued on next page)
</TABLE>
7
9 of 101
<PAGE> 10
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming total NACo Variable Account annual expenses of
0.95%, a $1,000 initial Purchase Payment and 5% annual return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you do not surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
=====================================================================================================================
<S> <C> <C> <C> <C>
The Bond Fund of AmericaSM , Inc. 17 53 92 200
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 22 67 115 247
- ---------------------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund -Class V 22 69 119 255
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years- 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 18 57 98 213
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 24 72 124 265
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund- Class A 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 22 66 114 245
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund-Class A 19 58 99 216
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 17 51 89 193
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 90 197
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 16 51 88 192
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 20 63 108 233
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 21 65 112 242
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 19 60 103 222
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 20 60 104 224
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 68 117 250
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
(continued on next page)
</TABLE>
8
10 of 101
<PAGE> 11
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a total NACo Variable Account annual expenses of
0.95%, $1,000 initial Purchase Payment and 5% annual return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you annuitize your Contract
at the end of the applicable time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
=====================================================================================================================
<S> <C> <C> <C> <C>
The Bond Fund of AmericaSM , Inc. 17 53 92 200
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 22 67 115 247
- ---------------------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund - Class V 22 69 119 255
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 18 57 98 213
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 24 72 124 265
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund- Class A 20 62 107 231
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 22 66 114 245
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund-Class A 19 58 99 216
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 17 51 89 193
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 90 197
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 16 51 88 192
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 20 63 108 233
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 21 65 112 242
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 19 60 103 222
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 20 60 104 224
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 68 117 250
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of the preceding tables is to assist the Participant in
understanding the various costs and expenses that a Participant will bear
directly or indirectly when investing in the Contract. The table reflects
expenses of the NACo Variable Account as well as the Underlying Mutual Fund
investment options. For a more detailed explanation of these expenses, see "NACo
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, see the Underlying Mutual Fund's prospectus. In addition
to the expenses shown above, deductions for premium taxes may also be
applicable, depending upon the jurisdiction in which the Contract is sold (see
"Premium Taxes").
9
11 of 101
<PAGE> 12
SYNOPSIS
The Contracts described in this prospectus are designed for use in
connection with deferred compensation plans adopted by Member Counties under the
NACo Program. Such Plans qualify for favorable tax treatment under Section 457
of the Code. The Participants are generally not subject to federal income tax on
amounts deferred under such plans until Distributions are received from the
Plan. Purchase Payments made at any time by or on behalf of any Participant must
be at least $20 per month.
Purchase Payments under the Contracts are placed in the NACo Variable
Account. The NACo Variable Account is a unit investment trust with 28
Sub-Accounts of unit values, each reflecting investment results of a different
management investment company. Amounts equivalent to the obligations of the
Company under each Sub-Account will be invested in the specified management
investment company (see "Appendix of Participating Funds").
The Company does not deduct a sales charge from Purchase Payments made for
these Contracts. However, in the event of the termination of this Contract and
directions from the Owner to the Company to withdraw all or part of the account
value of the Contract, the Company will, with certain exceptions, deduct from
the Contract Value, on a per Participant basis, a Contingent Deferred Sales
Charge ("CDSC") equal to not more than 4% of the lesser of the total of all
Purchase Payments made prior to the date of the request for withdrawal, or the
amount withdrawn. Absent Contract termination by the Owner, the CDSC provision
will not apply and therefore any full or partial withdrawals made on behalf of a
Participant will not be subject to any CDSC. The CDSC, when applicable, is
imposed to permit the Company to recover sales expenses which have been advanced
by the Company (see "Contingent Deferred Sales Charge").
Any applicable premium taxes can be deducted and will be charged against
the Contracts. If any such premium taxes are payable at the time Purchase
Payments are made, the premium tax deduction will be made from the Contract
prior to allocation to any Underlying Mutual Fund option (see "Premium Taxes").
A daily deduction is made from the NACo Variable Account in an amount
equivalent to an annual rate up to of 0.95% of the daily net asset value of the
NACo Variable Account for the Company's contractual promises to accept the
mortality and expense risks and for administration of the NACo Variable Account
(see "Mortality and Expense Risk and Administration"). In addition, the
investment companies whose shares are purchased by the NACo Variable Account
make certain deductions from their assets.
The Contracts provide that the mortality basis, minimum death benefits and
the deductions made from Purchase Payments, Participants' Accounts, the
Contingent Deferred Sales Charges, and Actuarial Risk Fees may be changed by the
Company after the first Contract Year (see "Modification of the Contract").
10
12 of 101
<PAGE> 13
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values (For an accumulation unit
outstanding throughout the period)
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Bond Fund of 1.741422 2.039710 6,578,720 1995
AmericaSM , Inc. ------------------------------------------------------------------------
1.850918 1.741422 5,740,929 1994
------------------------------------------------------------------------
1.637181 1.850918 5,644,051 1993
------------------------------------------------------------------------
1.484255 1.637181 4,185,113 1992
------------------------------------------------------------------------
1.338732 1.484255 3,262,200 1991*
- ------------------------------------------------------------------------------------------------------
The Dreyfus Third 1.663803 2.238323 9,402,637 1995
Century Fund, Inc. ------------------------------------------------------------------------
1.814915 1.663803 9,817,673 1994
------------------------------------------------------------------------
1.740666 1.814915 10,291,485 1993
------------------------------------------------------------------------
1.723855 1.740666 8,918,980 1992
------------------------------------------------------------------------
1.503652 1.723855 4,654,790 1991*
- ------------------------------------------------------------------------------------------------------
The Evergreen 1.419467 1.741651 2,635,928 1995
Total Return Fund - Class V ------------------------------------------------------------------------
1.531292 1.419467 3,343,918 1994
------------------------------------------------------------------------
1.368966 1.531292 10,220,011 1993
------------------------------------------------------------------------
1.256090 1.368966 8,701,160 1992
------------------------------------------------------------------------
1.146614 1.256090 7,977,105 1991*
- ------------------------------------------------------------------------------------------------------
Federated U.S. Government 1.062969 1.195751 2,344,091 1995
Securities Fund: 2-5 years - ------------------------------------------------------------------------
Institutional Shares 1.094086 1.062969 1,802,090 1994
------------------------------------------------------------------------
1.031362 1.094086 1,501,568 1993
------------------------------------------------------------------------
1.000000 1.031362 359,089 1992
- ------------------------------------------------------------------------------------------------------
Fidelity Capital & 3.210584 3.712491 818,785 1995
Income Fund ------------------------------------------------------------------------
3.397953 3.210584 900,127 1994
------------------------------------------------------------------------
2.746533 3.397953 1,009,928 1993
------------------------------------------------------------------------
2.165417 2.746533 1,100,291 1992
------------------------------------------------------------------------
1.972198 2.165417 1,260,909 1991*
- ------------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.974545 1.315600 86,483,728 1995
------------------------------------------------------------------------
0.994981 0.974545 59,048,072 1994
------------------------------------------------------------------------
1.000000 0.994981 17,300,194 1993
- ------------------------------------------------------------------------------------------------------
Fidelity Equity- Income Fund 3.424310 4.471070 41,090,717 1995
------------------------------------------------------------------------
3.448520 3.424310 37,439,255 1994
------------------------------------------------------------------------
2.869860 3.448520 30,564,448 1993
------------------------------------------------------------------------
2.526472 2.869860 25,417,028 1992
------------------------------------------------------------------------
2.283309 2.526472 24,200,256 1991*
- ------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 0.960039 1.301185 63,751,788 1995
------------------------------------------------------------------------
0.987051 0.960039 43,410,162 1994
------------------------------------------------------------------------
1.000000 0.987051 9,307,585 1993
- ------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 1.001544 1.371346 3,611,136 1995
------------------------------------------------------------------------
1.000000 1.001544 414,031 1994
- ------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.959935 1.154955 11,375,851 1995
------------------------------------------------------------------------
1.000000 0.959935 3,191,039 1994
- ------------------------------------------------------------------------------------------------------
The Investment 1.157835 1.498194 21,189,283 1995
Company of America(R) ------------------------------------------------------------------------
1.167040 1.157835 15,911,747 1994
------------------------------------------------------------------------
1.055548 1.167040 9,316,764 1993
------------------------------------------------------------------------
1.000000 1.055548 1,904,764 1992
- ------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income 0.980782 1.156444 461,663 1995
Portfolio ------------------------------------------------------------------------
1.000000 0.980782 16,059 1994
- ------------------------------------------------------------------------------------------------------
Massachusetts Investors 7.034148 8.942612 877,034 1995
Growth Stock Fund-Class A ------------------------------------------------------------------------
7.613442 7.034148 876,723 1994
------------------------------------------------------------------------
6.714892 7.613442 837,196 1993
------------------------------------------------------------------------
6.368639 6.714892 711,003 1992
------------------------------------------------------------------------
5.100857 6.368639 559,059 1991*
- ------------------------------------------------------------------------------------------------------
<FN>
*Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo Variable
Account and the NACo Variable Account commenced operations exclusive
to the NACo Program).
</TABLE>
(Continued on next page)
11
13 of 101
<PAGE> 14
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 Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R)Growth 4.589533 6.114190 2,209,754 1995
Opportunities Fund-Class A ------------------------------------------------------------------------
4.834037 4.589533 2,656,048 1994
------------------------------------------------------------------------
4.200054 4.834037 6,486,767 1993
------------------------------------------------------------------------
3.936838 4.200054 6,897,026 1992
------------------------------------------------------------------------
3.656615 3.936838 7,710,706 1991*
- ------------------------------------------------------------------------------------------------------
MFS(R)High 4.265493 4.949752 1,898,625 1995
Income Fund- Class A ------------------------------------------------------------------------
4.422523 4.265493 1,736,718 1994
------------------------------------------------------------------------
3.739642 4.422523 1,666,484 1993
------------------------------------------------------------------------
3.225557 3.739642 1,036,199 1992
------------------------------------------------------------------------
2.894993 3.225557 817,803 1991*
- ------------------------------------------------------------------------------------------------------
Nationwide(R) 9.468045 12.191058 2,755,666 1995
Fund ------------------------------------------------------------------------
9.502760 9.468045 2,754,540 1994
------------------------------------------------------------------------
8.985447 9.502760 2,950,704 1993
------------------------------------------------------------------------
8.810680 8.985447 3,032,348 1992
------------------------------------------------------------------------
7.837093 8.810680 2,238,323 1991*
- ------------------------------------------------------------------------------------------------------
Nationwide(R) 2.092009 2.667201 2,409,384 1995
Growth Fund ------------------------------------------------------------------------
2.081399 2.092009 2,602,594 1994
------------------------------------------------------------------------
1.887524 2.081399 6,293,504 1993
------------------------------------------------------------------------
1.792687 1.887524 5,507,203 1992
------------------------------------------------------------------------
1.498853 1.792687 4,283,563 1991*
- ------------------------------------------------------------------------------------------------------
Nationwide(R)Money 2.654661 2.774433 15,458,252 1995
Market Fund** ------------------------------------------------------------------------
2.583387 2.654661 14,664,113 1994
------------------------------------------------------------------------
2.542721 2.583387 15,887,549 1993
------------------------------------------------------------------------
2.487178 2.542721 17,431,451 1992
------------------------------------------------------------------------
2.437912 2.487178 20,546,392 1991*
- ------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 0.955773 1.250781 7,940,457 1995
Fund ------------------------------------------------------------------------
1.000000 0.955773 907,272 1994
- ------------------------------------------------------------------------------------------------------
Putnam Investors 8.297318 11.305164 2,260,621 1995
Fund-Class A ------------------------------------------------------------------------
8.652501 8.297318 2,145,377 1994
------------------------------------------------------------------------
7.410567 8.652501 1,975,963 1993
------------------------------------------------------------------------
6.934213 7.410567 1,682,860 1992
------------------------------------------------------------------------
6.383603 6.934213 1,597,104 1991*
- ------------------------------------------------------------------------------------------------------
Putnam Voyager 1.982311 2.752130 27,203,903 1995
Fund-Class A ------------------------------------------------------------------------
1.992379 1.982311 19,751,850 1994
------------------------------------------------------------------------
1.698751 1.992379 12,946,038 1993
------------------------------------------------------------------------
1.563079 1.698751 5,917,563 1992
------------------------------------------------------------------------
1.256187 1.563079 1,655,847 1991*
- ------------------------------------------------------------------------------------------------------
Seligman Growth 7.020585 8.934609 616,776 1995
Fund, Inc.-Class A ------------------------------------------------------------------------
7.370495 7.020585 582,039 1994
------------------------------------------------------------------------
6.989639 7.370495 538,601 1993
------------------------------------------------------------------------
6.340967 6.989639 364,304 1992
------------------------------------------------------------------------
5.483042 6.340967 308,224 1991*
- ------------------------------------------------------------------------------------------------------
<FN>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** The 7-day yield on the Nationwide(R) Money Market Fund as of December 31,
1995 was 4.23 %.
</TABLE>
(Continued on next page)
12
14 of 101
<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 Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Investments Trust - Treasury 1.066889 1.119630 1,524,715 1995
Portfolio - Institutional Class*** ------------------------------------------------------------------------
1.034183 1.066889 1,223,255 1994
------------------------------------------------------------------------
1.012172 1.034183 500,957 1993
------------------------------------------------------------------------
1.000000 1.012172 246,584 1992
- ---------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock 0.929695 1.025854 10,412,582 1995
Fund(R) ------------------------------------------------------------------------
1.000000 0.929695 4,482,375 1994
- ---------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 0.944596 1.040054 16,316,118 1995
------------------------------------------------------------------------
1.000000 0.944596 6,972,585 1994
- ---------------------------------------------------------------------------------------------------------------
Twentieth Century 3.359891 4.005400 37,362,979 1995
Growth Investors ------------------------------------------------------------------------
3.443124 3.359891 38,748,520 1994
------------------------------------------------------------------------
3.350122 3.443124 41,912,416 1993
------------------------------------------------------------------------
3.533694 3.350122 43,106,409 1992
------------------------------------------------------------------------
2.571846 3.533694 31,955,054 1991*
- ---------------------------------------------------------------------------------------------------------------
Twentieth Century Ultra 0.926489 1.263551 79,405,506 1995
Investors ------------------------------------------------------------------------
0.970411 0.926489 59,484,505 1994
------------------------------------------------------------------------
1.000000 0.970411 21,036,904 1993
- ---------------------------------------------------------------------------------------------------------------
<FN>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
*** The 7-day yield on the Short-Term Investments Trust - Treasury Portfolio as
of December 31, 1995 was 4.68%.
</TABLE>
The SEI Index Funds - S&P Index Portfolio first became effective on May 1, 1996,
in conjunction with this Plan. Accordingly, information for this fund is not
available at this time.
13
15 of 101
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY
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 it's Home
Office at One Nationwide Plaza, Columbus, Ohio 43215. The Company offers a
complete line of life insurance, including annuities and accident and health
insurance. It is admitted to do business in all states, the District of
Columbia, the Virgin Islands, and Puerto Rico.
THE NACO VARIABLE ACCOUNT
NACo Variable Account was established by the Company on September 7, 1988,
pursuant to the provisions of Ohio law. NACo Variable Account has been
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 NACo Variable
Account or the Company by the Securities and Exchange Commission.
The net Purchase Payments applied to the NACo Variable Account are invested
in shares of the Underlying Mutual Funds available under the terms of the
Contract. The NACo Variable Account is divided into 28 Sub-Accounts of
Accumulation Units, each of which represents a separate Underlying Mutual Fund
(see "Appendix Participating Funds" for a description of the investment
objective of each Underlying Mutual Fund).
Each Sub-Account in the NACo Variable Account is administered and accounted
for as a part of the separate account, but the income, capital gains or losses
of each Sub-Account are credited to or charged against the assets held for that
Sub-Account in accordance with the terms of each Contract, without regard to
other income, capital gains or losses of any other Sub-Account, or arising out
of any other business the Company may conduct. The assets within each
Sub-Account are not chargeable with liabilities arising out of the business
conducted by any other Sub-Account, nor will the NACo Variable Account as a
whole be chargeable with liabilities arising out of any other business the
Company may conduct.
VOTING RIGHTS
The NACo Variable Account will be owner of record of all Underlying Mutual
Fund shares purchased by the respective account until such Underlying Mutual
Fund shares are sold, but all securities will be held for the benefit of the
Owners of the Contracts. In accordance with its view of present applicable law,
the Company will vote the shares of the Underlying Mutual Funds held in the NACo
Variable Account at regular and special meetings of the shareholders of the
Underlying Mutual Funds in accordance with instructions received from the
Owners. The Company or its designee will mail to each Owner at its last known
address all periodic reports and proxy material of the applicable Underlying
Mutual Fund, and a form with which to give voting instructions. Any Underlying
Mutual Fund shares as to which no timely instructions are received will be voted
by the Company in the same proportion as the instructions received from all
persons furnishing timely instructions. An Owner's voting rights may decrease
with the cancellation of Accumulation Units to make annuity payments.
PERIODIC REPORTS
The Company or its designee will, semi-annually, provide to each person
covered by a Contract, a Statement of Assets, Liabilities and Contract Owners'
Equity and a Statement of Operations and Changes in Contract Owners' Equity of
the NACo Variable Account. Each Participant and Retired Participant will also be
informed, periodically, of the number of Accumulation Units credited to his or
her account as well as the total account value.
The current prospectus of the NACo Variable Account will be made available
to Participants through the Owner. In addition, the Owner may, under the terms
of the Plan, have an obligation to furnish additional information to
Participants, such as: a notice of any changes in the Plan, or tax status of the
Plan and the financial condition of the Owner as it relates to obligations under
the Plan.
14
16 of 101
<PAGE> 17
NACO VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS AND OTHER DEDUCTIONS
THE FEES AND CHARGES DEDUCTED UNDER THE CONTRACT IN THE AGGREGATE ARE REASONABLE
IN RELATION TO THE SERVICES RENDERED, THE EXPENSES EXPECTED TO BE INCURRED, AND
THE RISKS ASSUMED BY THE COMPANY.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, a Contingent Deferred Sales Charge ("CDSC"), when it
is applicable, will be used to cover expenses relating to the sale of the
Contracts, including compensation 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 a Contingent Deferred Sales Charge. Any shortfall will be borne by the
Company from surplus held in its General Account, which may indirectly include
portions of the Actuarial Risk Fee, since the Company intends to generate a
profit from this fee.
If the Owner terminates the Contract in accordance with the section
entitled "Suspension And Termination" and directs the Company to withdraw all or
part of the Contract Value, the Company will assess a CDSC against the amount
withdrawn, by deducting an amount from each Participant's Account as indicated
below. For purposes of the CDSC, withdrawals under a Contract come first from
the Purchase Payments which have been on deposit under the Contract for the
longest time period.
For withdrawals made through December 31, 1997, the CDSC will be the lesser
of (i) and (ii) below, where:
(i) is the lesser of 4% of the Purchase Payments made on behalf of a
Participant prior to the date of the withdrawal, or 4% of the amount
withdrawn; and
(ii) is the lesser of the applicable percentage set forth in the table
below multiplied by the Purchase Payments made on behalf of a
Participant prior to the date of withdrawal, or the applicable
percentage set forth below multiplied by the amount withdrawn.
For withdrawals made after December 31, 1997, the CDSC will be the lesser
of (iii) and (iv) below, where:
(iii) is the lesser of 2% of the Purchase Payments made on behalf of a
Participant prior to the date of the withdrawal, or 2% of the amount
withdrawn; and
(iv) is the lesser of the applicable percentage set forth in the table
below multiplied by the Purchase Payments made on behalf of a
Participant prior to the date of withdrawal, or the applicable
percentage set forth below multiplied by the amount withdrawn.
Notwithstanding the above, the Contingent Deferred Sales Charge will not
apply to any withdrawals made on or after January 1, 2001.
<TABLE>
<CAPTION>
Number of Completed
Contingent Deferred Years of Participation
Sales Charge Percentage (Beginning July 1, 1985)
----------------------- ------------------------
<S> <C> <C>
4% 1 Through 12
3% 13
2% 14
1% 15
0% 16 And After
</TABLE>
Years of participation credited toward the CDSC schedule set forth above
may only be those earned beginning with the date a Participant's first deferral
was deposited in the Contracts.
MORTALITY AND EXPENSE RISK AND ADMINISTRATION CHARGES
The Contracts contain purchase rates applicable at and after retirement.
These purchase rates may be used to determine the Retirement Income Payments to
be made by the Owner to Participants in accordance with the terms of the Plan.
However, the Owners have contracted with the Company to provide Retirement
Income Payments.
Under the terms of the Contracts, the Company assumes the risk that the
actuarial estimate of mortality rates among Retired Participants may prove
erroneous and amounts set aside for retirement income benefits on the basis of
such estimate may prove inadequate.
For the Company's contractual promise to accept these risks and for the
administrative costs associated with the NACo Variable Account, the Contracts
provide for the daily deduction of an Actuarial Risk Fee (see "Glossary of
15
17 of 101
<PAGE> 18
Terms"). The deduction is based on the daily value of the applicable NACo
Variable Account Sub-Account, and is equivalent to 0.95% on an annual basis
(0.10% for the mortality risk, 0.40% for the expense risk, and 0.45% for
administration of the NACo Variable Account). The 0.45% administration portion
of the Actuarial Risk Fee has been set at a level to recover no more than the
actual cost associated with administering the Contracts. If this Actuarial Risk
Fee is insufficient to cover the actual cost of the mortality risk, the expense
risk, or the administrative costs, the loss will be borne by the Company.
Conversely, if the Actuarial Risk Fee proves more than sufficient, the excess
will be a profit to the Company. If total assets of a Plan under the NACo
Program exceed $10 million, as of the specified date each year, the 0.45%
Administrative portion of the Actuarial Risk Fee will be reduced on a sliding
scale corresponding to total assets of a plan under the NACo Program (see
"Summary of Contract Expenses"). This reduction reflects the lower cost per
Participant to administer larger asset pools.
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 annuity
considerations received by the Company. Premium taxes currently imposed by
certain states range from 0% to 3.5% per annum. Currently, the Company is not
deducting such taxes from an Owner's Contract Value at the time of
Annuitization, but reserves the right to deduct such taxes when incurred.
Retirement Income Payments may be reduced or Accumulation Units canceled to
provide for premium taxes assessed.
EXPERIENCE CREDITS
The Contracts described herein are participating where permitted by law in
the state of issue. A participating Contract provides the right to participate
in the Distribution of surplus of the Company. In the event that Actuarial Risk
Fees collected under this Contract accrue to the Company in excess of an amount
deemed necessary at the sole discretion of the Company's Board of Directors,
such excess may be allocated to the Contract by purchasing additional
Accumulation Units and crediting such additional units to the Participant
Accounts. There have not been any Experience Credits to date. The Company cannot
offer any assurance that there will be Experience Credits in the future.
EXPENSES OF THE NACO VARIABLE ACCOUNT
The NACo Variable Account's total expenses for the fiscal year ended
December 31, 1995 were 0.95% of the average net assets on an annualized basis.
Deductions from and expenses paid out of the assets of the Underlying Mutual
Funds are described in the prospectus of each Underlying Mutual Fund.
DESCRIPTION OF THE CONTRACTS
PURPOSE OF THE CONTRACTS
The Contracts described in this prospectus are Group Flexible Fund
Retirement Contracts designed to fund deferred compensation plans adopted by
Member Counties under the NACo Program established under Section 457 of the
Code. A single group Contract is issued to the Owner, covering all present and
future participating employees. The Company will issue a certificate to the
Owner for delivery to each Retired Participant or other person for whom an
Optional Retirement Income Form is purchased, setting forth in substance the
benefits to which such person is entitled. In addition, if any applicable law
requires, the Company will issue a descriptive certificate to the Owner for
delivery to any such person required by law to receive such certificate, setting
forth in substance the benefits to which such person is entitled. For purposes
of determining benefits payable under the Plan, an individual accumulation
account is established for each Participant. The frequency of Purchase Payments
is normally monthly, but may be adjusted to fit the payroll practices of the
Owner. Purchase Payments made at any time by or on behalf of any Participant
must be at least $20 per month.
The basic objectives of the Contracts are to provide each Participant with
an initial Retirement Income Payment, which will tend to reflect the changes
which have occurred in the cost of living during pre-retirement years (without
the necessity of increased Purchase Payments to keep pace with any increase in
the cost of living which might occur during those years), and to provide
subsequent Retirement Income Payments which will tend to vary with the cost of
living changes during his or her retired lifetime. The Company seeks to
accomplish these objectives by applying purchase rates contained in the Contract
to the amounts accumulated through investment in Underlying Mutual Funds.
Notwithstanding the foregoing, there is no assurance that these objectives will
be attained. Historically, the value of a diversified portfolio of common stocks
held for an extended period of time has tended to rise during periods of
inflation. There has, however, been no exact correlation, and for some periods,
the prices of securities have declined while the cost of living was rising.
16
18 of 101
<PAGE> 19
MODIFICATION OF THE CONTRACT
Contract provisions with respect to the mortality basis, minimum death
benefits, and the deductions made from Purchase Payments, Participant Accounts,
the Contingent Deferred Sales Charges, if applicable, and Actuarial Risk Fees
may not be changed prior to the first Contract Anniversary. These same
provisions may not be changed except as they apply to Participants entering the
Contract after the effective date of such change.
Other than as set forth above, the Company reserves the right to change all
other provisions of the Contract by giving notice to the Owner not less than 90
days before the effective date of the change.
EXCHANGE PRIVILEGE
The Company will permit the Owner, or the Participant if the Plan so
provides, to exchange amounts among the Sub-Accounts as frequently as permitted
by the Plan, subject to the limits and rules set by each Underlying Mutual Fund.
For those Contracts where the Owner has elected an exchange privilege, there
will be no charge for exchanges among the Sub-Accounts.
The Company will also permit the Participant to utilize the Telephone
Exchange Privilege, for exchanging amounts among Sub-Accounts, if forms are
executed by the Contract Owner and Participant agreeing with certain
restrictions applicable to such privilege.
Telephone exchange requests must be received by the Company by the close of
the New York Stock Exchange in order to receive that day's closing Sub-Accounts
price. A telephone exchange request may not be revoked once instructions have
been recorded and accepted. If the Participant is unable to execute an exchange
request by telephone (for example, during times of unusual market activity), the
Participant might consider placing the exchange order by mail. The Company will
employ reasonable procedures to confirm that instruction 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 the Owner
or Participant and any agent of record, at the last address of record. Failure
to follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers. However, 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
Participant. The Company may determine to withdraw the Telephone Exchange
Privilege, upon 30 days written notice to Contract Owners and Participants.
On the date the Company receives an exchange request in good order, which
includes all of the information necessary for processing the request, the
Company will transfer the amount to be converted. Such transfers will be based
on the Accumulation Unit Values of the affected Sub-Accounts if received at the
Company's Home Office by the close of the New York Stock Exchange on a day on
which the New York Stock Exchange is open for business. If the exchange request
is received after the close of the New York Stock Exchange on any day, or on a
day the New York Stock Exchange is closed for business, the transfer will be
based on the next business day on which the New York Stock Exchange is open.
For those Plans which provide this Contract and Nationwide's Group Fixed
Fund Retirement Contract, the Owner, or the Participant if the Plan so provides,
may exchange Accumulation Units between any Sub-Account of the NACo Variable
Account and the Group Fixed Fund Retirement Contract. Exchanges from the deposit
fund to any Sub-Account of the NACo Variable Account will be subject to the
limitations of the Group Fixed Fund Retirement Contract. Exchanges will be
effected when received in good order by the Company at its Home Office.
ASSIGNMENTS
The Contract belongs to the Owner. All contractual rights and privileges
may be exercised by the Owner, subject to any rights specifically reserved in
the Plan for Participants as a group or as individuals. The Contract may not be
assigned.
SUSPENSION AND TERMINATION
The Contract may be suspended at the option of the Company on written
notice to the Owner if: (a) the Owner has failed to remit to the Company any
Purchase Payment specified in the Plan; or (b) if the Company does not accept an
amendment to the Plan, filed with the Company by the Owner, which in the
Company's opinion would adversely affect its administrative procedures or
financial experience, or both, with respect to the Contract. The Owner may
suspend the Contract upon 90 days written notice to the Company. Suspension of
the
17
19 of 101
<PAGE> 20
Contract will become effective as of the ninety-first (91st) day following
receipt of written notice by the Company. Suspension of the Contract shall mean
only that no further Purchase Payments will be accepted by the Company except by
mutual consent, and all other terms of the Contract shall continue to apply.
After suspension of the Contract has become effective, the Owner may, upon 30
days written notice, terminate the Contract. Termination of the Contract will
become effective as of the 31st day following receipt of written notice by the
Company. Upon termination of the Contract, the Company will pay to the Owner the
redemption value, subject to applicable charges, plus the balance of the annual
premiums transferred from the NACo Variable Account to the General Account for
payment of variable Retirement Income - - benefits under retirement Options B1
and B2 (see "Optional Retirement Income Forms"). Payment of redemption values
may be suspended when redemption of Underlying Mutual Fund shares are suspended
as provided in the section entitled --- "Redemption of Participant Accounts
(Termination)." Payment of any amounts under this section will be subject to any
applicable CDSC (see "Contingent Deferred Sales Charge").
APPLICATION OF PURCHASE PAYMENTS
Nationwide Life shall receive Purchase Payments from the Owner in
accordance with the requirements of the Plan. Net Purchase Payments received on
behalf of Participants will be applied by the Company to purchase Accumulation
Units of Sub-Accounts in the NACo Variable Account in accordance with the
instructions of the Owner. Purchase Payments made at any time by or on behalf of
each Participant must be at least $20 per month. Payments must be no less than
monthly, unless agreed to by the Company.
An initial Purchase Payment will be priced not later than 2 business days
after receipt of an order to purchase, if the application of the Participant and
all information necessary for processing the purchase order are complete upon
receipt by the Company. 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 business days, the Owner will be
informed of the reasons for the delay and the Purchase Payment will be returned
immediately unless the Owner consents to the Company retaining the Purchase
Payment until the application of the Participant is made complete. Upon
completion of such incomplete application, the Purchase Payment will be priced
within 2 business days.
Purchase Payments will not be priced on days when the New York Stock
Exchange is not open for business.
ADDITIONAL PURCHASE PAYMENT PRIOR TO COMMENCEMENT OF ANNUITY PAYMENTS
The Owner shall have the right to make one additional Purchase Payment in
respect to a Participant for the purpose of increasing Retirement Income
Payments. Notice of such payment shall be given to the Company at the time the
notice to distribute is given, and such additional Purchase Payment must be made
no later than the last business day prior to the date upon which Retirement
Income Payments are to commence. Any such additional Purchase Payment shall be
subject to any applicable premium taxes. The annuity rates provided under this
Contract at the time of issue shall be applicable to the entire value, including
any such additional Purchase Payment, of such account which does not exceed five
times the Purchase Payment allocated to such account prior to the date notice to
distribute is given. Any excess amount may be applied at annuity rates then
offered by the Company for contracts of the same type as this Contract.
CREDITING ACCUMULATION UNITS
When a Purchase Payment is received by the Company, the net Purchase
Payment for each Sub-Account is applied separately to provide Accumulation Units
which are credited to a Participant Account in accordance with the instructions
of the Owner. The number of Accumulation Units credited to each receipt
Participant Account for each Sub-Account is determined by dividing the net
Purchase Payment allocated to that Sub-Account for that Participant by the value
of the Accumulation Unit for that Sub-Account next computed following of the
Purchase Payment by the Company. The net Purchase Payment for each Participant
is the total Purchase Payment for that Participant less any taxes then payable.
NACO VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account was established at a
value equal to the accumulation unit value of the corresponding Sub-Account of
the Nationwide DC Variable Account on January 2, 1990. The DC Variable Account
is a segregated investment account of the Company in which Member Counties
formerly held Contracts. The value of an Accumulation Unit for each new
Sub-Account added to the NACo Variable Account after January 2, 1990, will be
established at $1.00 as of the date Underlying Mutual Fund shares are available
for purchase for that Sub-Account. The value of Accumulation Units for any
Sub-Account for any subsequent business day is determined by multiplying the
value for the preceding business day by the Net Investment Factor for that
Sub-Account for the period since that day. A business day is any day on which
the
18
20 of 101
<PAGE> 21
New York Stock Exchange is open for trading or any other day during which there
is a sufficient degree of trading of the Underlying Mutual Fund shares that the
current net asset value of their Accumulation Units might be materially
affected.
ALLOCATION OF PURCHASE PAYMENTS
The Owner or Participant must specify the proportion of the Purchase
Payments to be applied to provide benefits under any Sub-Account of the NACo
Variable Account. The Company will permit the Owner, or the Participant if the
Plan so permits, to change the allocation percentages among Sub-Accounts for
subsequent Purchase Payments, provided that no change may be made which would
result in an amount less than 1% of the payment being allocated to any
Sub-Account for any Participant. The Company will permit such allocation changes
as frequently as permitted by the Plan. A change in allocation percentages will
not affect Accumulation Units of any Sub-Account resulting from Purchase
Payments made before the change.
VALUATION OF AN ACCOUNT
The sum of the value of all Accumulation Units credited to the Participant
Account in respect of the Participant is the Participant Account Value. Purchase
Payments are allocated among the Sub-Accounts of the NACo Variable Account in
accordance with the instructions of the Owner.
The value of a Participant's Account on any day can be determined by
multiplying the total number of Accumulation Units credited to the account for
each Sub-Account by the current Accumulation Unit Value for that Sub-Account in
respect of the Participant. Each Participant and the Owner will be advised
periodically of the number of Accumulation Units credited to his or her account
for each Sub-Account, the current Accumulation Unit Values, and the total value
of his or her account. Such reports to Participants are for informational
purposes only and should not be interpreted to mean that a Participant has any
rights with respect to his or her account beyond that provided by the Owner in
accordance with the terms of the Plan.
The Participant and Owner should review the information in these reports
carefully. All errors or corrections must be reported to the Company immediately
to assure proper crediting to the Contract and appropriate Sub-Accounts. The
Company will assume all transactions are accurate unless the Participant or the
Owner notifies the Company otherwise within 30 days after receipt of the report.
REDEMPTION OF PARTICIPANT ACCOUNTS (TERMINATION)
The Owner's right to redeem (terminate) Participant Accounts, either fully
or partially, will be governed by the terms of the Plan which the Contract is
issued to fund. It should be recognized that the value of the investment on
redemption can be more or less than its cost. All such payments will be made by
the Company to the Owner. It is the Owner's obligation to distribute such
payments to a Participant. The Company may undertake the obligation on behalf of
the Owner to distribute such payments directly to a Participant by agreement
with the Owner. To the extent permitted by the Plan, a Participant Account may
be redeemed fully or partially at any time prior to the date Retirement Income
Payments commence for the Participant under either Option B1 or B2. No partial
redemption will directly affect future requirements to make Purchase Payments
for that Participant nor his or her retirement date. If the Contract is
terminated by the Owner, all Participant Accounts in the NACo Variable Account
will be redeemed to the extent permitted by the Plan, and such Participant
Accounts will be subject to any applicable CDSC. However, absent Contract
termination by the Owner, the CDSC provision will not apply and therefore any
full or partial redemptions made on behalf of a Participant will not be subject
to any CDSC (see "Contingent Deferred Sales Charge").
A request for a partial redemption of a Participant Account containing more
than one Sub-Account of Accumulation Units must specify the allocation of the
partial redemption among the Sub-Accounts of Accumulation Units. However, if no
such direction is contained in the request for a partial redemption, the Company
may pro-rate the redemption among the applicable Sub-Accounts of Accumulation
Units. Upon receipt at the Company's Home Office of a written request for a full
or partial redemption of a Participant Account, the Company will determine the
value of the number of Accumulation Units redeemed at the Accumulation Unit
Value next computed following receipt of such written request by the Company.
Payment of any such amount will be made to the Owner with reasonable promptness,
and in any event, within 7 days of the date the request is received by the
Company. Payment of redemption values may be suspended when redemption of the
Underlying Mutual Fund shares is suspended (i) during any period in which the
New York Stock Exchange is closed, or (ii) in the event that the Securities and
Exchange Commission may by order direct for the protection of Owners or
Participants. Instead of a lump sum Distribution of a full or partial
redemption, the Owner, or Participant if permitted by the Plan, may elect to
have that amount paid out in installments under Option A1 or A2, subject to the
minimums applicable to these options.
19
21 of 101
<PAGE> 22
DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD)
RETIREMENT INCOME PAYMENTS
The period during which a Participant Account is paid out in periodic
installments is known as the Distribution period. Because periodic Distributions
will normally be made after the Participant retires, the Distribution period is
also called the retirement period. All such periodic Distributions will be made
by the Company to the Owner. It is the Owner's obligation to pay such amounts to
a Participant. The Company may undertake the obligation on behalf of the Owner
to pay such amounts directly to a Participant by agreement with the Owner.
Retirement Income Payments under Options B1 and B2 are determined on the basis
of (i) the mortality tables specified in the Contract, (ii) the adjusted age of
the Retired Participants, (iii) the type of Retirement Income Payment option(s)
selected, and (iv) in the case of variable payments, the investment performance
of the specific NACo Variable Account Sub-Account elected. While the Company may
be obligated to make variable Retirement Income Payments under the Contract, the
amount of each such payment is not guaranteed. The dollar amount of variable
payments will reflect investment gains and losses, and investment income of the
NACo Variable Account Sub-Account on which they are based, but they will not be
affected by adverse mortality experience or by an increase in the Company's
expenses above the amount provided for in the Contracts.
ELECTION OF INCOME FORM AND DATE
The Contracts provide for Retirement Income Payments to begin on the date
and under the retirement options elected in accordance with the Plan. At least
one month prior to a Participant's Retirement Commencement Date (see "Glossary
of Terms"), the Contract Owner may by written election to the Company at its
home office, elect any one of the retirement income options described in this
prospectus. The Plan may restrict changes in election of retirement income
options.
ALLOCATION OF RETIREMENT INCOME
Upon retirement, Accumulation Units in a Participant's Account may be used
to purchase a Fixed Dollar Annuity for the Participant. For Participants
electing Options A1 or A2 as described in this prospectus, Accumulation Units in
a Participant's Account of any Sub-Account in the NACo Variable Account will be
used to provide variable Retirement Income Payments as described further in this
prospectus.
FIXED DOLLAR ANNUITY
A Fixed Dollar Annuity is an annuity with payments which are guaranteed as
to dollar amount during the retirement period. The first fixed dollar payment
will be determined by applying the General Account Contract value to the
applicable Annuity Table in accordance with the Optional Retirement Income Form
elected. This will be done at the retirement date. Fixed Dollar Annuity payments
after the first will not be less than the First Fixed Dollar Annuity payment.
The availability of Fixed Dollar Annuity Contracts under a particular Plan is
subject to the election of the Owner.
MINIMUM PAYMENT
If the present value of the Participant's accrued benefit at the time of
retirement is less than $3,500, the Company shall have the right to make a lump
sum Distribution to such Retired Participant.
DEATH BENEFIT BEFORE RETIREMENT
In the event a Participant dies before his or her retirement income
commences, a death benefit equal to the value of such Participant Account, on
the date due proof of death is received in writing by the Company will be paid
as provided by the Plan. If the Plan so provides, a Beneficiary may elect either
to receive such value in a lump sum or to apply it under any of the Optional
Retirement Income Forms contained in this Contract, subject to the minimums
applicable to such optional forms. Monthly payments due under such options may
be fixed, variable, or a combination of fixed and variable.
OPTIONAL RETIREMENT INCOME FORMS
The availability of the following Optional Retirement Income Forms are
subject to the election of the Owner.
OPTION A1-Payments for a Designated Period. Payments are made monthly for
any specified number of years not exceeding 30 years. The amount of each
variable payment will be determined by multiplying (a) by (b) where (a) is
the Accumulation Unit Value for the date the payment is made and (b) is the
number of Accumulation Units applied under this option divided by the
number of payments selected. Exchanges between the investment options are
permitted subject to limitations outlined in the Company's Group Fixed Fund
Retirement Contract. A period certain payment period of less than 5 years
for a Participant who has
20
22 of 101
<PAGE> 23
less than a minimum of 5 Participant Account Years would result in
imposition of the applicable Contingent Deferred Sales Charge.
OPTION A2-Payments of a Designated Amount. Payments are made monthly in
equal installments (not less than $25 per month) until the amount applied,
adjusted each business day for investment results, is exhausted. The final
installment will be the sum remaining with the Company. Payments under this
option which result in a payment period of less than 5 years for a
Participant who has less than 5 Participant Account Years would result in
imposition of the applicable Contingent Deferred Sales Charge.
OPTION B1-Life Income with Payment Certain. Payments are made monthly
during the lifetime of an individual with payments made for a period
certain of 60, 120, 180, 240, 300 or 360 months as elected. If the
individual dies before the end of the period certain, level payments will
continue to the designated Beneficiary during the remainder of the period
certain.
OPTION B2 - Joint and Survivor Life Income. Payments are made monthly
during the joint lifetime of an individual and another named individual.
Payments will continue to be made as long as either is living. This option
will permit the choice of 100%, 75%, 66 2/3% or 50% of the original payment
amount to be paid to the Beneficiary. Payments will stop with the last
payment due prior to the death of the Beneficiary. If the Beneficiary
predeceases the designated Annuitant, then payments continue at 100% to the
designated Annuitant.
OTHER FORMS AND BENEFIT PAYMENTS - With the consent of the Company, the
amount due upon Distribution may be applied on any other mutually agreeable
basis.
Exchanges processed while Participants are receiving payments under Option
A1 may change the number of Accumulation Units remaining. In this event, the
payment amount must be recalculated.
On the date on which Retirement Income Payments under Option B1 or B2 or
any other Retirement Income Payment measured by a life or lives commence in
respect of a Participant, all Accumulation Units (or the number thereof
appropriate to the election made) in any Sub-Account will be canceled.
DEATH OF RETIRED PARTICIPANT
If any Retired Participant dies while receiving payments, any death benefit
payable will be determined in accordance with the Retirement Income Form
elected. Calculation of the present value of any remaining payments certain for
purposes of making a lump sum payment will be based on the same assumed
investment rate used by the Company in determining the payments certain prior to
the death of the Retired Participant.
WITHDRAWAL
If permitted by the Plan, any amount remaining under Option A1 or A2 may be
withdrawn, or if that amount is at least $5,000, it may be applied under either
Option B1 or B2, subject to the minimum payment requirements described
previously. Unless prohibited by the Plan, a Beneficiary receiving payments
certain under Option B1 after the death of a Retired Participant may elect at
any time to receive the present value at the current dollar amount of the
remaining number of payments certain in a single payment, calculated on the
basis of the assumed investment rate used in computing the amount of the
previous payments.
FREQUENCY OF PAYMENT
At the election of the Retired Participant, and with the consent of the
Owner, payments made under any option may be made annually, semi-annually, or
quarterly instead of monthly. Any change in frequency of payments must be on the
anniversary of the commencement of Retirement Income Payments.
DETERMINATION OF PAYMENTS UNDER OPTIONS A1 AND A2
Monthly payments under Options A1 and A2 will be determined in the manner
set forth in the description of the options. As each payment is made under
either of these options, a number of Accumulation Units equal in value to the
payment will be canceled.
DETERMINATION OF PAYMENTS UNDER OPTIONS B1 AND B2
Variable monthly payments under Options B1 and B2 will be determined
annually and will remain level throughout the year. Each year, as of the
anniversary of the commencement of Retirement Income Payments, a new variable
monthly payment will be determined and that new payment will remain level for
that year. An adjusted age is used to determine the amount of monthly payment
for each year. Such adjusted age may not be the same as the actual age of the
Retired Participant.
21
23 of 101
<PAGE> 24
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR FIRST YEAR
In determining the amount of Retirement Income Payments under Options B1
and B2, the value held on behalf of a Participant is determined by multiplying
the number of Accumulation Units in each Sub-Account for that account by the
Accumulation Unit value for that Sub-Account on the last business day of the
second calendar week immediately preceding the date on which the first payment
is due.
The first year variable monthly payment for each Sub-Account is determined
by dividing the value of the Accumulation Units of that Sub-Account in the
Participant Account by the amount required to provide $1 per month (the purchase
rate).
Once the first year's variable monthly payment amount has been determined
for a Participant, the Company will deduct the annual premium from the
Participant Account. This deduction is made by canceling a number of
Accumulation Units in the Participant Account equal in value to the annual
premium. The allocation of the annual premium between Sub-Account will be in
such relationship as the monthly payments from each Sub-Account have to each
other.
The annual premium is calculated so that if there are no partial
redemptions (and therefore no Underlying Mutual Fund dividends have been taken
in cash) the payee will receive level annual payments if the net investment
factor, on an annual basis, is equal to the Assumed Investment Rate plus an
amount equal to the annual administrative charge. Payments for subsequent years
will be smaller than, equal to, or greater than the payments received during the
initial year, depending on whether the actual net investment result on an annual
basis of a Sub-Account is smaller than, equal to, or greater than the Assumed
Investment Rate.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR THE SECOND AND
SUBSEQUENT YEARS
As of the first anniversary of the commencement of Retirement Income
Payments, the second year variable monthly payments will be determined in
exactly the same manner as for the first year, using the purchase rates in the
Contract for the Retired Participant's age as then determined under the terms of
the Contract. As in the first year, an annual premium will be deducted and
transferred to the General Account from which Account the Company will make the
Retirement Income Payments. Subsequent annual determinations will be made in the
same manner.
Upon the death of any Retired Participant, the Participant Account will be
reduced by the number of Accumulation Units not required to provide further
payments during the remainder of a period certain, if any, or to a contingent
Retired Participant. Any Accumulation Units so canceled will either remain in
the NACo Variable Account or be transferred to the Company's General Account,
depending on the Company's obligation.
ALTERNATE ASSUMED INVESTMENT RATE
The Contracts include purchase rates based on a 3.5% rate per annum. If not
prohibited by the laws and regulations of the states in which this Contract is
issued, an Owner may elect on the Contract Date to have all variable benefits
payable for all Participants determined on an Assumed Investment Rate of 5% per
annum. The Assumed Investment Rate basis in the Contract is used merely to
determine each year's monthly payment from investment experience of any of the
NACo Variable Account Sub-Accounts. The choice of the Assumed Investment Rate
affects the pattern of Retirement Income Payments. A higher Assumed Investment
Rate will produce a higher initial payment, but a more slowly rising series of
subsequent payments (or a more rapidly falling series of subsequent payments)
than a lower Assumed Investment Rate.
Although a higher initial payment would be received under a higher Assumed
Investment Rate, there is a point in time after which payments under a lower
Assumed Investment Rate would be greater, assuming payment continues after that
point in time.
The objective of a variable retirement Contract is to provide level
payments during periods when the economy is relatively stable and to reflect as
increased payments only the excess of investment results flowing from inflation
or an increase in productivity. The achievement of this objective will depend in
part upon the validity of the assumption that the net investment result, on an
annual basis, of a Sub-Account equals the Assumed Investment Rate during periods
of stable prices.
22
24 of 101
<PAGE> 25
GENERAL INFORMATION
SUBSTITUTION OF SECURITIES
If the shares of any Underlying Mutual Fund should no longer be available
for investment by the NACo Variable Account or, if in the judgment of the
Company's management, further investment in such Underlying Mutual Fund shares
should become inappropriate in view of the purposes of the Contract, the Company
may substitute shares of another Underlying Mutual Fund for Underlying Mutual
Fund shares already purchased or to be purchased in the future by Purchase
Payments under the Contract.
From time to time it may become necessary for the Company to substitute
Underlying Mutual Fund shares for reasons relating to the historical investment
performance of the Underlying Mutual Funds. The Company, in consultation with
NACo and NACo's advisers, has developed standards for substituting Underlying
Mutual Funds that consistently experience poor investment performance over time.
These standards involve comparing the performance of each Underlying Mutual Fund
within the NACo Variable Account to the performance of all other mutual funds
within the Underlying Mutual Fund's same risk category. Underlying Mutual Funds
within the same risk category are Underlying Mutual Funds with similar
investment objectives and policies, and similar volatilities of investment
return.
In no event will any substitution of securities in the NACo Variable
Account take place without prior approval of the Securities and Exchange
Commission, and under such requirements as it may impose.
PERFORMANCE ADVERTISING
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the NACo Variable Account. A "yield" and
"effective yield" may be advertised for the Nationwide Money Market Fund and the
Short-Term Investments Trust Treasury Portfolio 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-Accounts' units. Yield is an
annualized figure, which means that it is assumed that the Sub-Account generates
the same level of net income each week 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 advertise for the Sub-Account standardized "average
annual total return", calculated in a manner prescribed by the Securities and
Exchange Commission, and non-standardized "total return." "Average annual total
return" will show the percentage rate of return of a hypothetical initial
investment of $1,000 for rolling calendar quarters and will cover, at least the
most recent one, five and ten year periods, or for a period from inception to
date if the Underlying Mutual Fund held in the Sub-Account has not been in
existence for one of the prescribed periods. This calculation reflects the
deduction of all applicable charges made to the Contracts except for premium
taxes, which may be imposed by certain states. Non-standardized "total return"
will be calculated in a similar manner as will average annual total return
except total return will not reflect the deduction of any applicable Contingent
Deferred Sales Charge, which, if reflected, would decrease the level of
performance shown.
The Company may also from time to time advertise the performance of the
Sub-Accounts of the NACo Variable Account relative to the performance of other
variable annuity sub-accounts or mutual funds with similar or different
objectives, or the investment industry as a whole.
The Sub-Accounts of the NACo 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; 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, U.S. NEWS AND
WORLD REPORT, NATIONAL UNDERWRITER; rating services such as LIMRA, Value, Best's
Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and other
publications such as the WALL STREET JOURNAL, BARRON'S, INVESTOR'S DAILY, and
Standard & Poor's OUTLOOK. In addition, Variable Annuity Research & Data Service
(The VARDS Report) is an independent rating service that ranks over 500 variable
annuity Underlying Mutual Funds based upon total return performance. These
rating services and publications rank the performance of the Underlying Mutual
Funds against all mutual funds over specified periods and against mutual funds
in specified categories. The rankings may or may not include the effects of
sales or other charges.
23
25 of 101
<PAGE> 26
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 NACo 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 Contract.
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. THE OWNER'S OR PARTICIPANT'S ACCOUNT VALUE AT REDEMPTION MAY BE
MORE OR LESS THAT ORIGINAL COST.
The Statement of Additional Information contains more detailed information
about the performance calculations, including actual examples for each type of
performance advertised.
CONTRACT OWNER INQUIRIES
Owner and Participant inquiries may be directed to Nationwide Life
Insurance Company by writing P. O. Box 16766, One Nationwide Plaza, Columbus,
Ohio 43216, or calling 1-800-545-4730, T.T.Y. 1-800-848-0833.
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, plus
or minus
(3) a per share charge or credit, if any, for any taxes reserved for
which is determined by the Company to have resulted from the
investment operations of the Sub-Account.
(b) is the net of
(1) the net asset value per share of the Underlying Mutual Fund held in
the Sub-Account determined as of the end of the immediately preceding
Valuation Period, plus or minus
(2) the per share charge or credit for any taxes reserved for in the
immediately preceding Valuation Period.
(c) is a factor representing the daily Actuarial Risk Fee deducted from the
NACo Variable Account. Such factor is equal to an annual rate of 0.95% of
the daily net asset value of the NACo Variable Account.
For Underlying Mutual Funds that credit dividends on a daily basis and pay
such dividends once each month or quarter (such as money market funds and
certain bond funds), the Net Investment Factor allows for the monthly or
quarterly reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one, therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of Underlying Mutual Fund shares, because of the
deduction for the Actuarial Risk Fee and the effect of the various purchase and
sale transactions on any particular day.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the NACo Variable Account will be
purchased and valued at their net asset value (daily bid price exclusive of any
sales charges). An Underlying Mutual Fund's net asset value per share is
determined by dividing the value of the total assets of the Underlying Mutual
Fund, less liabilities, by the number of shares outstanding, with no charge for
sales expense.
24
26 of 101
<PAGE> 27
FEDERAL TAX STATUS
The following description of the federal tax status of these Contracts is
not exhaustive, and special rules are provided with respect to situations not
discussed herein. For complete information, consult a qualified tax advisor. The
Company does not make any guarantee regarding the tax status of any Contract or
any transaction involving the Contracts.
For federal income tax purposes, the operations of the NACo Variable
Account form a part of the Company's operations. Under existing federal income
tax law, no taxes are payable by the Company on the investment income of the
NACo Variable Account to the extent it is credited to the Owners under the
Contracts. The Company is taxed as a life insurance company under Part One,
Subchapter L, of the Code.
Income and capital gains of the NACo Variable Account would normally be
taxable to Owners whether or not taken by the Owners in cash. However, the
Contracts are issued only to organizations exempt from federal income tax.
The amounts received by the Participant under the Plan normally represent
the accumulation of Purchase Payments which were not previously included in the
Participant's gross income, and therefore any such amounts should be included in
gross income of a Participant or Beneficiary when such amounts are received.
It is the responsibility of each Owner to determine that its Plan is
established and administered in accordance with the applicable provisions of the
Code.
CONTRACTS ISSUED UNDER THE NEW YORK MODEL PLAN
The following Contract amendments are required by the Rules and Regulations
of the New York State Deferred Compensation Board in order to market the
Contracts to governmental employers for use in funding public employee deferred
compensation plans in the State of New York.
Throughout the prospectus, references to "annuity" payments are modified to
"benefit" payments.
The "Suspension and Termination" provisions are amended to permit a
Participant to "freeze" his or her account and maintain the account on deposit
with the Company notwithstanding the Contract Owner's termination of its
contractual relationship with the Company. These accounts shall remain the
exclusive property of the Contract Owner, subject to the claims of its general
creditors.
All references throughout the prospectus to Life Income Options B1 and B2
are deleted. All references to "Contingent Deferred Sales Charge" are deleted.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which Nationwide Life Insurance
Company, or the NACo 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
Annuity Payments.......................................................................................................4
Financial Statements...................................................................................................5
</TABLE>
25
27 of 101
<PAGE> 28
APPENDIX
PARTICIPATING UNDERLYING MUTUAL FUNDS
THE COMPANY MAY LIMIT THE NUMBER OF UNDERLYING MUTUAL
FUNDS SELECTED BY OWNER, AND ALL UNDERLYING MUTUAL
FUNDS MAY NOT BE AVAILABLE UNDER YOUR PLAN.
A SUMMARY OF INVESTMENT OBJECTIVES IS CONTAINED IN THE DESCRIPTIONS OF EACH
UNDERLYING MUTUAL FUND BELOW. MORE DETAILED INFORMATION MAY BE FOUND IN THE
CURRENT PROSPECTUS FOR EACH UNDERLYING MUTUAL FUND. SUCH A PROSPECTUS FOR THE
UNDERLYING MUTUAL FUND OR FUNDS BEING CONSIDERED SHOULD 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, P. O. BOX
16766, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216, 1-800-545-4730 (TDD
1-800-848-0833)
THE DREYFUS THIRD CENTURY FUND, INC.
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
to 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 of America. Current income is secondary to the primary goal.
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS - INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund
pursues this investment objective by investing in U.S. government securities
with remaining maturities of five years or less.
FIDELITY CONTRAFUND
The investment objective of the Fund is capital appreciation by
investing in securities that its manager believes are undervalued due to an
overly pessimistic appraisal by the public. Although the Fund will usually be
invested primarily in common stocks and securities convertible into common
stock, the percentage of its assets invested in other securities may vary.
FIDELITY EQUITY-INCOME FUND
The investment objective of the Fund is to obtain reasonable income
from a portfolio consisting primarily of income-producing equity securities. The
Fund seeks a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks. In pursuing this
objective, the Fund will also consider the potential for capital appreciation.
FIDELITY MAGELLAN(R) FUND
The investment objective of the Fund is capital appreciation by
investing primarily in common stock and securities convertible into common
stock. The Fund may also invest in foreign securities, which involves additional
risks. The Fund may also invest in stock index futures and options both of which
can be volatile investments.
FIDELITY OTC PORTFOLIO
The investment objective of the Fund is to seek capital appreciation by
investing primarily in securities traded on the over-the counter (OTC)
securities market. Securities traded on the OTC include, among others,
industrial corporations, financial services institutions, public utilities, and
transportation companies, common and preferred stocks, securities convertible
into common stock, warrants and similar rights, and debt securities, and
obligations of the federal government. The fund does not place any weight on
dividend and interest income unless it believes this income will have a
favorable influence on the market value of a security.
FIDELITY PURITAN FUND
The investment objective of the Fund seeks to obtain as much income as
possible, consistent with the preservation and conservation of capital, by
investing in a broadly diversified portfolio of securities, including common
stocks, preferred stocks, and bonds. While emphasis on income is an important
objective, this does not preclude growth in capital since some securities
offering a better than average yield may also possess some growth possibilities.
MAS FUNDS FIXED INCOME PORTFOLIO
The investment objective of the Fund is to achieve above-average total
return over a market cycle of three of five years, consistent with reasonable
risk, by investing in a diversified portfolio of U. S. government securities,
corporate bonds (including bonds rated below investment grade commonly referred
to as "junk
26
28 of 101
<PAGE> 29
bonds"), foreign fixed-income securities and mortgage-backed securities of
domestic issuers and other fixed-income securities. The portfolio's average
weighted maturity will ordinarily be greater than five years.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - CLASS A
The investment objective of the Fund is the long-term growth of capital
and future income rather than current income.
MFS(R) HIGH INCOME FUND - CLASS A
The investment objective of the Fund is high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities, some of which may involve equity features. Securities
offering the high current income sought by this Fund are ordinarily in the lower
rating categories of recognized rating agencies or are unrated and generally
involve greater volatility of price and risk of principal and income than
securities in the high rating categories. Capital growth, if any, is a
consideration incidental to the investment objective of high current income.
NATIONWIDE(R) FUND
The investment objective of the Fund is to obtain a total return from a
flexible combination of current income and capital appreciation. Primary
emphasis is given to common stocks, but investments may also include convertible
issues, bonds and money market instruments.
NATIONWIDE(R) MONEY MARKET FUND
The investment objective of the Fund is to provide as high a level of
current income as is consistent with the preservation of capital and maintenance
of liquidity, through investment in a diversified portfolio of high quality
money market instruments maturing in 397 days or less. These instruments
include, but are not limited to, U.S. Government and Agency obligations,
obligations of large commercial and foreign banks, certificates of deposit of
large savings associations, taxable or partly taxable obligations of state,
county and local governments, highly rated commercial paper, highly rated
corporate obligations, and repurchase agreements in any of the above.
NEUBERGER & BERMAN GUARDIAN FUND
The Fund seeks capital appreciation through investments generally in
dividend-paying issues of established companies that its investment officers
believe are well managed. The emphasis of the Fund's investments is on common
stock. The Fund diversifies its holdings among different industries and
different companies in light of conditions prevailing at any given time. Current
income is a secondary objective.
PUTNAM INVESTORS FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and
any increased income resulting from such growth. The Fund is designed for
investors seeking long-term growth of capital from a portfolio consisting
primarily of common stocks. The Fund's management emphasizes investment in
quality growth stocks.
PUTNAM VOYAGER FUND - CLASS A
The investment objective of the Fund is capital appreciation. The Fund
invests primarily in common stocks believed by the Fund's Investment Manager,
Putnam Management, to have potential for capital appreciation significantly
greater than the market average. The Fund is designed for investors willing to
assume above-average risk in return for above-average capital growth potential.
SEI INDEX FUNDS - S & P 500 INDEX PORTFOLIO
The S & P Index Portfolio seeks to provide investment results that
correspond to the aggregate price and dividend performance of the securities in
the Standard & Poor's 500 Composite Stock Price Index which is comprised of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The investment objective is a fundamental policy of the Portfolio. There can be
no assurance that the Portfolio will achieve its investment objective.
SELIGMAN GROWTH FUND, INC. - CLASS A
The investment objective of the Fund is longer-term growth in capital value
and an increase in future income. Fund assets have been invested primarily in
common stocks with the inherent investment risks tempered by portfolio
diversification.
27
29 of 101
<PAGE> 30
SHORT-TERM INVESTMENTS TRUST - TREASURY PORTFOLIO - INSTITUTIONAL CLASS
The investment objective of the Portfolio is the maximization of
current income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in a portfolio consisting of direct obligations of the U.S. Treasury
and repurchase agreements secured by such obligations. The instruments purchased
by the Portfolio will have maturities of 397 days or less.
T. ROWE PRICE INTERNATIONAL STOCK FUND(R)
The Fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. Companies.
TEMPLETON FOREIGN FUND - CLASS I
The investment objective of the Fund is 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.
TWENTIETH CENTURY GROWTH INVESTORS
The investment objective of the Fund is capital growth through investment
in securities which the management considers to have better-than-average
prospects for appreciation. It is management's intention that the portfolio will
generally consist of common stocks of large established companies.
TWENTIETH CENTURY ULTRA INVESTORS
The investment objective of the Fund is capital growth by investing
primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation. It is management's intention
that the portfolio will generally consist of common stocks of medium-sized and
smaller companies.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR OWNERS WHOSE
PREDECESSOR NATIONWIDE DCVA CONTRACT WAS ISSUED ON OR AFTER JANUARY 1, 1987:
FIDELITY CAPITAL & INCOME FUND (FORMERLY, "FIDELITY HIGH INCOME FUND")
The investment objective of the Fund is to seek to provide a
combination of income and capital growth by investing primarily in debt
instruments and common and preferred stocks, with a focus on lower-quality debt
securities and securities of companies with uncertain financial positions.
Effective on and after July 1, 1991, the Company shall no longer permit
Owners or Participants to make additional Purchase Payments or to exchange
Contract values into the Fidelity Capital & Income Fund Sub-Account. However,
Contract values held in the Fidelity Capital & Income Fund Sub-Account as of
July 1, 1991 may continue to be invested in that Sub-Account. Unless the Company
is notified otherwise, any Purchase Payments or exchanges which the Owner or
Participant directs the Company to invest in the Fidelity Capital & Income Fund
Sub-Account on and after July 1, 1991 shall instead be automatically invested in
the Nationwide Money Market Fund Sub-Account.
The Company has determined that further investment in the Fidelity
Capital & Income Fund Sub-Account is not in the best interests of the Owners and
Participants in view of the Fund's adoption, effective for shares purchased on
and after February 1, 1991, of a redemption fee equal to 1.5% of the net asset
value of any Fund shares redeemed which are held less than twelve months. Any
redemption fees which the Fund may assess against Fund shares held by the
Company in the NACo Variable Account which were purchased from February 1, 1991
to July 1, 1991 shall be paid by the Company from surplus and shall not be paid,
directly or indirectly, by Contract Owners, Participants or the NACo Variable
Account.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1993:
THE EVERGREEN TOTAL RETURN FUND - CLASS V
The investment objective of the Fund is current income and capital
appreciation. The Fund invests primarily in common and preferred stocks,
securities convertible into or exchangeable for common stocks, and fixed income
securities. The Fund's objective is to maximize the "total return" on its
portfolio of investments.
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A (FORMERLY "MFS(R) CAPITAL DEVELOPMENT
FUND")
The investment objective of the Fund is growth of capital. Dividend
income, if any, is incidental to the objective of capital growth. To achieve
this objective, a flexible approach toward types of companies as well as
28
30 of 101
<PAGE> 31
types of securities is maintained by the Fund, depending upon the economic
environment and the relative attractiveness of the various securities markets.
NATIONWIDE(R) GROWTH FUND
The investment objective of the Fund is to achieve long-term capital
appreciation without emphasis on current return. Major emphasis in the selection
of securities is placed on companies which have capable management, and are in
fields where social and economic trends, technological developments, and new
processes or products indicate a potential for greater than average growth.
THE FOLLOWING UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE TO ALL CONTRACT
OWNERS ON OR AFTER JULY 1, 1994:
THE BOND FUND OF AMERICA(SM), INC.
The Fund's investment objective is to provide as high a level of
current income as is consistent with the preservation of capital. The Fund
invests substantially all of its assets in marketable corporate debt securities,
U.S. Government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. Normally, at least 65% of the
Fund's assets will be invested in bonds.
THE INVESTMENT COMPANY OF AMERICA(R), INC.
The investment objectives are long-term growth of capital and income. The
Fund strives to accomplish these objectives through constant supervision,
careful selection and broad diversification. In the selection of securities for
investment, the possibilities of appreciation and potential dividends are given
more weight than current yield. The Fund ordinarily invests principally in
common stocks. However, assets may also be held in securities convertible into
common stocks, straight debt securities (rated in the top three quality
categories by Standard & Poor's Corporation or Moody's Investor Service, Inc. or
determined to be of equivalent quality by Capital Research and Management
Company), cash equivalent quality by Capital Research and Management Company),
cash or cash equivalents, U.S. Government securities, or nonconvertible
preferred stocks.
29
31 of 101
<PAGE> 32
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 2, 1996
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS ISSUED
BY THE NACO VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth the
prospectus and should be read in conjunction with the prospectus dated November
2, 1996. The prospectus may be obtained from Nationwide Life Insurance Company,
P. O. Box 16766, One Nationwide Plaza, Columbus, Ohio 43216, or by calling
1-800-545-4730, (T.T.Y. 1-800-848-0833).
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
Annuity Payments.....................................................................................................4
Financial Statements.................................................................................................5
</TABLE>
GENERAL INFORMATION AND HISTORY
The NACo Variable Account is a separate investment account of
Nationwide Life Insurance Company (the "Company"). The Company is a member of
the Nationwide Insurance Enterprise and all of the Company's common stock is
owned by Nationwide Corporation. Nationwide Corporation is a holding company.
All of its common stock is held by Nationwide Mutual Insurance Company (95.2%)
and Nationwide Mutual Fire Insurance Company (4.8%).
SERVICES
The Company has responsibility for administration of the Contracts and
the NACo Variable Account, maintaining records, including name, address,
taxpayer identification number, and other pertinent information for each Owner
and the number and type of Contracts issued to each such Owner and the Contract
Value of each Contract.
All assets of the NACo Variable Account are held in custody for
safekeeping by the Company. The assets of each Sub-Account will be kept
physically segregated and held separate and apart from assets of other
Sub-Accounts and from assets of any other firm, person, or corporation. The
Company will maintain a record of all and redemption for shares of the
Underlying Mutual Fund held in each Sub-Account.
The Company, or affiliates of the Company may have entered into
agreements with either the investment adviser or distributor for several of the
Underlying Mutual Funds. The agreements relate to administrative services
furnished by the Company or an affiliate of the Company and provide for an
annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular Underlying Mutual Funds.
These fees in no way affect the net asset value of the Underlying Mutual Funds
or fees paid by the Contract Owner.
The financial statements and schedules herein have been included 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.
1
32 of 101
<PAGE> 33
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.
For those Plans which provide this Contract and Nationwide's Group
Fixed Fund Retirement Contracts, the Owner or the Participant, if the Plan so
provides, may exchange Accumulation Units between any Sub-Account of the NACo
Variable Account and the deposit and of the Group Fixed Fund Retirement Contract
Exchanges from the deposit fund to any Sub-Account of the NACo Variable Account
will be subject to the limitations of the Group Fixed Fund Retirement Contract
Exchanges will be effected when received in good order by the Company at its
Home Office.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43215, wholly owned subsidiary of the Company. No underwriting commissions
are paid by Nationwide Life to NFS.
CALCULATION OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund and
the Short-Term Investments Trust Treasury Portfolio 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 capital
changes in the value of a hypothetical pre-existing account having a balance of
one accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. As of December 31, 1995, the
Nationwide Money Market Fund and the Short-Term Investments Trust Treasury
Portfolio Sub-Accounts seven-day current yield were 4.23% and 4.68%
respectively. The Nationwide Money Market Fund and the Short-Term Investments
Trust Treasury Portfolio Sub-Accounts' effective yield is computed similarly but
includes the effect of assumed compounding on an annualized basis of the current
yield quotations of the Sub-Accounts, and for the period ending December 31,
1995 were 4.32% and 4.79%, respectively.
The yield and effective yield will fluctuate daily. Actual yields will
depend on factors such as the type of instruments in the Sub-Accounts'
portfolio, portfolio quality and average maturity, changes in interest rates,
and the Sub-Accounts' 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. 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 Nationwide Money Market Fund and the Short Term Investment
Trust Treasury Portfolio Sub-Account is not guaranteed or insured. Yields of
other money market funds may not be comparable if a different base period or
another method of calculation is used.
All performance advertising shall include quotations of average annual
total return, calculated in accordance with a standard method prescribed by
rules of the Securities and Exchange Commission, to facilitate comparison with
total return quoted 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 0.95% Actuarial Risk 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. Non-standardized total return is calculated in a
manner similar to average annual total return except the total return does not
reflect the deduction of any applicable Contingent Deferred Sales Charge, which,
if reflected, would decrease the level of the performance advertised.
2
33 of 101
<PAGE> 34
The average annual total return and 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. The standardized average annual
total return figures will be based on rolling calendar quarters and will cover,
at least, periods of one, five, and ten years, or a period covering the time a
Underlying Mutual Fund held in the Sub-Account has been in existence, if the
Underlying Mutual Fund has not been in existence for one of the prescribed
periods. The non-standardized total return will cover the cumulative current
calendar year and the most recently completed calendar year, and periods of
three, five and ten years on a rolling calendar quarter basis. For those
Underlying Mutual Funds which have not been held as Sub-Accounts within the NACo
Variable Account for one of the quoted periods, the standardized average annual
total return and non standardized total return quotations will show the
investment performance such Underlying Mutual Funds would have achieved (reduced
by the applicable charges) had they been held as Sub-Accounts within the NACo
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-Accounts' performance include general market conditions,
operating expenses and investment management. A Contract Owner's and
Participant's account when redeemed may be more or less than original cost
Below are quotations of average annual total return and total return,
calculated as described above, for each of the non-money market Sub-Accounts
available within the NACo Variable Account.
SUB-ACCOUNT PERFORMANCE SUMMARY -- NACO VARIABLE ACCOUNT
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Sub-Account Options 1 Year To 5 Years To 10 Years To
12/31/95 12/31/95 12/31/95
==========================================================================================================
<S> <C> <C> <C>
The Bond Fund of America(SM), Inc. 13.13% 9.96% 8.60%
- ----------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 30.53% 11.67% 10.35%
- ----------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund - Class V 18.70% 10.52% 8.15%
- ----------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 8.49% 5.97% 6.80%
years - Institutional Shares
- ----------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 11.63% 16.70% 9.99%
- ----------------------------------------------------------------------------------------------------------
Fidelity ContraFund 31.00% 22.53% 18.18%
- ----------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 26.57% 17.38% 11.88%
- ----------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 31.53% 18.84% 16.22%
- ----------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 32.92% 18.62% 14.56%
- ----------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 16.32% 15.14% 11.84%
- ----------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 25.40% 13.16% 12.98%
- ----------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 13.91% 9.47% 8.97%
- ----------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund-Class A 29.22% 13.01% 10.04%
- ----------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund-Class A 12.04% 17.33% 8.01%
- ----------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund-Class A 23.13% 15.04% 11.98%
- ----------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 24.76% 11.78% 12.19%
- ----------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 23.49% 14.47% 11.57%
- ----------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 0.51% 2.42% 4.42%
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 26.87% 17.83% 13.64%
- ----------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 32.25% 15.28% 12.67%
- ----------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 34.83% 20.89% 17.05%
- ----------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 23.26% 13.67% 11.74%
- ----------------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury Portfolio - 0.94% 2.95% 4.86%
Institutional Class
- ----------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 6.34% 10.03% 13.71%
- ----------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 6.11% 10.32% 14.09%
- ----------------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 15.21% 13.19% 13.02%
- ----------------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 32.38% 23.48% 18.55%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3
34 of 101
<PAGE> 35
SUB-ACCOUNT PERFORMANCE SUMMARY -- NACO VARIABLE ACCOUNT
NON-STANDARDIZED TOTAL RETURN
(The above return figures quoted below do not reflect the
deduction of any applicable Contingent Deferred Sales Charges)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Sub-Account Options Year Ended 3 Years To 5 Years To 10 Years To
12/31/95 12/31/95 12/31/95 12/31/95
=========================================================================================================
<S> <C> <C> <C> <C>
The Bond Fund of America(SM), Inc. 17.13% 7.60% 10.50% 8.79%
- ---------------------------------------------------------------------------------------------------------
The Dreyfus Third Century(R) Fund, Inc. 34.53% 8.74% 12.18% 10.52%
- ---------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund- Class V 22.70% 8.36% 11.06% 8.35%
- ---------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 12.49% 5.05% 6.60% 7.02%
years - Institutional Shares
- ---------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 15.63% 10.57% 17.13% 10.15%
- ---------------------------------------------------------------------------------------------------------
Fidelity Contrafund 35.00% 16.73% 22.89% 18.27%
- ---------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 30.57% 15.93% 17.80% 12.03%
- ---------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 35.53% 17.63% 19.24% 16.32%
- ---------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 36.92% 12.38% 19.02% 14.68%
- ---------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 20.32% 13.47% 15.59% 11.99%
- ---------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 29.40% 12.38% 13.65% 13.11%
- ---------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 17.91% 7.63% 10.02% 9.15%
- ---------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund-Class A 33.22% 13.33% 13.49% 10.21%
- ---------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund-Class A 16.04% 9.80% 17.75% 8.21%
- ---------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund-Class A 27.13% 10.02% 15.49% 12.12%
- ---------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 28.76% 10.71% 12.28% 12.33%
- ---------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 27.49% 12.22% 14.93% 11.71%
- ---------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 4.51% 2.95% 3.14% 4.69%
- ---------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund 30.87% 13.91% 18.25% 13.77%
- ---------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 36.25% 15.12% 15.73% 12.80%
- ---------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 38.83% 17.45% 21.26% 17.15%
- ---------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 27.26% 8.53% 14.14% 11.89%
- ---------------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury Portfolio 4.94% 3.42% 3.65% 5.12%
- - Institutional Class
- ---------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 10.34% 14.62% 10.57% 13.83%
- ---------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 10.11% 14.06% 10.86% 14.22%
- ---------------------------------------------------------------------------------------------------------
Twentieth Century Growth Investors 19.21% 6.14% 13.67% 13.15%
- ---------------------------------------------------------------------------------------------------------
Twentieth Century Ultra Investors 36.38% 16.25% 23.82% 18.63%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" located
in the prospectus.
4
35 of 101
<PAGE> 36
<PAGE> 1
Independent Auditors' Report
The Board of Directors and Contract Owners of
NACo Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of NACo 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 NACo 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
NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
The Bond Fund of America(SM), Inc. (BdFdAm)
966,726 shares (cost $13,210,009) ......................................................... $ 13,418,163
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
2,554,050 shares (cost $20,068,031) ....................................................... 21,045,369
The Evergreen Total Return Fund - Class Y (EvTotRet)
230,460 shares (cost $4,576,110) .......................................................... 4,590,762
Federated U.S. Government Securities Fund: 2-5 Years -Institutional Shares (FedUSGvt)
262,206 shares (cost $2,729,803) .......................................................... 2,802,984
Fidelity Capital & Income Fund (FidCapIn)
331,847 shares (cost $2,576,964) .......................................................... 3,039,718
Fidelity Contrafund (FidContr)
2,992,441 shares (cost $99,264,483) ....................................................... 113,772,601
Fidelity Equity-Income Fund (FidEqInc)
4,843,463 shares (cost $142,151,275) ...................................................... 183,712,549
Fidelity Magellan(R) Fund (FidMgln)
964,729 shares (cost $72,728,212).......................................................... 82,947,379
Fidelity OTC Portfolio (FidOTC)
163,266 shares (cost $5,074,525) .......................................................... 4,951,862
Fidelity Puritan Fund (FidPurtn)
772,356 shares (cost $12,178,275) ......................................................... 13,137,773
The Investment Company of America(R) (InvCoAm)
1,468,962 shares (cost $28,004,047) ....................................................... 31,744,268
MAS Funds - Fixed Income Portfolio (MASFIP)
45,283 shares (cost $534,869) ............................................................. 533,884
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
987,782 shares (cost $10,841,194) ......................................................... 11,794,119
MFS(R) High Income Fund - Class A (MFSHiInc)
1,814,362 shares (cost $9,333,551) ........................................................ 9,398,396
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
737,796 shares (cost $8,261,283) .......................................................... 7,842,774
Nationwide(R) Fund (NWFund)
1,907,625 shares (cost $30,186,873) ....................................................... 33,593,274
Nationwide(R) Growth Fund (NWGroFd)
521,177 shares (cost $5,600,082) .......................................................... 6,426,114
Nationwide(R) Money Market Fund (NWMyMkt)
43,083,744 shares (cost $43,083,744) ...................................................... 43,083,744
Neuberger & Berman Guardian Fund (NBGuard)
431,214 shares (cost $9,920,957) .......................................................... 9,930,869
Putnam Investors Fund - Class A (PutInvFd)
2,968,148 shares (cost $24,804,430) ....................................................... 25,555,752
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Putnam Voyager Fund - Class A (PutVoyFd)
4,909,187 shares (cost $58,941,231) ............................................. 74,865,100
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,055,610 shares (cost $5,643,080) .............................................. 5,510,283
Short-Term Investments Trust -Treasury Portfolio - Institutional Class (AIMTreas)
1,707,142 shares (cost $1,707,142) .............................................. 1,707,142
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
873,375 shares (cost $10,159,948) ............................................... 10,681,375
Templeton Foreign Fund - Class I (TemForFd)
1,848,460 shares (cost $17,201,870) ............................................. 16,968,860
Twentieth Century Investors, Inc. - Growth Investors (TCGroInv)
7,717,862 shares (cost $164,229,994) ............................................ 149,649,339
Twentieth Century Investors, Inc. - Ultra Investors (TCUltra)
3,842,555 shares (cost $86,573,461) ............................................. 100,329,109
------------
Total investments ............................................................ 983,033,562
Accounts receivable ............................................................... 1,759,794
------------
Total assets ................................................................. 984,793,356
Accounts payable .................................................................. 201,236
------------
Contract owners' equity ........................................................... $984,592,120
============
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Units Unit Value
---------- --------
Contract owners' equity represented by:
<S> <C> <C> <C>
The Bond Fund of America(SM), Inc...................... 6,578,720 $2.039710 $13,418,681
The Dreyfus Third Century Fund, Inc.................... 9,402,637 2.238323 21,046,139
The Evergreen Total Return Fund - Class Y.............. 2,635,928 1.741651 4,590,867
Federated U.S. Government Securities Fund: 2-5 Years-
Institutional Shares................................. 2,344,091 1.195751 2,802,949
Fidelity Capital & Income Fund......................... 818,785 3.712491 3,039,732
Fidelity Contrafund.................................... 86,483,728 1.315600 113,777,993
Fidelity Equity-Income Fund............................ 41,090,717 4.471070 183,719,472
Fidelity Magellan(R) Fund.............................. 63,751,788 1.301185 82,952,870
Fidelity OTC Portfolio................................. 3,611,136 1.371346 4,952,117
Fidelity Puritan Fund.................................. 11,375,851 1.154955 13,138,596
The Investment Company of America(R)................... 21,189,283 1.498194 31,745,657
MAS Funds - Fixed Income Portfolio..................... 461,663 1.156444 533,887
MFS(R) Growth Opportunities Fund - Class A............. 2,209,754 6.114190 13,510,856
MFS(R) High Income Fund - Class A...................... 1,898,625 4.949752 9,397,723
Massachusetts Investors Growth Stock Fund - Class A.... 877,034 8.942612 7,842,975
Nationwide(R) Fund..................................... 2,755,666 12.191058 33,594,484
Nationwide(R) Growth Fund.............................. 2,409,384 2.667201 6,426,311
Nationwide(R) Money Market Fund........................ 15,458,252 2.774433 42,887,884
Neuberger & Berman Guardian Fund....................... 7,940,457 1.250781 9,931,773
Putnam Investors Fund - Class A........................ 2,260,621 11.305164 25,556,691
Putnam Voyager Fund - Class A.......................... 27,203,903 2.752130 74,868,678
Seligman Growth Fund, Inc. - Class A................... 616,776 8.934609 5,510,652
Short-Term Investments Trust -Treasury Portfolio -
Institutional Class.................................. 1,524,715 1.119630 1,707,117
T. Rowe Price International Funds, Inc. -
International Stock Fund(R).......................... 10,412,582 1.025854 10,681,789
Templeton Foreign Fund - Class I....................... 16,316,118 1.040054 16,969,644
Twentieth Century Investors, Inc. - Growth Investors... 37,362,979 4.005400 149,653,676
Twentieth Century Investors, Inc. - Ultra Investors.... 79,405,506 1.263551 100,332,907
========== ======== ============
$984,592,120
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NACo 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 ................ $ 73,174,649 49,662,440 38,723,891
------------- ------------ -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ..... 94,814,984 109,813,731 74,574,481
Cost of mutual fund shares sold ..................... (90,332,356) (103,752,916) (65,493,558)
------------- ------------ -----------
Realized gain (loss) on investments ................. 4,482,628 6,060,815 9,080,923
Change in unrealized gain (loss) on investments ..... 121,289,385 (63,425,619) (2,630,142)
------------- ------------ -----------
Net gain (loss) on investments .................... 125,772,013 (57,364,804) 6,450,781
------------- ------------ -----------
Net investment activity ........................ 198,946,662 (7,702,364) 45,174,672
------------- ------------ -----------
Equity transactions:
Purchase payments received from contract owners ....... 211,743,850 172,770,344 125,959,842
Redemptions ........................................... (59,225,086) (50,702,236) (36,871,944)
Adjustments to maintain reserves ...................... 130,249 (9,107) 39,775
------------- ------------ -----------
Net equity transactions ......................... 152,649,013 122,059,001 89,127,673
------------- ------------ -----------
Expenses: Contract charges (note 2)...................... (7,716,253) (5,555,163) (4,339,264)
------------- ------------ -----------
Net change in contract owners' equity ................... 343,879,422 108,801,474 129,963,081
Contract owners' equity beginning of period ............. 640,712,698 531,911,224 401,948,143
------------- ------------ -----------
Contract owners' equity end of period ................... $ 984,592,120 640,712,698 531,911,224
============= ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NACo 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 NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the Company) on
September 7, 1988, and has been registered as a unit investment trust under the
Investment Company Act of 1940. The NACoVA was introduced for exclusive use by
Member Counties for deferred compensation Plans adopted under the National
Association of Counties (NACo) Program.
The Company offers group flexible fund retirement contracts through the
Account. The primary distribution for the contracts is through an affiliated
sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts are offered for purchase in
connection with deferred compensation Plans adopted by Member Counties under the
NACo Program. Participants in the contracts may invest in any of the following
fund sub-accounts:
The Bond Fund of America(SM), Inc. (BdFdAm) (only available for certain
contracts issued beginning July 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
The Evergreen Total Return Fund - Class Y (EvTotRet) (not available for
contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares (FedUSGvt) (formerly Federated Intermediate Government Trust)
Fidelity Capital & Income Fund (FidCapIn) (not available for contracts
issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan Fund (FidPurtn)
The Investment Company of America(R) (InvCoAm) (only available for certain
contracts issued beginning July 1, 1994)
MAS Funds-Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund -- Class A (MFSGrOpp) (not available for
contracts issued on or after October 1, 1993)
MFS(R) High Income Fund -- Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund -- Class A (MFSGrStk)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated investment
advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an affiliated
investment advisor) (not available for contracts issued on or after
October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
Seligman Growth Fund, Inc. -- Class A (SelGroFd)
Short-Term Investments Trust - Treasury Portfolio - Institutional Class
(AIMTreas)
T. Rowe Price International Funds, Inc. - International Stock Fund(R)
(TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
Twentieth Century Investors, Inc. - Growth Investors (TCGroInv)
Twentieth Century Investors, Inc. - Ultra Investors (TCUltra)
All of the above funds were being utilized as of December 31, 1995.
The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain expenses (see note 2).
The accompanying financial statements include only contract owners'
<PAGE> 7
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 the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the NACoVA 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 assets in this account are held pursuant to contracts with
entities which are exempt from federal income tax. Because of this exemption, no
taxes need be provided for investment income or realized and unrealized capital
gains. Annuity payouts and withdrawal payments are taxable as wages when
received by the participants.
(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 contigent 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
No deduction for a sales charge is made from the purchase payments for
these contracts. However, if an owner terminates the contract and directs the
Company to withdraw all or part of the contract value held in the Account for
less than sixteen (16) years, the Company will, with certain exceptions, assess
a contingent deferred sales charge by deducting an amount from each participants
account. This charge will be equal to not more than 4% in the first year,
declining to 1% in the fifteenth year, of the lesser of all purchase payments
made on behalf of a participant prior to the date of withdrawal, or the amount
withdrawn. No sales charges are deducted on redemptions used to purchase units
in the fixed investment options of the Company. Sales charges may be reduced or
eliminated upon negotiated conversion of the contracts to other investment
programs offered by the Company or its affiliates.
The following administrative charges are deducted by the Company: 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
0.10%, 0.40% and 0.45%, respectively.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various investment
options for each participant's account. The number of transfers allowed, and any
administrative charges associated therewith, are subject to negotiation between
the contract owner and the Company.
<PAGE> 8
(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 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.
<PAGE> 9
SCHEDULE I
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
BdFdAm Dry3dCen EvTotRet FedUSGvt FidCapIn FidContr FidEqInc FidMgln FidOTC
--------- -------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $1.741422 1.663803 1.419467 1.062969 3.210584 .974545 3.424310 .960039 1.001544
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .148075 .156545 .092352 .070177 .338236 .102679 .262606 .075533 .078671
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .168396 .436477 .244789 .073378 .197671 .249364 .821416 .276728 .302706
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.018183) (.018502) (.014957) (.010773) (.034000) (.010988) (.037262) (.011115) (.011575)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $2.039710 2.238323 1.741651 1.195751 3.712491 1.315600 4.471070 1.301185 1.371346
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 35% 23% 12% 16% 35% 31% 36% 37%
===================================================================================================================================
1994
Beginning unit value - Jan. 1 $1.850918 1.814915 1.531292 1.094086 3.397953 .994981 3.448520 .987051 1.000000
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .138760 .233019 .106153 .053776 .285090 .007092 .333965 .038465 .008959
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.231366) (.367765) (.204194) (.074693) (.440620) (.018188) (.325363) (.056248) (.004289)
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.016890) (.016366) (.013784) (.010200) (.031839) (.009340) (.032812) (.009229) (.003126)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.741422 1.663803 1.419467 1.062969 3.210584 .974545 3.424310 .960039 1.001544
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)% (8)% (7)% (3)% (6)% (2)% (1)% (3)% 0%(b)
===================================================================================================================================
1993
Beginning unit value - Jan. 1 $1.637181 1.740666 1.368966 1.031362 2.746533 1.000000 2.869860 1.000000 **
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .178726 .132238 .165734 .047079 .275431 .064787 .126727 .056812
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .052059 (.041442) .010622 .025861 .406133 (.067472) .482324 (.067438)
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.017048) (.016547) (.014030) (.010216) (.030144) (.002334) (.030391) (.002323)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.850918 1.814915 1.531292 1.094086 3.397953 .994981 3.448520 .987051
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 13% 4% 12% 6% 24% (1)%(b) 20% (1)%(b)
===================================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available.
<PAGE> 10
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
FidPurtn InvCoAm MASFIP MFSGrOpp MFSHiInc MFSGrStk
--------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $ .959935 1.157835 .980782 4.589533 4.265493 7.034148
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .060993 .093079 .073523 .768242 .403605 1.177905
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .144010 .259870 .112302 .807886 .325361 .807395
- ----------------------------------------------------------------------------------------------------
Contract charges (.009983) (.012590) (.010163) (.051471) (.044707) (.076836)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.154955 1.498194 1.156444 6.114190 4.949752 8.942612
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 20% 29% 18% 33% 16% 27%
====================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 1.167040 1.000000 4.834037 4.422523 7.613442
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .059967 .067770 .029902 .376509 .374437 .717173
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.096987) (.065957) (.046046) (.576664) (.490350) (1.229319)
- ----------------------------------------------------------------------------------------------------
Contract charges (.003045) (.011018) (.003074) (.044349) (.041117) (.067148)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ .959935 1.157835 .980782 4.589533 4.265493 7.034148
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (4)%(b) (1)% (2)%(b) (5)% (4)% (8)%
====================================================================================================
1993
Beginning unit value - Jan. 1 * * $1.055548 * * 4.200054 3.739642 6.714892
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .072592 .528137 .354624 1.133243
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .049402 .148725 .367761 (.168690)
- ----------------------------------------------------------------------------------------------------
Contract charges (.010502) (.042879) (.039504) (.066003)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.167040 4.834037 4.422523 7.613442
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 11% 15% 18% 13%
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWFund NWGroFd NWMyMkt
--------- -------- --------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 9.468045 2.092009 2.654661
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .820350 .282003 .145674
- -------------------------------------------------------------------
Unrealized gain (loss) 2.003431 .316217 .000000
- -------------------------------------------------------------------
Contract charges (.100768) (.023028) (.025902)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 12.191058 2.667201 2.774433
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 29% 27% 5%
===================================================================
1994
Beginning unit value - Jan. 1 9.502760 2.081399 2.583387
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .927943 .079372 .096188
- -------------------------------------------------------------------
Unrealized gain (loss) (.873192) (.049054) .000000
- -------------------------------------------------------------------
Contract charges (.089466) (.019708) (.024914)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 9.468045 2.092009 2.654661
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% 1% 3%
===================================================================
1993
Beginning unit value - Jan. 1 8.985447 1.887524 2.542721
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .679906 .073989 .065160
- -------------------------------------------------------------------
Unrealized gain (loss) (.077647) .138601 .000000
- -------------------------------------------------------------------
Contract charges (.084946) (.018715) (.024494)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 9.502760 2.081399 2.583387
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 6% 10% 2%
===================================================================
</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 available.
<PAGE> 11
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NBGuard PutInvFd PutVoyFd SelGroFd AIMTreas TRIntStk
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $ .955773 8.297318 1.982311 7.020585 1.066889 .929695
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .054385 1.391197 .146629 .931537 .063099 .030917
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .251433 1.710170 .645332 1.057625 .000000 .074337
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.010810) (.093521) (.022142) (.075138) (.010358) (.009095)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.250781 11.305164 2.752130 8.934609 1.119630 1.025854
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit
value* (a) 31% 36% 39% 27% 5% 10%
=======================================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 8.652501 1.992379 7.370495 1.034183 1.000000
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .019568 .771381 .083642 .708203 .042627 .057013
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.060786) (1.046752) (.075428) (.990524) .000000 (.124310)
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.003009) (.079812) (.018282) (.067589) (.009921) (.003008)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ .955773 8.297318 1.982311 7.020585 1.066889 .929695
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (4)%(b) (4)% (1)% (5)% 3% (7)%(b)
=======================================================================================================================
1993
Beginning unit value - Jan. 1 * * $7.410567 1.698751 6.989639 1.012172 * *
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends 1.260334 .072965 1.309602 .031750
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .057997 .237532 (.863222) .000000
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.076397) (.016869) (.065524) (.009739)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $8.652501 1.992379 7.370495 1.034183
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 17% 5% 2%
=======================================================================================================================
<CAPTION>
TemForFd TCGroInv TCUltra
-------- -------- -------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 .944596 3.359891 .926489
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .065652 .555289 .059786
- -----------------------------------------------------------------------
Unrealized gain (loss) .039222 .127077 .287821
- -----------------------------------------------------------------------
Contract charges (.009416) (.036857) (.010545)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 1.040054 4.005400 1.263551
- -----------------------------------------------------------------------
Percentage increase (decrease) in unit
value* (a) 10% 19% 36%
=======================================================================
1994
Beginning unit value - Jan. 1 1.000000 3.443124 .970411
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .067522 .498592 .029006
- -----------------------------------------------------------------------
Unrealized gain (loss) (.119861) (.549338) (.064074)
- -----------------------------------------------------------------------
Contract charges (.003065) (.032487) (.008854)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 .944596 3.359891 .926489
- -----------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)%(b) (2)% (5)%
=======================================================================
1993
Beginning unit value - Jan. 1 * * 3.350122 1.000000
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .384659 .000000
- -----------------------------------------------------------------------
Unrealized gain (loss) (.260224) (.027302)
- -----------------------------------------------------------------------
Contract charges (.031433) (.002287)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 3.443124 .970411
- -----------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% (3)%(b)
=======================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available.
See note 3.
<PAGE> 37
<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> 38
Part C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(a) Financial Statements: Page
<S> <C>
(1) Financial statements and schedule included in
Prospectus (Part A):
Condensed Financial Information 13
(2) Financial statements and schedule included in Part B: 36
Those financial statements and schedule required by Item 23
to be included in Part B have been incorporated therein by
reference to the Prospectus (Part A).
Nationwide NACo Variable Account:
Independent Auditors' Report. 36
Statement of Assets, Liabilities and Contract Owners'
Equity as of December 31, 1995. 37
Statements of Operations and Changes in Contract
Owners' Equity for the years ended December 31, 1995,
1994 and 1993. 40
Notes to Financial Statements. 41
Schedules of Changes in Unit Value. 44
Nationwide Life Insurance Company:
Independent Auditors' Report. 47
Consolidated Balance Sheets as of December 31, 1995
and 1994. 48
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993. 49
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1995, 1994 and 1993. 50
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993. 51
Notes to Consolidated Financial Statements 52
Schedule I - Summary of Investments - Other
Than Investments in Related Parties. 72
Schedule III - Supplementary Insurance Information. 73
Schedule IV - Reinsurance. 74
Schedule V - Valuation and Qualifying Accounts. 75
</TABLE>
76 of 101
<PAGE> 39
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors authorizing the
establishment of the Registrant, adopted September 7, 1988. --Filed
previously with pre-effective Amendment No. 1 to the registration
statement, and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contract between the Registrant and
Principal Underwriter. --Filed previously with pre-effective Amendment
No. 1 to the registration statement, and hereby incorporated by
reference.
(4) The form of the variable annuity contract. --Filed previously with
pre-effective Amendment No. 1 to the registration statement, and
hereby incorporated by reference.
(5) Variable Annuity Application. --Filed previously with pre-effective
Amendment No. 1 to the registration statement, and hereby incorporated
by reference.
(6) Articles of Incorporation of Depositor. --Filed previously with
pre-effective Amendment No. 1 to the registration statement, and
hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel. --Filed previously with pre-effective Amendment
No. 1 to the registration statement, and hereby incorporated by
reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule. --Filed previously with
pre-effective Amendment No. 1 to the registration statement, and
hereby incorporated by reference.
77 of 101
<PAGE> 40
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise and Director
Columbus, OH 43215
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
78 of 101
<PAGE> 41
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
79 of 101
<PAGE> 42
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
80 of 101
<PAGE> 43
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY 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 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
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
</TABLE>
81 of 101
<PAGE> 44
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
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
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
</TABLE>
82 of 101
<PAGE> 45
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to form
or acquire the control of other corporations
Nationwide Development Company Ohio Owns, leases and manages commercial real
estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and deals in Real
Property
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
</TABLE>
83 of 101
<PAGE> 46
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
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
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
</TABLE>
84 of 101
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
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>
85 of 101
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide 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
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
86 of 101
<PAGE> 49
<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> 50
<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> 51
<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> 52
<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> 53
<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. |
| |
|___________________________|
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
</TABLE>
Page 2
<PAGE> 54
Item 27. Number of Contract Owners
The number of Owners of Contracts as of June 30, 1996 was 2,673.
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.
Item 29. Principal Underwriter
(a) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the NACo Variable Account, 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 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
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
</TABLE>
89 of 101
<PAGE> 55
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
Item 30. Location of Accounts and Records
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a 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.
90 of 101
<PAGE> 56
PROSPECTUS
- --------------------------------------------------------------------------------
NACo National Association of Counties
Counties Care for America
Group
Flexible Fund
Retirement
Contracts
offered by
NATIONWIDE
Life Insurance Company
through its NACo Variable Account
- --------------------------------------------------------------------------------
NOVEMBER 2, 1996
91 of 101
<PAGE> 57
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of NACo 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
92 of 101
<PAGE> 58
NATIONWIDE LIFE INSURANCE COMPANY
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
Issued Through The NACo Variable Account
(Supplement Dated __________ to Prospectus Dated November 2, 1996)
This supplement updates certain information contained in the Prospectus and
should be kept for future reference. This supplement is for use exclusively with
Contracts issued which offer Nationwide Asset Allocation Funds.
1. The "GLOSSARY OF TERMS" is hereby amended to add the following definition:
NATIONWIDE ASSET ALLOCATION FUND ("ASSET ALLOCATION FUND") -
One of a series of Underlying Mutual Funds advised by Nationwide
Financial Services, Inc., each of which has been constructed as a
"fund of funds."
2. The section entitled "SUMMARY OF CONTRACT EXPENSES" on page 5 of the
Prospectus is hereby amended to include the following:
93 of 101
<PAGE> 59
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (4)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
-----------------------------------------------------------
Management Fees Other Expenses Total Fund Annual
Expenses
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Asset Allocation Fund -
Aggressive Fund 0.50 0.00 0.50
- ------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund -
Moderately Aggressive Fund 0.50 0.00 0.50
- ------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund -
Moderate Fund 0.50 0.00 0.50
- ------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund -
Moderately Conservative Fund 0.50 0.00 0.50
- ------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund -
Conservative Fund 0.50 0.00 0.50
- ------------------------------------------------------------------------------------------------------------
</TABLE>
94 of 101
<PAGE> 60
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
---------------------------------------------------
If you surrender your Contract at the end
of the applicable time period.
- ----------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs.
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- ----------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- ----------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderate Fund
- ----------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- ----------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Conservative Fund
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
95 of 101
<PAGE> 61
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
---------------------------------------
If you do not surrender your Contract
at the end of the applicable time
period.
- ----------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs.
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- ----------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- ----------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderate Fund
- ----------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- ----------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Conservative Fund
- ----------------------------------------------------------------------------------------------------
</TABLE>
96 of 101
<PAGE> 62
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
------------------------------------------------------
If you annuitize your Contract at the end
of the applicable time period.
- -------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- -------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- -------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderate Fund
- -------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- -------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Fund - Conservative Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
97 of 101
<PAGE> 63
3. The section entitled "NACO VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS AND
OTHER DEDUCTIONS" on page 15 of the Prospectus is hereby amended by adding
the following sections:
CONTRACT SURRENDER CHARGE
Upon termination of the Contract, an Owner whose Contract is invested in
the Nationwide Asset Allocation Funds will be assessed a surrender charge
calculated using a market value adjustment formula which only applies to
the fixed interest contract portion of each Asset Allocation Fund. The
market value adjustment is the amount which the Company determines, in
accordance with its then current procedures applicable to all fixed
interest contracts of this type and class, would be the net capital loss,
if any, resulting to the Company if investments were liquidated to make the
lump sum withdrawal. The then current Company procedures for determination
of the market value adjustment will be provided to the Owner on request.
ASSET ALLOCATION FUND CHARGES
A Participant Account will be assessed a market value adjustment against
the fixed interest contract portion of an Asset Allocation Fund for any
exchange or transfer from such Asset Allocation Fund, when certain
restrictions are exceeded (said restrictions are more fully set forth in
the Section entitled "Exchanges and Transfers for Asset Allocation Funds").
The Company reserves the right to change the percentage of said market
value adjustment on a quarterly basis.
The section entitled "DESCRIPTION OF THE CONTRACTS - EXCHANGE PRIVILEGE" on
page 17 of the Prospectus is hereby amended by adding the following
sentence at the end of the first paragraph:
"Exchanges and transfers from the Asset Allocations are also subject
to the provisions of the "Exchanges and Transfers for the Asset
Allocation Funds" set forth below.
4. The section entitled "DESCRIPTION OF THE CONTRACTS" on Page 17 of the
Prospectus is hereby amended by adding the following section after the
"EXCHANGE PRIVILEGE" section:
EXCHANGES AND TRANSFERS FOR ASSET ALLOCATION FUNDS
The Company will permit the Owner or the Participant, if the Plan so
provides, to exchange or transfer amounts among the Asset Allocation Funds
as frequently as permitted by the Plan. Exchanges or transfers from another
investment vehicle to an Asset Allocation Fund are permitted, subject to
the limits and rules as set by any such other investment provider.
The following provisions apply to exchanges and transfers from an Asset
Allocation Fund. Fifty percent (50%) of a Participant Account may be
exchanged or transferred out of any Asset Allocation Fund per calendar
year. There will be no charge for such exchange or transfer. In the event
more than 50% of a Participant Account is exchanged or transferred in a
calendar year, then such exchange or transfer shall be subject to market
value adjustment (see "Asset Allocation Fund Charge"). One hundred percent
(100%) of a Participant Account value in each Asset Allocation Fund can be
exchanged or transferred over a two year period, free of charge, subject to
all of the following requirements:
1) At least 50% of a Participant Account must be exchanged or
transferred during the first calendar year. Any exchange or
transfer exceeding 50% is subject to the charge described in the
section entitled "Asset Allocation Fund Charges";
2) Upon such election, no new deferrals or exchanges will be allowed
into the Asset Allocation Fund until after a Participant's
Account value reaches zero; and
3) 100% of the Participant Account must be exchanged or transferred
in one transaction during the second calendar year.
In the event the above conditions are not met, the election of this option
will have been deemed canceled and the Participant Account shall be
permitted to only transfer 50% of the Participant Account within such
calendar year without incurring the Asset Allocation Fund charge as
described above.
5. The section entitled "SUSPENSION AND TERMINATION" on page 17 of the
Prospectus is hereby amended by adding the following sentence:
98 of 101
<PAGE> 64
"Upon such termination by the Owner, payment of Contract Values will
be subject to any applicable Contingent Deferred Sales Charge and
Contract Surrender Charge."
6. The Appendix located on page 26 of the Prospectus is hereby amended to
include the following information:
Each Asset Allocation Fund seeks to maximize total investment return
(i.e., capital growth and income) subject to its investment
restrictions and asset allocation policies. Each Fund has been
constructed as a "fund of funds" which means that it pursues its
investment objective primarily by allocating its investments among
other mutual funds (the "Underlying Funds"); some of the Underlying
Funds will invest primarily in equity securities ("Equity Funds")
while others will invest primarily in bonds and other fixed income
securities ("Bond Funds"). The Underlying Funds will include
portfolios advised by the Asset Allocation Funds' investment adviser,
Nationwide Financial Services, Inc. ("NFS"), as well as other mutual
funds which are not affiliated with the Funds advised by NFS. Each of
the Asset Allocation Funds, except the Nationwide Asset Allocation --
Aggressive Fund will also invest in a fixed interest contract issued
by the Company (the "Nationwide Contract").
<TABLE>
<S> <C>
Nationwide Asset Allocation -- Aggressive Fund Seeks to provide growth of capital. It
will invest in Equity Funds. It is
generally appropriate for investors
looking for high returns over an
investment time horizon of at least 15
years and having a higher tolerance for
market fluctuations.
Nationwide Asset Allocation -- Moderately Seeks to provide growth of capital. It
Aggressive Fund will invest primarily in Equity Funds,
but the Fund will attempt to reduce its
volatility by also investing in the
Nationwide Contract and Bond Funds. It is
generally appropriate for moderate
investors looking for high returns over
an investment horizon of at least 15
years or for more aggressive investors
over an investment horizon of 10 to 15
years.
Nationwide Asset Allocation -- Moderate Fund Seeks growth of capital and income. It
will also invest primarily in Equity
Funds, but will invest a significant
percentage of its assets in the
Nationwide Contract and Bond Funds. It is
appropriate for moderate investors
seeking moderate returns over an
investment time horizon of between 10 and
15 years, as well as more conservative
investors over an investment time horizon
of over 15 years and more aggressive
investors over an investment time horizon
of 5 to 10 years.
Nationwide Asset Allocation -- Moderately Seeks income and, secondarily, long term
Conservative Fund growth of capital. It will generally
invest half of its assets in Equity funds
with the remainder in the Nationwide
Contract and Bond Funds. It is
appropriate for moderate investors
seeking lower fluctuations in returns
combined with some of the upside
potential of equity investments over an
investment time horizon of between five
and 10 years, as well as more conservative
investors over
</TABLE>
99 of 101
<PAGE> 65
<TABLE>
<S> <C>
an investment time horizon of between 10
and 15 years and more aggressive
investors over an investment time horizon
of less than 5 years.
Nationwide Asset Allocation -- Conservative Fund Seeks income and secondarily, long term
growth of capital. It will invest
primarily in a fixed income combination
of the Nationwide Contract and the Bond
Funds, with a smaller investment in
Equity Funds. It is appropriate for
investors seeking lower fluctuations in
returns over an investment time horizon
of less than five years, as well as more
conservative investors with an investment
time horizon of between five and 10
years.
</TABLE>
100 of 101
<PAGE> 66
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, NACo VARIABLE ACCOUNT certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of the
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 3rd day
of September, 1996.
NACo VARIABLE ACCOUNT
-------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-------------------------------------
(Depositor)
By /s/ W. SIDNEY DRUEN
-------------------------------------
W. Sidney Druen,
Senior Vice President and
General Counsel and Assistant Secretary
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 3rd day of September, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- -----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- ------------------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- ------------------------------------------
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer - Nationwide Insurance
- ----------------------------------------- Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- ------------------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-Chief Financial Officer
- ------------------------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By /s/ W. SIDNEY DRUEN
- ------------------------------------------ ------------------------------------------
James F. Patterson W. Sidney Druen
Attorney-in-Fact
ARDEN L. SHISLER Director
- ------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------------------
Robert L. Stewart
Director
NANCY C. THOMAS
- ------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------------------
Harold W. Weihl
</TABLE>
101 of 101
<PAGE> 67
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
