<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-82190
'40 Act File No. 811-8666
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 1 /x/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 /x/
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in
respect of the Prospectus, the Statement of Additional Information and the
Financial Statements.
It is proposed that this filing will become effective (check appropriate
space):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on September 1, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of rule (485)
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500.00 has been paid to the Commission. Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1994, on February 22,
1995.
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<PAGE> 2
NATIONWIDE FIDELITY ADVISOR 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..................................................................... 11
Item 4. Condensed Financial Information............................................................ 12
Item 5. General Description of Registrant, Depositor, and Portfolio Companies...................... 13
Item 6. Deductions and Expenses.................................................................... 15
Item 7. General Description of Variable Annuity Contracts.......................................... 17
Item 8. Annuity Period............................................................................. 20
Item 9. Death Benefit and Distributions............................................................ 22
Item 10. Purchases and Contract Value............................................................... 26
Item 11. Redemptions................................................................................ 28
Item 12. Taxes...................................................................................... 29
Item 13. Legal Proceedings.......................................................................... 33
Item 14. Table of Contents of the Statement of Additional Information............................... 33
</TABLE>
<TABLE>
<CAPTION>
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<S> <C> <C>
Item 15. Cover Page................................................................................. 36
Item 16. Table of Contents.......................................................................... 36
Item 17. General Information and History............................................................ 36
Item 18. Services................................................................................... 36
Item 19. Purchase of Securities Being Offered....................................................... 36
Item 20. Underwriters............................................................................... 37
Item 21. Calculation of Performance Information..................................................... 37
Item 22. Annuity Payments........................................................................... 38
Item 23. Financial Statements....................................................................... 39
</TABLE>
<TABLE>
<CAPTION>
Part C OTHER INFORMATION
<S> <C> <C>
Item 24. Financial Statements and Exhibits.......................................................... 63
Item 25. Directors and Officers of the Depositor.................................................... 65
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant............. 67
Item 27. Number of Contract Owners.................................................................. 78
Item 28. Indemnification............................................................................ 78
Item 29. Principal Underwriter...................................................................... 78
Item 30. Location of Accounts and Records........................................................... 79
Item 31. Management Services........................................................................ 79
Item 32. Undertakings............................................................................... 79
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 182610
Columbus, Ohio 43218-2610, 1-800-573-5775
Voice Response (available 24 hours) 1-800-573-2447
TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
OF NATIONWIDE LIFE INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
Prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). Reference throughout the Prospectus to Individual Deferred
Variable Annuity Contracts shall also mean Certificates issued under Group
Flexible Fund Retirement Contracts. For such Group Contracts, references to
"Owner" shall mean the "Participant" unless the Plan otherwise permits or
requires the Owner to exercise such rights under the authority of the Plan
terms. The Contracts are sold to individuals for use in retirement plans which
may qualify for special federal tax treatment under the Internal Revenue Code.
Annuity payments under the Contracts are deferred until a selected later date.
Purchase payments are allocated to the Nationwide Fidelity Advisor
Variable Account ("Variable Account"), a separate account of Nationwide Life
Insurance Company (the "Company"). The Variable Account uses its assets to
purchase shares at net asset value of the following series of the underlying
Mutual Fund options:
FIDELITY ADVISOR ANNUITY FUND
Fidelity Advisor Annuity Fidelity Advisor Annuity
Government Investment Fund Growth Opportunities Fund
Fidelity Advisor Annuity Fidelity Advisor Annuity
High Yield Fund* Income & Growth Fund
Fidelity Advisor Annuity Fidelity Advisor Annuity
Money Market Fund Overseas Fund
This Prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide Fidelity Advisor Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information,
containing further information about the Contracts and the Nationwide Fidelity
Advisor Variable Account has been filed with the Securities and Exchange
Commission. You can obtain a copy without charge from Nationwide Life Insurance
Company by calling the number listed above, or writing P.O. Box 182610,
Columbus, Ohio 43218-2610.
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 SEPTEMBER 1, 1995, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 31 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 1, 1995.
*The High Yield Fund may invest in lower quality debt securities commonly
referred to as junk bonds.
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<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of contract issuance.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence, as originally shown on the Contract Data Page of the Contract unless
changed by the Owner.
ANNUITY PAYMENT OPTION- The method for making annuity payments. Several options
are available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named in the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of the
last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. The Owner's right to name a Contingent Designated Annuitant may be
restricted under the provisions of any retirement or deferred compensation plan
for which this Contract is issued.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of Contract Owner
upon the Contract Owner's death before Annuitization. For contracts issued in
the State of New York, references throughout this prospectus to "Contingent
Owner" shall mean "Owner's Beneficiary."
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date.
CONTRACT VALUE- The sum of the Variable Account Contract Value and the Fixed
Account Contract Value.
CONTRACT YEAR- Each year commencing with the Date of Issue, and each Contract
Anniversary thereafter shall be a Contract Year.
DATE OF ISSUE- The date shown as the Date of Issue on the Contract Data Page of
the Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant.
This benefit does not apply upon the death of the Contract Owner when the Owner
and Designated Annuitant are not the same person. If the Annuitant dies after
the Annuitization Date, any benefit that may be payable shall be as specified in
the Annuity Payment Option elected.
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
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<PAGE> 5
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
INDIVIDUAL RETIREMENT ANNUITY- An annuity which qualifies for treatment under
Section 408 of the Internal Revenue Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time in which an interest rate credited to the Fixed Account under
the Contract is guaranteed to remain the same. For Purchase Payments into the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter at
least one year from deposit or transfer. At the end of an Interest Rate
Guarantee Period, a new interest rate is declared with an Interest Rate
Guarantee Period starting at the end of the prior period and ending at the end
of the calendar quarter one year later.
MUTUAL FUND- The registered management investment companies in which assets of
the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACTS- Contracts not issued to Qualified Plans or Tax
Sheltered Annuity Plans, or as Individual Retirement Annuities or Tax Sheltered
Annuities.
NON-QUALIFIED PLANS- Retirement Plans which do not receive favorable tax
treatment under the provisions of the Internal Revenue Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Plan or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
QUALIFIED CONTRACTS- Contracts issued under Qualified Plans.
QUALIFIED PLANS- Retirement Plans which receive favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
TAX SHELTERED ANNUITY- An annuity which qualifies for treatment under Section
403(b) of the Internal Revenue Code of 1986, as amended.
VALUATION DATE- Each day the New York Stock Exchange and the Company's home
office is open for business or any other day during which there is a sufficient
degree of trading of the underlying Mutual Fund shares held by the Variable
Account, such that the current value of the Variable Account Accumulation Units
might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Company into which
Variable Account purchase payments are allocated.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS..................................................................................... 2
SUMMARY OF CONTRACT EXPENSES.................................................................................. 6
SYNOPSIS...................................................................................................... 9
CONDENSED FINANCIAL INFORMATION............................................................................... 10
NATIONWIDE LIFE INSURANCE COMPANY............................................................................. 11
THE VARIABLE ACCOUNT.......................................................................................... 11
Underlying Mutual Fund Options....................................................................... 11
Underlying Mutual Fund Descriptions.................................................................. 11
Voting Rights........................................................................................ 12
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS............................................. 13
Mortality Risk Charge................................................................................ 13
Expense Risk Charge.................................................................................. 13
Contingent Deferred Sales Charge..................................................................... 13
Elimination of Contingent Deferred Sales Charge...................................................... 14
Contract Maintenance Charge and Administration Charge................................................ 14
Premium Taxes........................................................................................ 15
Expenses of Variable Account......................................................................... 15
Investments of the Variable Account.................................................................. 15
Right to Revoke...................................................................................... 15
Transfers............................................................................................ 15
Assignment........................................................................................... 16
Loan Privilege....................................................................................... 16
Beneficiary Provisions............................................................................... 17
Ownership Provisions................................................................................. 18
Substitution of Securities........................................................................... 18
Contract Owner Inquiries............................................................................. 18
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT....................................................................... 18
Value of an Annuity Unit............................................................................. 19
Assumed Investment Rate.............................................................................. 19
Frequency and Amount of Annuity Payments............................................................. 19
Annuity Commencement Date............................................................................ 19
Change in Annuity Commencement Date.................................................................. 19
Change in Form of Annuity............................................................................ 19
Annuity Payment Options.............................................................................. 19
Death of Contract Owner.............................................................................. 20
Death Benefit at Death of Designated Annuitant Prior to the Annuitization Date....................... 21
Death Benefit After the Annuitization Date........................................................... 21
Required Distribution for Qualified Plans or Tax Sheltered Annuities................................. 21
Required Distributions for Individual Retirement Annuities........................................... 22
Generation-Skipping Transfers........................................................................ 23
GENERAL INFORMATION........................................................................................... 23
Contract Owner Services.............................................................................. 23
Statements and Reports............................................................................... 24
Allocation of Purchase Payments and Contract Value................................................... 24
Value of a Variable Account Accumulation Unit........................................................ 25
Net Investment Factor................................................................................ 25
Valuation of Assets.................................................................................. 25
Determining the Contract Value....................................................................... 25
Surrender (Redemption)............................................................................... 26
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract.................................. 27
Taxes................................................................................................ 27
Non-Qualified Contracts.............................................................................. 28
Diversification...................................................................................... 29
Charge for Tax Provisions............................................................................ 29
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and Tax Sheltered
Annuities .......................................................................................... 29
Advertising.......................................................................................... 30
LEGAL PROCEEDINGS............................................................................................. 31
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...................................................... 31
APPENDIX A.................................................................................................... 32
</TABLE>
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<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1)............... 7 %
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
<TABLE>
<CAPTION>
Number of Completed Years from Contingent Deferred Sales Load
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
<TABLE>
<S> <C>
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE(2).................... $30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges........................ 1.25 %
Administration Charge..................................... 0.05 %
Total Variable Account Annual Expenses.................... 1.30 %
</TABLE>
(1) Starting with the second year after a purchase payment has been made, 10%
of that purchase payment may be withdrawn without imposition of a
Contingent Deferred Sales Charge. This free withdrawal privilege is
non-cumulative and must be used in the year available. Under current
Company administrative practice the Contingent Deferred Sales Charge is
waived for: (1) first year withdrawals of up to 10% of each purchase
payment under Individual Retirement Annuity Contracts (IRAs as defined
under Section 408 of the Internal Revenue Code of 1986), or (2) for
distributions required for the Contract to meet minimum distribution
rules. Withdrawals may be restricted for Contracts issued pursuant to the
terms of a Tax Sheltered Annuity or other Qualified Plan. The Contingent
Deferred Sales Charge is imposed only against purchase payments (see
"Contingent Deferred Sales Charge").
(2) The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and in any year in which the entire Contract Value is
surrendered on the date of Surrender (see "Contract Maintenance Charge
and Administration Charge").
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
<TABLE>
<CAPTION>
Management Total Mutual
Fees Other Expenses Fund Expenses
---------- -------------- -------------
<S> <C> <C> <C>
Fidelity Advisor Annuity Government Investment Fund* 0.44% 0.56% 1.00%
Fidelity Advisor Annuity Growth Opportunities Fund 0.62% 0.36% 0.98%
Fidelity Advisor Annuity High Yield Fund 0.61% 0.39% 1.00%
Fidelity Advisor Annuity Income & Growth Fund 0.52% 0.98% 1.50%
Fidelity Advisor Annuity Money Market Fund 0.19% 0.48% 0.67%
Fidelity Advisor Annuity Overseas Fund 0.77% 0.73% 1.50%
</TABLE>
(3) The Mutual Fund expenses shown above are assessed at the underlying
Mutual Fund level and are not direct charges against Variable Account
assets or reductions from contract values. These underlying Mutual Fund
expenses are taken into consideration in computing each underlying Mutual
Fund's net asset value, which is the share price used to calculate the
unit values of the Variable Account. "Other Expenses" are based on
estimated amounts for the current fiscal year. The investment adviser has
voluntarily agreed to reimburse the operating expenses of each fund above
an annual rate of 1.00%, 1.50%, 1.00%, 1.50%, 1.00% and 1.50% of the
average net assets of the Government Investment Fund, the Growth
Opportunities Fund, the High Yield Fund, the Income & Growth Fund, the
Money Market Fund and the Overseas Fund, respectively.
* The Management Fee and Total Mutual Fund Expenses for the Government
Investment Fund reflect a reimbursement by the Investment Advisor as
described in footnote 3. Without the reimbursement, the Management Fee
would be 0.46% and Total Mutual Fund Expenses would be 1.02%.
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<PAGE> 10
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below. The expense amounts presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing Contracts. Since
the average Contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
------------------------------- ----------------------------- ------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
------ ------ ------ ------- ----- ----- ------ ------- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Advisor Annuity 94 119 154 272 24 74 127 272 * 74 127 272
Government Investment
Fund
Fidelity Advisor Annuity 94 119 153 270 24 74 126 270 * 74 126 270
Growth Opportunities Fund
Fidelity Advisor Annuity 94 119 154 272 24 74 127 272 * 74 127 272
High Yield Fund
Fidelity Advisor Annuity 99 135 180 323 29 90 153 323 * 90 153 323
Income & Growth Fund
Fidelity Advisor Annuity 91 109 137 236 21 64 110 236 * 64 110 236
Money Market Fund
Fidelity Advisor Annuity 99 135 180 323 29 90 153 323 * 90 153 323
Overseas Fund
</TABLE>
*The Contracts sold under this Prospectus do not permit annuitizations during
the first two Contract years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that a Contract
Owner will bear directly or indirectly when investing in the Contract. The
expenses of the Nationwide Fidelity Advisor Variable Account as well as those of
the underlying Mutual Fund options are reflected in the Example. For more and
complete descriptions of the expenses of the Variable Account, see the "Variable
Account Charges, Purchase Payments, and Other Deductions" provision. For more
and complete information regarding expenses paid out of the assets of the
underlying Mutual Fund options, see the underlying Mutual Fund's prospectuses.
Deductions for premium taxes may also apply but are not reflected in the Example
shown above (see "Premium Taxes").
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<PAGE> 11
SYNOPSIS
The Company does not deduct a sales charge from purchase payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct from
the Contract Owner's Contract Value a Contingent Deferred Sales Charge not to
exceed 7% of the lesser of the total of all purchase payments made within 84
months prior to the date of the request to surrender, or the amount surrendered.
This charge, when applicable, is imposed to permit the Company to recover sales
expenses which have been advanced by the Company (see "Contingent Deferred Sales
Charge").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge from the Contract Value of the Contracts. The
Company will also assess an Administration Charge equal to an annual rate of
0.05% of the daily net asset value of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. The Company does not expect to recover from these
charges an amount in excess of accumulated administrative expenses (see
"Contract Maintenance Charge and Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the daily net asset value of the Variable Account for mortality risk
assumed by the Company (see "Mortality Risk Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.45% of the daily net asset value of the Variable Account as compensation for
the Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial first year purchase payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by purchase payments
made on an annualized basis. The cumulative total of all purchase payments under
a Contract may not exceed $1,000,000 without the prior consent of the Company
(see "Allocation of Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $500, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20 (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable 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").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date the Contract
is received, it may be returned to the home office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of purchase payments (see "Right to
Revoke").
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<PAGE> 12
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding through the
period.**
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
---- ------------ ------------ ------------ ------------- ----
<S> <C> <C> <C> <C> <C>
Fidelity Advisor Annuity- 10.000000 10.940014 9.40% 4,900 1995
Government Investment Fund-Q
Fidelity Advisor Annuity- 10.000000 10.940014 9.40% 3,829 1995
Government Investment Fund-NQ
Fidelity Advisor Annuity- 10.000000 11.725059 17.25% 279,699 1995
Growth Opportunities Fund-Q
Fidelity Advisor Annuity- 10.000000 11.725059 17.25% 218,593 1995
Growth Opportunities Fund-NQ
Fidelity Advisor Annuity- 10.000000 11.049326 10.49% 58,503 1995
High Yield Fund-Q
Fidelity Advisor Annuity- 10.000000 11.049326 10.49% 33,243 1995
High Yield Fund-NQ
Fidelity Advisor Annuity- 10.000000 10.681654 6.82% 88,996 1995
Income & Growth Fund-Q
Fidelity Advisor Annuity- 10.000000 10.681654 6.82% 77,596 1995
Income & Growth Fund-NQ
Fidelity Advisor Annuity- 10.000000 10.193620 1.94% 22,571 1995
Money Market Fund-Q*
Fidelity Advisor Annuity- 10.000000 10.193620 1.94% 37,505 1995
Money Market Fund-NQ*
Fidelity Advisor Annuity- 10.000000 10.542532 5.43% 24,981 1995
Overseas Fund-Q
Fidelity Advisor Annuity- 10.000000 10.542532 5.43% 21,202 1995
Overseas Fund-NQ
</TABLE>
*The 7-day yield on the Money Market Fund as of June 30, 1995 was 5.01%.
**The Accumulation Unit Values are for an Accumulation Unit outstanding
through the period from December 1, 1994 to June 30, 1995.
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<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March, 1929. The Company is a member of the "Nationwide
Insurance Enterprise", with its home office at One Nationwide Plaza, Columbus,
Ohio 43216-6609. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
the District of Columbia, Puerto Rico, and in all states.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on July 22, 1994,
pursuant to the provisions of Ohio law. The Company has caused the Variable
Account to be registered with the Securities and Exchange Commission as a Unit
Investment Trust pursuant to the provisions of the Investment Company Act of
1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and
as such, is not chargeable with liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains, or losses of the Company.
Purchase payments are allocated within the Variable Account among one or
more sub-accounts made up of shares in the underlying Mutual Fund option(s)
designated by the Contract Owner. There are two sub-accounts within the Variable
Account for each of the underlying Mutual Fund options which may be designated
by the Contract Owner. One such sub-account contains the underlying Mutual Fund
shares attributable to Accumulation Units under Qualified Contracts and one such
sub-account contains the underlying Mutual Fund shares attributable to
Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different underlying
Mutual Fund options. A summary of investment objectives is contained in the
descriptions of each underlying Mutual Fund below.
FIDELITY ADVISOR ANNUITY FUND
The Fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on July 15, 1994. The fund shares
are purchased by insurance companies to fund benefits under variable life
insurance and annuity contracts. Fidelity Management and Research Company
("FMR") is the Fund's manager.
FIDELITY ADVISOR ANNUITY GOVERNMENT INVESTMENT FUND
Investment Objective: Seeks a high level of current income by investing
primarily in obligations issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities. Under normal circumstances, at
least 65% of the fund's total assets will be invested in government
securities.
-FIDELITY ADVISOR ANNUITY GROWTH OPPORTUNITIES FUND
Investment Objective: Seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
Under normal circumstances, at least 65% of the fund's total assets will
be invested in securities of companies that FMR believes have long-term
growth potential. Growth can be considered either appreciation of the
security itself or growth of the company's earnings or gross sales.
Accordingly, these securities will pay little, if any, income, which will
be entirely incidental to the objective of capital growth.
FIDELITY ADVISOR ANNUITY HIGH YIELD FUND
Investment Objective: Seeks a combination of a high level of income and
the potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed income and zero coupon
securities, such as bonds, debentures and notes, convertible securities
and preferred stocks.
The fund normally will invest at least 65% of its total assets in
high-yielding, income producing debt securities and preferred stocks,
including convertible and zero coupon securities. The fund may invest
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all or a substantial portion of its assets in lower-quality debt
securities (commonly referred to as "junk bonds"). This is an aggressive
approach to income investing.
FIDELITY ADVISOR ANNUITY INCOME & GROWTH FUND
Investment Objective: Seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income
securities with income, growth of income and capital appreciation
potential.
The fund will invest in equity securities, convertible securities,
preferred and common stocks paying any combination of dividends and
capital gains and in fixed-income securities. The fund also may buy
securities that are not paying dividends but offer prospects for growth
of capital or future income. The proportion of the fund's assets invested
in each type of security will vary from time to time in accordance with
FMR's assessment of economic conditions.
FIDELITY ADVISOR ANNUITY MONEY MARKET FUND
Investment Objective: Seeks to obtain as high a level of current income
as is consistent with preserving capital and providing liquidity. The
fund will invest only in high quality U.S. dollar-denominated money
market securities of domestic and foreign issuers.
FIDELITY ADVISOR ANNUITY OVERSEAS FUND
Investment Objective: Seeks growth of capital primarily through
investments in foreign securities. The fund defines foreign securities as
securities of issuers whose principal activities are outside the United
States. Normally, at least 65% of the fund's total assets will be
invested in securities of issuers from at least three different countries
outside of North America (the United States, Canada, Mexico and Central
America).
More detailed information may be found in the current prospectus for each
underlying Mutual Fund offered. Such a prospectus for the underlying Mutual Fund
being considered must accompany this Prospectus and should be read in
conjunction herewith. A copy of each prospectus may be obtained without charge
from Nationwide Life Insurance Company by calling 1-800-573-5775, Voice Response
(available 24 hours) 1-800-573-2447, TDD 1-800-238-3035 or writing P.O. Box
182610, Columbus, Ohio 43218-2610.
The underlying Mutual Fund options may also be available to other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect the
Contract Owners and variable annuity payees, including withdrawal of the
Variable Account from participation in the underlying Mutual Fund or Mutual
Funds which are involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to purchase
payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the Investment Company
Act of 1940 or any Regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares held in the Variable Account which is attributable
to each Contract is determined by dividing the reserve for such Contract by the
net asset value of one share.
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The number of shares which a person has the right to vote will be
determined as of the date chosen by the Company not more than 90 days prior to
the meeting of the underlying Mutual Fund. Voting instructions will be solicited
by written communication at least 15 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having the voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions with respect to the
proportion of the underlying Mutual Fund shares held in the Variable Account
corresponding to his or her interest in the Variable Account.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments
will not be affected by the death rates of persons receiving such payments or of
the general population by virtue of annuity rates incorporated in the Contract
which cannot be changed.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis, and
is equal to an annual rate of 0.80% of the daily net asset value of the Variable
Account. The Company expects to generate a profit through assessing this charge.
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
deducts an Expense Risk Charge from the Variable Account. This amount is
computed on a daily basis, and is equal to an annual rate of 0.45% of the daily
net asset value of the Variable Account. The Company expects to generate a
profit through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the purchase payments for
these Contracts. However, the Contingent Deferred Sales Charge, referred to
below, when it is applicable, will be used to cover expenses relating to the
sale of the Contracts, including commissions paid to sales personnel, the costs
of preparation of sales literature and other promotional activity. The Company
attempts to recover its distribution costs relating to the sale of the Contracts
from the Contingent Deferred Sales Charge. Any shortfall will be made up from
the General Account of the Company, which may indirectly include portions of the
Mortality and Expense Risk Charges, since the Company expects to generate a
profit from these charges. The maximum amount that may be paid to a selling
agent on the sale of these Contracts is 5.25% of purchase payments.
If part or all of the Contract Value is surrendered, a Contingent
Deferred Sales Charge will be made by the Company. For purposes of the
Contingent Deferred Sales Charge, surrenders under a Contract come first from
the purchase payments which have been on deposit under the Contract for the
longest time period. (For tax purposes, a surrender is treated as a withdrawal
of earnings first.) This charge will apply in the amounts set forth below to
purchase payments within the time periods set forth. In no event will any
Contingent Deferred Sales Charge be made against any values which have been held
under the Contract for at least 84 months, or to commencement of an annuity
payout under Contracts which have been in effect for at least two years or upon
the death of the Designated Annuitant.
The Contingent Deferred Sales Charge applies to purchase payments as
follows:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
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Starting with the second year after a purchase payment has been made
under the Contract, 10% of that purchase payment may be withdrawn each year
without imposition of the Contingent Deferred Sales Charge. This free withdrawal
privilege is non-cumulative and will not exceed 10% of the purchase payment in
any year. Under current Company administrative practice the Contingent Deferred
Sales Charge is waived for either: (1) first year withdrawals of up to 10% of
each purchase payment under Individual Retirement Annuity contracts (IRAs as
defined under Section 408 of the Internal Revenue Code of 1986), or (2) for
distributions required for the Contract to meet minimum distribution rules.
Withdrawals may be restricted for Contracts issued pursuant to the terms of a
Tax Sheltered Annuity or other Qualified Plan. No sales charges are deducted on
redemption proceeds that are transferred to the Fixed Account option of this
annuity.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For Tax Sheltered Annuity Contracts, Qualified Contracts sold in
conjunction with section 401 of the Internal Revenue Code of 1986, and SEP-IRA
Contracts, the Company will waive the Contingent Deferred Sales Charge when:
A. the Plan Participant experiences a case of hardship (as provided
in Code Section 403(b) and as defined for purposes of Code Section
401(k));
B. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Plan Participant attains age 59-1/2 and has participated in
the Contract for at least 5 years, as determined from the Contract
Anniversary date;
D. the Plan Participant has participated in the Contract for at least
15 years as determined from the Contract Anniversary date;
E. the Plan Participant dies; or
F. the Contract is annuitized after 2 years from the inception of the
Contract.
For Non-Qualified Contracts and IRA Contracts other than SEP-IRA
Contracts, the Company will waive the Contingent Deferred Sales Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this Prospectus is exchanged for another
Contract issued by the Company, of the type and class which the Company
determined is eligible for such exchange, the Company will waive the Contingent
Deferred Sales Charge on the first Contract.
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by state law.
CONTRACT MAINTENANCE CHARGE AND ADMINISTRATION CHARGE
Each year on the Contract Anniversary, the Company deducts an annual
Contract Maintenance Charge from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. The Contract Maintenance Charge is $30 for Non-Qualified Plans and
Individual Retirement Annuities. For Qualified Contracts or Tax Sheltered
Annuities, the Contract Maintenance Charge is $12 or $0 per contract. The charge
is determined based on Company underwriting guidelines. These guidelines are
applied on a nondiscriminatory basis. The Contract Maintenance Charge will be
allocated between the Fixed Account and Variable Account in the same percentages
as the purchase payment investment allocations are to the Fixed Account and
Variable Account. The Company also assesses an Administration Charge equal on an
annual basis to 0.05% of the daily net asset value of the Variable Account. The
deduction of the Administration Charge is made from each sub-account in the same
proportion that the Contract Value in each sub-account bears to the total
Contract Value in the Variable Account. These charges are designed only to
reimburse the Company for administrative expenses and the Company will monitor
these charges to ensure that they do not exceed annual administration expenses.
In any Contract Year when a Contract is surrendered for its full value on other
than the Contract Anniversary, the Contract Maintenance Charge will be deducted
at the time of such surrender. The amount of the Contract Maintenance Charge may
not be increased by the Company. In no event will reduction or elimination of
the Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
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PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon purchase
payments received by the Company. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. This range is subject to change. The method used to recoup premium
tax expense will be determined by the Company at its sole discretion and in
compliance with applicable state law. The Company currently deducts such charges
from a Contract Owner's Contract Value either: (1) at the time the Contract is
surrendered, (2) at annuitization, or (3) in those states which require, at the
time purchase payments are made to the Contract.
EXPENSES OF VARIABLE ACCOUNT
Expenses of the Variable Account include: (1) administration expenses
relating to the issuance and maintenance of the Contracts; (2) expenses relating
to the mortality risk associated with the guarantee of annuity purchase rates at
issue for the life of the Contracts and the payment of minimum death benefits
regardless of the investment experience of the Variable Account; and (3)
expenses associated with the risk assumed by the Company in guaranteeing that
the Contract Maintenance Charge and administrative fee will not be increased
regardless of the actual administrative expenses of the company. Deduction from
and expenses paid out of the assets of the underlying Mutual Funds are described
in each of the underlying Mutual Fund's prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his participation in the Variable Account allocated
among one or more of the sub-accounts which consist of shares in the underlying
Mutual Fund options. Shares of the respective underlying Mutual Fund options
specified by the Contract Owner are purchased at net asset value for the
respective sub-account(s) and converted into Accumulation Units. At the time of
Application, the Contract Owner designates the underlying Mutual Fund options to
which he or she desires to have purchase payments allocated. Such election is
subject to any minimum purchase payment limitations which may be imposed by the
underlying Mutual Funds designated. The Contract Owner may change the election
as to allocation of purchase payments or may elect to exchange amounts among the
sub-account options pursuant to such terms and conditions applicable to such
transactions as may be imposed by each of the underlying Mutual Fund options, in
addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the date
of Application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of purchase
payments. In order to revoke the Contract, it must be mailed or delivered to the
home office of the Company at the mailing address shown on page 1 of this
Prospectus. Mailing or delivery must occur on or before 10 days after receipt of
the Contract for revocation to be effective. In order to revoke the Contract, if
it has not been received, written notice must be mailed or delivered to the home
office of the Company at the mailing address shown on page 1 of this Prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each sub-account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Owner may request a transfer of up to 100% of the Contract Value from
the Variable Account to the Fixed Account. No penalty shall be assessed with
respect to any such transfer. All amounts transferred to the Fixed Account must
remain on deposit in the Fixed Account until the expiration of the current
Interest Rate Guarantee Period. The Interest Rate Guarantee Period expires on
the final day of a calendar quarter during which the one year anniversary of the
allocation to the Fixed Account occurs. The Owner's value in each sub-account
will be determined as of the date the transfer request is received in the home
office in good order. The Company reserves the right restrict transfers from the
Variable Account to the Fixed Account to 25% of the Contract Value for any 12
month period.
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The Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred from the Fixed Account to the
Variable Account will be determined by the Company, at its sole discretion, but
will not be less than 10% of the total value of the portion of the Fixed Account
that is maturing and will be declared upon the expiration date of the then
current Interest Rate Guarantee Period. Should the Company exercise this right,
the specific percentage will be declared upon the expiration date of the
guaranteed period. Transfers from the Fixed Account must be made within 45 days
after the expiration date of the guarantee period. Owners who have entered into
a Dollar Cost Averaging agreement with the Company (see "Dollar Cost Averaging")
may transfer from the Fixed Account to the Variable Account under the terms of
that agreement.
Transfers from the Fixed Account may not be made prior to the first
Contract Anniversary. Transfers must also be made prior to the Annuitization
Date.
Transfers among the sub-accounts may be made either in writing or, in
states allowing such transfers, by telephone. This telephone exchange privilege
is made available to Contract Owners automatically without their having to elect
this privilege. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include
any or all of the following, or such other procedures as the Company may, from
time to time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Contract Owner and any agent of record, at the last address
of record. Although failure to follow reasonable procedures may result in the
Company's liability for any losses due to unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. Any losses
incurred pursuant to actions taken by the Company in reliance on telephone
instructions reasonably believed to be genuine shall be borne by the Contract
Owner. The Company may withdraw the telephone exchange privilege upon 30 days'
written notice to the Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Designated Annuitant. Such assignment will take
effect upon receipt by the Company of a written notice thereof executed by the
Contract Owner. The Company assumes no responsibility for the validity or
sufficiency of any assignment. The Company shall not be liable as to any payment
or other settlement made by the Company before receipt of the assignment.
Qualified Contracts may not be assigned, pledged or otherwise transferred except
under such conditions as may be allowed by applicable law.
If this Contract is a Non-Qualified Contract, any portion of Contract
Value attributable to purchase payments shall be treated as a distribution and
shall be included in gross income to the extent that the cash value exceeds the
investment in the Contract for the taxable year in which assigned or pledged. In
addition, any Contract Values assigned may, under certain conditions, be subject
to a tax penalty equal to 10% of the amount which is included in gross income.
Individual Retirement Accounts, Individual Retirement Annuities and Tax
Sheltered Annuities are not eligible for assignment.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity Contract may receive a loan from the Contract Value subject to
the terms of the Contract, the Plan, and the Internal Revenue Code ("Code"),
which impose restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period. Additional loans are subject to the
contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated above.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a
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loan to 50% of the Contract Value subject to the acceptance by the Contract
Owner of the Company's loan agreement. Where permitted, the Company may require
other named collateral where the loan from a Contract exceeds 50% of the
Contract Value.
All loans are made from a collateral fixed account. An amount equal to
the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in each
option until the required balance is reached or all such variable units are
exhausted. The remaining required collateral will next be transferred from the
Fixed Account. No withdrawal charges are deducted at the time of the loan, or on
the transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the collateral
fixed account will never be less than 3.0%. Specific loan terms are disclosed at
the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently
than quarterly, within five years. Loans used to purchase the principal
residence of the Contract Owner must be repaid within 15 years. During the loan
term, the outstanding balance of the loan will continue to earn interest at an
annual rate as specified in the Loan Agreement. Loan repayments will consist of
principal and interest in amounts set forth in the Loan Agreement. Loan
repayments will be allocated between the Fixed and Variable Accounts in the same
proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in the Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the
employer's plan.
Loan repayments must be identified as such or else they will be treated
as purchase payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment of loans. The Company also reserves the right to
assess a loan processing fee. Individual Retirement Annuities , SEP-IRA accounts
and Non-Qualified Contracts are not eligible for loans.
BENEFICIARY PROVISIONS
Subject to the terms of any existing assignment, the Contract Owner may
change the Beneficiary from time to time during the lifetime of the Designated
Annuitant or Annuitant, by written notice to the Company. The change will, upon
receipt by the Company at its home office, take effect as of the time the
written notice was signed, whether or not the Designated Annuitant or the
Annuitant is living at the time of recording, but without further liability as
to any payment or settlement made by the Company before receipt of such change.
Unless otherwise provided in the Contract or in an effective change of
Beneficiary designation, all rights and interests of any Beneficiary
predeceasing the Designated Annuitant or the Annuitant shall vest in the
Contingent Beneficiary if designated. If a Contingent Beneficiary is not
designated or predeceases the Beneficiary, all rights and interests of the
Beneficiary will vest in the Contract Owner or the Contract Owner's estate.
The Beneficiary will be the designated person or persons who survive the
Designated Annuitant, and if more than one survive, they will share equally
unless otherwise specified in the Beneficiary designation. In the event that the
Beneficiary dies before the Designated Annuitant or Annuitant, the Contingent
Beneficiary will become the Beneficiary.
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OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS OWNER,
THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. The Annuitant may become
the Contract Owner on and after the Annuitization Date subject to the terms of
the Annuity Payment Option elected. If the Owner dies prior to the Annuitization
Date, Contract ownership will be determined in accordance with the "Death of
Contract Owner" provision. If the Designated Annuitant does not survive the
Contract Owner or if the Designated Annuitant and the Owner are the same person,
Contract ownership will be determined in accordance with the "Death Benefit At
Death Of Designated Annuitant Prior To The Annuitization Date" provision. After
the Annuitization Date ownership will be based on the Annuity Payment Option
selected. Ownership rights under this Contract may be restricted under the
provisions of the retirement or deferred compensation plan under which this
Contract may be issued.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner at any time, but such change may be subject to state and federal
gift taxes and may be treated as an assignment of the Contract for income tax
purposes. Such an assignment would result in a deemed distribution of the value
of the Contract. Any new choice of Contract Owner will automatically revoke any
prior choice of Contract Owner. Any request for change must be: (1) made in
writing; and (2) received by the Company at its home office. A request for
change of Contract Owner must be a "Proper Written Application" and may include
a signature guarantee as specified in the "Surrender" section. The change will
become effective as of the date the written request is signed. A new choice of
Contract Owner will not apply to any payment made or action taken by the Company
prior to the time it was received.
A change in the Designated Annuitant will have the following conditions:
(1) request for such change must be made by the Contract Owner; (2) request must
be made in writing on a form acceptable to the Company; (3) request must be
signed by the Contract Owner; and (4) such change is subject to underwriting and
approval by the Company.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options described in this
Prospectus should no longer be available for investment by the Variable Account
or if, in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate 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. No
substitution of securities in the Variable Account may take place without prior
approval of the Securities and Exchange Commission, and under such requirements
as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 182610, Columbus, Ohio 43218-2610, or calling
1-800-573-5775, Voice Response (available 24 hours) 1-800-573-2447, TDD
1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected in accordance with the Annuity Table in
the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
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VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were available for purchase. The value
of an Annuity Unit for a sub-account for any subsequent Valuation Period is
determined by multiplying the Annuity Unit Value for the immediately preceding
Valuation Period by the Net Investment Factor for the Valuation Period for which
the Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (see "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$500, the Company shall have the right to pay such amount in one lump sum in
lieu of the payments otherwise provided for. In addition, if the payments
provided for would be or become less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
Application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. No further changes in the Designated Annuitant will be permitted under
the Contract. The amount of the Death Benefit will be limited to the Contract
Value if the Annuity Commencement Date is postponed beyond the first day of the
calendar month after the Designated Annuitant's 75th birthday or such other
Annuity Commencement Date provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE THE
THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second person
and continuing thereafter during the lifetime of the survivor. AS IS THE
CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
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Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period to
the Beneficiary or the Beneficiary may, at any time, elect to have
the present value of the guaranteed number of annuity payments
remaining paid in a lump sum as specified in section (2) below.
(2) If a Beneficiary is the payee, the present value, computed as of
the date on which notice of death is received by the Company at
its home office, of the guaranteed number of annuity payments
remaining after receipt of such notice and to which the deceased
would have been entitled had he or she not died, commuted at the
Assumed Investment Rate effective in determining the Annuity
Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states.
The Owner may request an alternative non-guaranteed option by giving notice in
writing prior to annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity
Payment Option, the Contract Value will continue to accumulate. Qualified Plan
Contracts, Individual Retirement Annuities or Tax Sheltered Annuities are
subject to the minimum distribution requirements set forth in the Plan,
Contract, or Internal Revenue Code.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts issued on or after January 19, 1985, in the
event the Contract Owner dies, the following rules will apply:
(1) If the Contract Owner dies prior to the Annuitization Date, the
entire interest in the contract, less any applicable deductions
(which may include a Contingent Deferred Sales Charge), must be
distributed within 5 years. Such distribution will be paid to the
Designated Annuitant unless the Owner has named a Contingent Owner
or his or her estate to receive the distribution. In the
alternative, the Designated Annuitant or Contingent Owner (where
one is named) may elect to receive distribution in the form of a
life annuity or an annuity for a period certain not exceeding the
Designated Annuitant's (Contingent Owner's) life expectancy and
such annuity must begin within one year following the date of the
Contract Owner's death. If no Contingent Owner, Beneficiary or
Contingent Beneficiary is named (or if the Contingent Owner,
Beneficiary or Contingent Beneficiary predeceases the Contract
Owner), then the Contract Owner's estate becomes the Contract
Owner. In the event the Designated Annuitant or Contingent Owner
is the Contract Owner's spouse, the Contract may be continued by
such Designated Annuitant or Contingent Owner, treating the spouse
as the Contract Owner. In the event the Designated Annuitant does
not survive the Contract Owner, or if the Designated Annuitant and
the Contract Owner are the same person, a distribution will be
made in accordance with the "Death Benefit At Death of Designated
Annuitant Prior To The Annuitization Date" below provided,
however, that all distributions are made as a result of the death
of Contract Owner shall be made within the time limits set forth
in this paragraph. If the Contract Owner and the Designated
Annuitant are not the same, no Death Benefit is payable upon the
death of the Contract Owner, but distribution must be made as
discussed above.
(2) In the event the Contract Owner/Annuitant dies on or after the
Annuitization Date, distribution, if any, must be made to the
Beneficiary at least as rapidly as under the method of
distribution being used as of the date of the Contract
Owner/Annuitant's death.
B. If the Contract Owner is not a natural person, the death of the Annuitant
(or a change of the Annuitant) will be treated like a death of the
Contract Owner and will result in a distribution pursuant to Section (1),
regardless of whether a Contingent Annuitant has also been named. The
distribution will take the form of either:
(a) the Death Benefit described in the "Death Benefit at Death of
Designated Annuitant Prior To Annuitization Date" provision (if
the Annuitant has died and there is no Contingent Annuitant), or,
in all cases,
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(b) the benefit described in Section (1) of this provision, except
that in the event of a change of Annuitant, the benefit will be
paid to the Contract Owner if the Annuitant is living, or as a
Death Benefit to the Beneficiary upon the death of the Annuitant
(and the Contingent Annuitant, if any) prior to the expiration of
the period described in Section (1) of this provision.
DEATH BENEFIT AT DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
The Death Benefit is payable to the Beneficiary unless, the Owner has
named a Contingent Designated Annuitant. In such case, the Death Benefit is
payable to the Beneficiary upon the death of the last survivor of the Designated
Annuitant and Contingent Designated Annuitant. The value of the Death Benefit
will be determined as of the Valuation Date coincident with or next following
the date the Company receives both (1) due proof of death and (2) an election
for (a) a single sum payment or (b) Annuity Payment Option.
Contracts issued in connection with Qualified Plans, Individual
Retirement Annuities, or Tax Sheltered Annuities will be subject to specific
rules, set forth in the Plan, Contract, or Internal Revenue Code concerning
distributions upon the death of the Owner or Designated Annuitant (see the
"Required Distribution For Qualified Plans or Tax Sheltered Annuities"
provision).
If a single sum settlement is requested, payment will be made in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is desired, election may be made by
the Beneficiary during the 90-day period commencing with the date written notice
is received by the Company. If no election has been made by the end of such
90-day period, the Death Benefit will be paid to the Beneficiary in a single
sum. The amount of the Death Benefit will be the greater of (i) the sum of all
purchase payments, less any amounts surrendered, or (ii) the Contract Value.
If the Contract Owner has (1) requested an Annuity Commencement Date
later than the first day of the calendar month after the Designated Annuitant's
75th birthday; (2) the Company has approved the request; and (3) the Designated
Annuitant dies after his or her 75th birthday; the dollar amount of the Death
Benefit will be equal to the Contract Value.
If an Owner/Annuitant has died prior to the first day of the calendar
month following his or her 75th birthday, and
1. the Contract Value is less than the Death Benefit as defined in
this provision, and
2. the Beneficiary is entitled to continue the Contract indefinitely
(in the case of a beneficiary-spouse) or for any period of time
consistent with Section 72 of the Internal Revenue Code (in the
case of non-spousal beneficiaries), then the following option will
be provided:
At the direction of the Beneficiary, and in lieu of distribution
of the Death Benefit, the Company will credit the Contract with the
difference between the Contract Value and the Death Benefit. Any such
credit shall be made among the various sub-accounts and the Fixed Account
in the same proportional allocation existing at the time of the
Owner's/Annuitant's death.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Internal Revenue Code and regulations thereunder, as
applicable, and will be paid, notwithstanding anything else contained herein, to
the Owner/Annuitant under the Annuity Payments Option selected, over a period
not exceeding:
A. the life of the Owner/Annuitant or the lives of the
Owner/Annuitant and the Owner/Annuitant's designated Beneficiary;
or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary provided that, for
Tax Sheltered Annuity Contracts, no distributions will be required
from this Contract if distributions
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otherwise required from this Contract are being withdrawn from
another Tax Sheltered Annuity Contract of the Annuitant.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as those terms are used in
Code Section 401(a)(9)(c)), the Required Beginning Date will be the later of the
dates determined under the preceding sentence or April 1 of the calendar year
following the calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the year in which the fifth anniversary of his or
her death occurs unless:
(a) In the case of a Tax Sheltered Annuity the Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his
or her benefit; or
(ii) receive distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
beneficiary elects to receive a distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse may treat a Tax Sheltered Annuity as
his or her own to the extent permitted by law.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
Designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70-1/2 provided that, for Individual Retirement Annuity Contracts,
no distributions will be required from this Contract if distributions otherwise
required from this Contract are being withdrawn from another Individual
Retirement Annuity Contract of the Annuitant. Distribution may be accepted in a
lump sum or in nearly equal payments over: (a) the Owner's life or the lives of
the Owner and his or her spouse or Designated Beneficiary, or (b) a period not
extending beyond the Owner's life expectancy or the life expectancy of the Owner
and the Owner's spouse or designated Beneficiary.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the year in which the fifth anniversary of his or her death
occurs unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and such
spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse and
such beneficiary elects to receive a distribution of the account in
nearly equal payments over his or her life (or a period not
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exceeding his or her life expectancy) commencing not later than December
31 of the year following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse may treat the Individual Retirement
Annuity as his or her own, in the same manner as is described in Section (a)(i)
of this provision.
If the amounts distributed do not satisfy the distribution rules
mentioned above, a penalty tax of 50% is levied on that portion of the minimum
distribution amount that should have been distributed for that year.
A pro-rata portion of all distributions will be included in the gross
income of the person receiving the distribution and taxed at ordinary income tax
rates. The portion of the distribution which is taxable is based on the ratio
between the amount by which non-deductible contributions exceed prior
non-taxable distributions and total account balances at the time of the
distribution. The Owner of an Individual Retirement Annuity must annually report
the amount of non-deductible contributions, the amount of any distribution, the
amount by which non-deductible contributions for all years exceed non-taxable
distributions for all years, and the total balance of all Individual Retirement
Accounts and Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum distribution from a Qualified Plan. If the
Owner dies prior to the time distribution of his or her interest in the annuity
is completed, the balance will also be included in his or her gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the
Internal Revenue Code, and the amount of the tax on the generation-skipping
transfer resulting from such direct skip. If applicable, such payment will be
reduced by any tax the Company is required to pay by Section 2603 of the
Internal Revenue Code.
A direct skip may occur when property is transferred to, or a Death
Benefit is paid to, an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday or any other day
when the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the last business day before that day. An Asset Rebalancing request
must be in writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Internal Revenue Code may have superseding plan restrictions with
regard to the frequency of fund exchanges and underlying Mutual Fund options.
The Contract Owner may want to contact a financial adviser in order to discuss a
specific contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owners; however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer amounts from the Money Market sub-account or the Fixed
Account to any other sub-account within the Variable Account on a monthly basis.
This service is intended to allow the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time. The Company makes no guarantees that Dollar Cost
Averaging, will result in a profit or protect against loss in a declining
market. To qualify for Dollar Cost Averaging, there must be a minimum total
Contract Value of $15,000. Transfers for purposes of Dollar Cost Averaging can
only be made from the Money Market sub-account or the Fixed Account. The minimum
monthly Dollar Cost Averaging transfer is $100. In addition, Dollar Cost
Averaging monthly transfers from the Fixed Account must be equal to or less than
1/30th of the Fixed Account value when the Dollar Cost Averaging program is
requested. Transfers out of the Fixed Account, other than for Dollar Cost
Averaging, may be subject to certain additional restrictions (see "Transfers").
A written election of this service, on a form provided by the Company, must be
completed by the Contract Owner in order to begin transfers.
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Once elected, transfers from the Money Market sub-account or the Fixed Account
will be processed monthly until either the value in the Money Market sub-account
or the Fixed Account is completely depleted or the Contract Owner instructs the
Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners however, any such
discontinuation will not affect Dollar Cost Averaging programs which have
already commenced. The Company also reserves the right to assess a processing
fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all sub-accounts in
which the Contract Owner has an interest, and the Fixed Account. A Contingent
Deferred Sales Charge may also apply to Systematic Withdrawals in accordance
with the considerations set forth in the "Contingent Deferred Sales Charge"
section. Each Systematic Withdrawal is subject to federal income taxes on the
taxable portion. In addition, a 10% federal penalty tax may be assessed on
Systematic Withdrawals if the Contract Owner is under age 59-1/2. If directed by
the Contract Owner, the Company will withhold federal income taxes from each
Systematic Withdrawal. The Contract Owner may discontinue Systematic Withdrawals
at any time by notifying the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners however, any such
discontinuation will not affect any Systematic Withdrawal programs which have
already commenced. The Company also reserves the right to assess a processing
fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional purchase payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner should review the information in these
statements carefully. All errors or corrections must be reported to the Company
immediately to assure proper crediting to the Owner's Contract. The Company will
assume all transactions are accurate unless the Contract Owner notifies the
Company otherwise within 30 days after receipt of the statement. The Company
will also send to Contract Owners each year a semi-annual and annual report
containing financial statements for the Variable Account, as of June 30 and
December 31, respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase payments are allocated to one or more sub-accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year purchase payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by purchase payments
made on an annualized basis. Purchase payments, if any, after the first Contract
Year must be at least $10 each. The Company, however, reserves the right to
lower this $10 purchase payment minimum for certain employer sponsored programs.
The Contract Owner may increase or decrease purchase payments or change the
frequency of payment. The Contract Owner is not obligated to continue purchase
payments in the amount or at the frequency elected. There are no penalties for
failure to continue purchase payments.
The cumulative total of all purchase payments under Contracts issued on
the life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
THE PURCHASER IS CAUTIONED THAT THE INVESTMENT RETURN ON SMALL INITIAL
AND SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE
COMPANY.
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The initial purchase payment allocated to designated sub-accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase, if the Application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and the
Company may retain the purchase payment for up to 5 business days while
attempting to complete an incomplete Application. If the Application cannot be
made complete within 5 days, the prospective purchaser will be informed of the
reasons for the delay and the purchase payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the purchase payment until the Application is made complete. When the
Application is complete, the purchase payment will be priced within two business
days.
Purchase payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each sub-account
was arbitrarily set initially at $10 when underlying Mutual Fund shares in that
sub-account were made available for purchase. The value for any subsequent
Valuation Period is determined by multiplying the Accumulation Unit value for
each sub-account for the immediately preceding Valuation Period by the Net
Investment Factor for the sub-account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation Period
to Valuation Period. The number of Accumulation Units will not change as a
result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is:
(1) the net asset value per share of the underlying Mutual Fund held
in the sub-account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the sub-account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net asset value per share of the underlying Mutual Fund held in
the sub-Account determined at the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account. Such
factor is equal to an annual rate of 1.30% of the daily net asset value
of the Variable Account.
For underlying Mutual Fund options that credit dividends on a daily basis
and pay such dividends once a month (the Fidelity Adivsor Annuity Money Market
Fund), the Net Investment Factor allows for the monthly reinvestment of these
daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge and Administration
Charge, and any charge or credit for tax reserves (see "Charge For Tax
Provisions").
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each sub-account
are determined by dividing the net amount allocated to the sub-account by the
Accumulation Unit Value for the sub-account for the Valuation Period during
which the purchase payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an
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appropriate amount from the Fixed Account will be deducted in the same
proportion that the Contract Owner's interest in the Variable Account and the
Fixed Account bears to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper Written Application" means that the surrender must be
requested in writing by the Contract Owner, satisfy all good order requirements,
and the Company may require that the signature(s) be guaranteed by a member firm
of the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a Commercial Bank or a Savings and Loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases (for example, requests
by a corporation, partnership, agent, fiduciary, or surviving joint owner), the
Company will require additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all sub-accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each sub-account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the sub-accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's home office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
purchase payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
Certain redemption restrictions also apply to Contracts issued under the
Texas Optional Retirement Program or the Louisiana Optional Retirement Plan.
With respect to Contracts issued under the Texas Optional Retirement Program,
the Texas Attorney General has ruled that withdrawal benefits are available only
in the event of a participant's death, retirement, termination of employment due
to total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable Contingent Deferred Sales Charge. The
Company issues this Contract to participants in the Texas Optional Retirement
Program in reliance upon, and in compliance with, Rule 6c-7 of the Investment
Company Act of 1940 and to participants in the Louisiana Optional Retirement
Plan in reliance upon, and in compliance with, an exemptive order the Company
obtained from the Securities and Exchange Commission on August 22, 1990.
SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
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A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Internal Revenue Code, may be
executed only:
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case
of hardship may not include any income attributable to salary
reduction contributions.
B. The surrender limitations described in Section A. above also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event of
a ten-day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Internal Revenue
Code, upon proper direction by the Contract Owner. The foregoing is the
Company's understanding of the withdrawal restrictions which are currently
applicable under Code Section 401(k)(2)(B), Code Section 403(b)(11) and Revenue
Ruling 90-24. Such restrictions are subject to legislative change and/or
reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the
plan terms and Internal Revenue Code tax provisions when the contract is issued
to fund a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Internal Revenue Code (the "Code") governs taxation of
annuities in general. That section sets forth different rules for annuities
purchased by (1) Qualified Plans (corporate pension and profit sharing plans,
simplified employee pension-individual retirement account plans, and retirement
plans for self-employed individuals), Individual Retirement Annuities,
Individual Retirement Accounts and Tax Sheltered Annuities and (2) annuities
which are not purchased by such plans. (For discussion of tax treatment of
non-qualified contracts, see below.) Each type of annuity is discussed
separately below.
The tax treatment of Qualified Plans, Individual Retirement Annuities,
Tax Sheltered Annuities, and annuities purchased by such plans is controlled by
the Internal Revenue Code. You should consult your financial consultant or tax
adviser to discuss in detail your particular tax situation and the use of the
Contracts.
Generally the amount of any payment of items of interest to a nonresident
alien of the United States shall be subject to withholding of a tax equal to
thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A
payment may not be subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the recipient's
conduct of a trade or business in the United States and such payment is
includable in the recipient's gross income.
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NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Designated Annuitant dies prior to excluding
from income the entire investment in the Contract, the Designated Annuitant's
final tax return may reflect a deduction for the balance of the investment in
the Contract.
Distributions made from the Contract prior to the Annuity Commencement
Date are taxable to the Contract Owner to the extent that the cash value of the
Contract exceeds the Contract Owner's investment at the time of the
distribution. Distributions, for this purpose, include partial surrenders,
dividends, loans, any portion of the Contract that is assigned or pledged, or
any portion of the Contract transferred by gift. For these purposes, a transfer
by gift may occur upon annuitization if the Contract Owner and the Designated
Annuitant are not the same individual. In determining the taxable amount of a
distribution, all annuity contracts issued by the same company to the same
contract owner during any calendar year, will be treated as one annuity
contract. Distributions prior to the Annuity Commencement Date with respect to
that portion of the Contract invested prior to August 14, 1982, are treated
first as a recovery of the investment in the Contract as of that date. A
distribution in excess of the amount of the investment in the Contract as of
August 14, 1982, will be treated as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for Qualified Contracts, Individual Retirement Annuities and Tax Sheltered
Annuities; immediate annuities; and certain Contracts owned for the benefit of
an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase.
Internal Revenue Code Section 72 also provides for a penalty, equal to
10% of any distribution which is includable in gross income, if such
distribution is made prior to attaining age 59-1/2, the death or disability of
the Contract Owner. The penalty does not apply if the distribution is one of a
series of substantially equal periodic payments made over the life or life
expectancy (or joint lives or life expectancies) of the Designated Annuitant
(and the Designated Annuitant's Beneficiary), or is made from an immediate
annuity, or is allocable to an investment in the Contract before August 14,
1982. A Contract Owner wishing to begin taking distributions to which the 10%
tax penalty does not apply should forward a written request to the Company. Upon
receipt of a written request from the Contract Owner, the Company will inform
the Contract Owner of the procedures pursuant to Company Policy and subject to
limitations of the Contract including but not limited to first year withdrawals.
If the Designated Annuitant selects an annuity for life or life expectancy and
changes the method of payment before the expiration of 5 years and the
attainment of age 59-1/2, the early withdrawal penalty will apply. The penalty
will be equal to that which would have been imposed had no exception applied
from the outset, and the Designated Annuitant will also pay interest on the
amount of the penalty from the date it would have originally applied until it is
actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year from the death of
the Contract Owner. If the Contract Owner's Beneficiary is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. In the event the Contract
Owner dies on or after the Annuitization Date and before the entire interest has
been distributed, the remaining portion must be distributed at least as rapidly
as under the method of distribution being used as of the date of the Contract
Owner's death. If the Contract Owner is not an individual, the death of the
Annuitant (or a change in the Annuitant) will result in a distribution pursuant
to these rules, regardless of whether a Contingent Annuitant has been named (see
"Required Distribution For Qualified Plans or Tax Sheltered Annuities").
The Company is required to withhold tax from certain distributions to the
extent that such distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such distribution, but may be subject to penalties in the event insufficient
federal income tax is paid, through withholding estimated payments.
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Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Internal Revenue Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless the
failure to satisfy the regulations was inadvertent, the failure is corrected,
and the Owner or the Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the Owner if the
income, for the period the contract was not diversified, had been received by
the Owner. If the failure to diversify is not corrected in this manner, the
Owner of an annuity contract will be deemed the Owner of the underlying
securities and will be taxed on the earnings of his or her account. The Company
believes, under its interpretation of the Code and regulations thereunder, that
the investments underlying this Contract will meet these diversification
standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of purchase payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Internal Revenue Code of 1986, as amended, permits the rollover of
most distributions from Qualified Plans to other Qualified Plans, Individual
Retirement Accounts, or Individual Retirement Annuities. Most distributions from
Tax Sheltered Annuities may be rolled into another Tax Sheltered Annuity, an
Individual Retirement Account, or an Individual Retirement Annuity.
Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary, or c) for a
specified period of ten years or more, or
2. a required minimum distribution.
Any distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the distribution is transferred directly
to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater of
the cash value of the Contract or the sum of all purchase payments (less
surrenders) it is possible the Internal Revenue Service could determine that the
Individual Retirement Account and Individual Retirement Annuity did not qualify
for the desired tax treatment.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of the Employee Retirement Income Security Act (ERISA). It is the
responsibility of the plan and its fiduciaries to determine and satisfy section
404(c) requirements.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Fidelity
Advisor Annuity Money Market Fund sub-account. "Yield" is a measure of the net
dividend and interest income earned over a specific seven-day period (which
period will be stated in the advertisement) expressed as a percentage of the
offering price of the sub-account's units. Yield is an annualized figure, which
means that it is assumed that the sub-account generates the same level of net
income over a 52-week period. The "effective yield" is calculated similarly but
includes
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the effect of assumed compounding, calculated under rules prescribed by the
Securities and Exchange Commission. The effective yield will be slightly higher
than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
sub-account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual fund options with similar or
different objectives, or the investment industry as a whole. Other investments
to which the sub-accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The sub-accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: the S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2-1/2 Year CD Rates;
and the Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA Technologies, Morningstar, Donoghue's,
Wiesenberger; magazines such as Money, Forbes, Kiplinger's Personal Finance
Magazine, Financial World, Consumer Reports, Business Week, Time, Newsweek,
National Underwriter, U.S. News and World Report; rating services such as LIMRA,
Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports;
and other publications such as the Wall Street Journal, Barron's, Investor's
Daily, and Standard & Poor's Outlook. In addition, Variable Annuity Research &
Data Service (The VARDS Report) is an independent rating service that ranks over
500 variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the underlying Mutual Fund
options against all underlying mutual funds over specified periods and against
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
The Company may from time to time advertise several types of historical
performance for the sub-accounts of the Variable Account. The Company may
advertise for the sub-accounts standardized "average annual total return",
calculated in a manner prescribed by the Securities and Exchange Commission, and
nonstandardized "total return." "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund option held in the sub-account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation reflects the deduction of all
applicable charges made to the Contracts except for premium taxes, which may be
imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner and
for the same time periods as the average annual total return except total return
will assume an initial investment of $10,000 and will not reflect the deduction
of any applicable Contingent Deferred Sales Charge, which, if reflected, would
decrease the level of performance shown. The Contingent Deferred Sales Charge is
not reflected because the Contracts are designed for long term investment. An
assumed initial investment of $10,000 will be used because that figure more
closely approximates the size of a typical Contract than does the $1,000 figure
used in calculating the standardized average annual total return quotations. The
amount of the hypothetical initial investment assumed affects performance
because the Contract Maintenance Charge is a fixed per Contract charge.
For those underlying Mutual Fund options which have not been held as
sub-accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as sub-accounts within the Variable Account for the period quoted.
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ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE COMPANY
IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE FUTURE
RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR LESS
THAN ORIGINAL COST.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Fidelity Investments Institutional Services
Company, Inc., is not engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History............................... 1
Services...................................................... 1
Purchase of Securities Being Offered.......................... 1
Underwriters.................................................. 2
Calculations of Performance................................... 2
Fund Performance Summary...................................... N/A
Annuity Payments.............................................. 3
Financial Statements.......................................... 4
</TABLE>
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APPENDIX A
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which support insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which related to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Nationwide Variable Account II and any other segregated
asset account. Fixed Account purchase payments will be allocated to the Fixed
Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum rate
as stated in the contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New purchase payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money transferred from the Variable sub-accounts to the Fixed Account and
amounts maturing in the Fixed Account at the expiration of an Interest Rate
Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the purchase payments allocated to the
Fixed Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred will be determined by the Company
at its sole discretion, but will not be less than 10% of the total value of the
portion of the Fixed Account that is maturing and will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. The Interest
Rate Guarantee Period expires on the final day of a calendar quarter. Transfer
under this provision must be made within 45 days after the expiration date of
the guarantee period.
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Owners who have entered into a Dollar Cost Averaging Agreement with the Company
(see "Dollar Cost Averaging") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year).
ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
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STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 1995
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
OF NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and in some respects more detailed than set forth in
the Prospectus and should be read in conjunction with the Prospectus dated
September 1, 1995. The Prospectus may be obtained from Nationwide Life Insurance
Company by writing P.O. Box 182610, Columbus, Ohio 43218-2610, or calling
1-800-573-5775, Voice Response (available 24 hours) 1-800-573-2447, TDD
1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................... 1
Services................................................................. 1
Purchase of Securities Being Offered..................................... 1
Underwriters............................................................. 2
Calculations of Performance.............................................. 2
Fund Performance Summary................................................. N/A
Annuity Payments......................................................... 3
Financial Statements..................................................... 4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Fidelity Advisor Variable Account is a separate investment
account of Nationwide Life Insurance Company ("Company"). The Company is a
member of the Nationwide Insurance Enterprise and all of the Company's common
stock is owned by Nationwide Corporation. Nationwide Corporation is a holding
company. All of its common stock is held by Nationwide Mutual Insurance Company
(95.3%) and Nationwide Mutual Fire Insurance Company (4.7%).
SERVICES
The Company, which has responsibility for administration of the Contracts
and the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of the
underlying Mutual Funds.
The financial statements have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may transfer up to 100% of the Contract Value from the
Variable Account to the Fixed Account. However, the Company, at its sole
discretion, reserves the right to limit such transfers to 25% of the Contract
Value for any 12 month period. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such portion will be determined by the
Company at its sole discretion (but will not be less than 10% of the total value
of the portion of the Fixed Account that is maturing), and will be declared upon
the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter.
Transfer under this provision must be made within 45 days after the termination
date of the
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guarantee period. Owners who have entered into a Dollar Cost Averaging agreement
with the Company may transfer from the Fixed Account under the terms of that
agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to
the first Contract Anniversary. Transfers from the Fixed Account may not be made
within 12 months of any prior Transfer. Transfers must also be made prior to the
Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Fidelity Investments Institutional Services Company, Inc. ("Fidelity"), 82
Devonshire Street, Boston, Massachusetts 02109. The Company has paid no
underwriting commission to Fidelity. During the year ended December 31, 1994, no
underwriting commissions were paid by the Company to Fidelity.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Fidelity Advisor Annuity Money Market
Fund sub-account, subject to Rule 482 of the Securities Act of 1933, shall
consist of a seven calendar day historical yield, carried at least to the
nearest hundredth of a percent. The yield shall be calculated by determining the
net change, exclusive of capital changes, in the value of hypothetical
pre-existing account having a balance of one accumulation unit at the beginning
of the base period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the net change in account value by the
value of the account at the beginning of the period to obtain a base period
return, and multiplying the base period return by (365/7) or (366/7) in a leap
year. As of June 30, 1995, the Nationwide Fidelity Advisor Annuity Money Market
Fund sub-account's seven day current unit value yield was 3.68%. The Fidelity
Advisor Annuity Money Market Fund sub-account's effective yield is computed
similarly but includes the effect of assumed compounding on an annualized basis
of the current unit value yield quotations of the Fund, and for the period ended
June 30, 1995, the effective yield was 3.75%.
The Fidelity Advisor Annuity Money Market Fund sub-account's yield and
effective yield will fluctuate daily. Actual yields will depend on factors such
as the type of instruments in the Fund's portfolio, portfolio quality and
average maturity, changes in interest rates, and the Fund's expenses. Although
the sub-account determines its yield on the basis of a seven calendar day
period, it may use a different time period on occasion. The yield quotes may
reflect the expense limitation described in the Fund's Statement of Additional
Information. There is no assurance that the yields quoted on any given occasion
will remain in effect for any period of time and there is no guarantee that the
net asset values will remain constant. It should be noted that a Contract
Owner's investment in the Fidelity Advisor Annuity Money Market Fund sub-account
is not guaranteed or insured. Yield of other money market funds may not be
comparable if a different base period or another method of calculation is used.
Income gathered within a bond sub-account may be reflected in "30 Day
Yield" quotations. Such quotations are computed by dividing the net investment
income per Accumulation Unit during a 30 day period by the maximum unit value
per Accumulation Unit on the last day of the period. The formula for arriving
at bond fund yield quotations is as follows: 2[((a-b)/cd+1)To the 6th
power-1] where: a = net investment income earned by the applicable portfolio;
b = expenses for the period, including contract level fees and charges; c = the
average daily number of Accumulation Units outstanding during the period; and
d = the maximum offering price per Accumulation Unit on the last day of the
period.
All performance advertising shall also include quotations of standardized
average annual total return, calculated in accordance with a standard method
prescribed by rules of the Securities and Exchange Commission, to facilitate
comparison with standardized average annual total return advertised for a
specific period is found by first taking a hypothetical $1,000 investment in
each of the sub-accounts' units on the first day of the period at the offering
price, which is the Accumulation Unit Value per unit ("initial investment") and
computing the ending redeemable value ("redeemable value") of that investment at
the end of the period. The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. Standardized average annual total return reflects the deduction of a
maximum $30 Contract Maintenance Charge and a 1.30% Mortality, Expense Risk and
Administration Charge. The redeemable value also reflects the effect of any
applicable Contingent Deferred Sales Charge that may be imposed at the end of
the period (see the "Contingent Deferred Sales Charge" provision located in the
prospectus). No deduction is made for premium taxes which may be assessed
2
37 of 81
<PAGE> 38
by certain states. Nonstandardized total return may also be advertised, and is
calculated in a manner similar to standardized average annual total return
except the nonstandardized total return is based on a hypothetical initial
investment of $10,000 and does not reflect the deduction of any applicable
Contingent Deferred Sales Charge. Reflecting the Contingent Deferred Sales
Charge would decrease the level of the performance advertised. The Contingent
Deferred Sales Charge is not reflected because the Contract is designed for long
term investment. An assumed initial investment of $10,000 will be used because
that figure more closely approximates the size of a typical Contract than does
the $1,000 figure used in calculating the standardized average annual total
return quotations. The amount of the hypothetical initial investment used
affects performance because the Contract Maintenance Charge is fixed per
Contract charge.
The standardized average annual total return and nonstandardized average
annual total return quotations will be current to the last day of the calendar
quarter preceding the date on which an advertisement is submitted for
publication. Both the standardized average annual return and the nonstandardized
average annual total return will be based on rolling calendar quarters and will
cover periods of one, five, and ten years, or a period covering the time the
underlying Mutual Fund held in the sub-account has been in existence, if the
underlying Mutual Fund has not been in existence for one of the prescribed
periods. For those underlying Mutual Funds which have not been held as
sub-accounts within the Variable Account for one of the quoted periods, the
average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Funds would have achieved
(reduced by the applicable charges) had they been held as sub-accounts within
the Variable Account for the period quoted.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, therefore,
would not be considered a guarantee of future performance. Factors affecting a
sub-account's performance include general market conditions, operating expenses
and investment management. A Contract Owner's account when redeemed may be more
or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
38 of 81
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholder's equity and cash flows for each of the years
in the three-year period ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Participating insurance and the related surplus are discussed in note 13. 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, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 2 to the consolidated financial statements, 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 27, 1995
39 of 81
<PAGE> 40
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $8,318,865 in 1994) $ 8,045,906 -
Equity securities (cost $18,373 in 1994; $8,263 in 1993) 24,713 16,593
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310
in 1994; $10,886,820 in 1993) 3,688,787 10,120,978
Mortgage loans on real estate 4,222,284 3,871,560
Real estate 252,681 253,831
Policy loans 340,491 315,898
Other long-term investments 63,914 118,490
Short-term investments (note 14) 131,643 41,797
----------- -----------
16,770,419 14,739,147
----------- -----------
Cash 7,436 21,835
Accrued investment income 220,540 190,886
Deferred policy acquisition costs 1,064,159 811,944
Deferred Federal income tax 36,515 -
Other assets 790,603 636,161
Assets held in Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
$31,112,133 25,406,361
=========== ===========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 16,321,461 14,092,255
Policyholders' dividend accumulations 338,058 322,686
Other policyholder funds 72,770 71,959
Accrued Federal income tax (note 7):
Current 13,126 12,294
Deferred - 31,659
----------- -----------
13,126 43,953
----------- -----------
Other liabilities 235,778 217,952
Liabilities related to Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
29,203,654 23,755,193
----------- -----------
Shareholder's equity (notes 3, 4, 7 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Paid-in additional capital 622,753 422,753
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $82,525 ($0 in 1993) and net of
deferred Federal income tax benefit of $64,425 ($1,583 expense in 1993) (119,668) 6,747
Retained earnings 1,401,579 1,217,853
----------- -----------
1,908,479 1,651,168
----------- -----------
Commitments and contingencies (notes 9 and 16)
$31,112,133 25,406,361
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
40 of 81
<PAGE> 41
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (note 17):
Traditional life insurance premiums $ 209,538 215,715 226,888
Accident and health insurance premiums 324,524 312,655 430,009
Universal life and investment product policy charges 239,021 188,057 148,464
Net investment income (note 5) 1,289,501 1,204,426 1,120,157
Net ceded commissions from disposition of credit life and
credit accident and health business (note 12) - - 27,115
Realized gains (losses) on investments (notes 5 and 14) (16,384) 113,673 (19,315)
---------- ---------- ----------
2,046,200 2,034,526 1,933,318
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,279,763 1,236,906 1,319,735
Provision for policyholders' dividends on participating
policies (note 13) 46,061 53,189 61,834
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Other operating costs and expenses 352,402 329,396 321,993
---------- ---------- ----------
1,772,970 1,721,625 1,802,759
---------- ---------- ----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 273,230 312,901 130,559
---------- ---------- ----------
Federal income tax (note 7):
Current expense 79,847 75,124 47,402
Deferred expense (benefit) 9,657 31,634 (13,660)
---------- ---------- ----------
89,504 106,758 33,742
---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 183,726 206,143 96,817
Cumulative effect of changes in accounting principles,
net of tax (note 3) - 5,365 -
---------- ---------- ----------
Net income $ 183,726 211,508 96,817
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
41 of 81
<PAGE> 42
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
--------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 3,815 311,753 96,048 933,179 1,344,795
Dividends paid to shareholder - - - (5,846) (5,846)
Net income - - - 96,817 96,817
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (5,524) - (5,524)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 311,753 90,524 1,024,150 1,430,242
========= =========== ============== ========== =============
1993:
Balance, beginning of year 3,815 311,753 90,524 1,024,150 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 of deferred
Federal income tax - - (83,777) - (83,777)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 422,753 6,747 1,217,853 1,651,168
========= =========== ============== ========== =============
1994:
Balance, beginning of year 3,815 422,753 6,747 1,217,853 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 of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 216,915 - 216,915
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (343,330) - (343,330)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 622,753 (119,668) 1,401,579 1,908,479
========= =========== ============== ========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
42 of 81
<PAGE> 43
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 183,726 211,508 96,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Capitalization of deferred policy acquisition costs (264,434) (191,994) (177,928)
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Amortization and depreciation 6,207 11,156 5,607
Realized losses (gains) on invested assets, net 15,949 (113,648) 19,092
Deferred Federal income tax benefit (2,166) (6,006) (13,105)
Increase in accrued investment income (29,654) (4,218) (11,518)
(Increase) decrease in other assets (112,566) (549,277) 6,132
Increase in policyholder account balances 1,038,641 509,370 19,087
Increase in policyholders' dividend accumulations 15,372 17,316 18,708
Increase (decrease) in accrued Federal income tax payable 832 16,838 (15,723)
Increase in other liabilities 17,826 26,958 73,512
Other, net (19,303) (11,745) (10,586)
---------- ---------- ----------
Net cash provided by operating activities 945,174 18,392 109,292
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 579,067 - -
Proceeds from sale of securities available-for-sale 247,876 247,502 27,844
Proceeds from maturity of fixed maturities held-to-maturity 516,003 1,192,093 1,030,397
Proceeds from sale of fixed maturities - 33,959 123,422
Proceeds from repayments of mortgage loans on real estate 220,744 146,047 259,659
Proceeds from sale of real estate 46,713 23,587 22,682
Proceeds from repayments of policy loans and
sale of other invested assets 134,998 59,643 99,189
Cost of securities available-for-sale acquired (2,569,672) (12,550) (12,718)
Cost of fixed maturities held-to-maturity acquired (675,835) (2,016,831) (2,687,975)
Cost of mortgage loans on real estate acquired (627,025) (475,336) (654,403)
Cost of real estate acquired (15,962) (8,827) (137,843)
Policy loans issued and other invested assets acquired (118,012) (76,491) (97,491)
---------- ---------- ----------
Net cash used in investing activities (2,261,105) (887,204) (2,027,620)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from capital contributions 200,000 111,000 -
Dividends paid to shareholder - (17,805) (5,846)
Increase in universal life and investment product account balances 3,640,958 2,249,740 2,468,236
Decrease in universal life and investment product account balances (2,449,580) (1,458,504) (575,180)
---------- ---------- ----------
Net cash provided by financing activities 1,391,378 884,431 1,887,210
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 75,447 15,619 (31,118)
Cash and cash equivalents, beginning of year 63,632 48,013 79,131
---------- ---------- ----------
Cash and cash equivalents, end of year $ 139,079 63,632 48,013
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
43 of 81
<PAGE> 44
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(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 Financial Horizons Life Insurance
Company (FHLIC), West Coast Life Insurance Company (WCLIC), National
Casualty Company and subsidiaries (NCC), Nationwide Financial
Services, Inc. (NFS), and effective December 31, 1994, Employers Life
Insurance Company of Wausau and subsidiary (ELICW). NLIC and its
subsidiaries are collectively referred to as "the Company".
NLIC, FHLIC, 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,
health and annuity products through exclusive agents 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 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.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated
financial statements and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are adequate.
44 of 81
<PAGE> 45
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(a) Consolidation Policy
The December 31, 1994, 1993 and 1992 consolidated
financial statements include the accounts of NLIC and its
wholly owned subsidiaries FHLIC, 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 14. All
significant intercompany balances and transactions have
been eliminated.
(b) Valuation of Investments and Related Gains and Losses
Prior to January 1, 1994, the Company classified fixed
maturities in accordance with the then existing accounting
standards, and accordingly, fixed maturity securities were
carried at amortized cost, adjusted for amortization of
premium or discount, since the Company had both the
ability and intent to hold those securities until
maturity. Equity securities were carried at fair value
with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of
shareholder's equity.
In May 1993, the Financial Accounting Standards Board
(FASB) issued STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115
requires fixed maturities and equity securities to be
classified as either held-to-maturity, available-for-sale,
or trading. The Company has no trading securities. The
Company adopted SFAS 115 as of January 1, 1994, with no
effect on consolidated net income. See note 3 regarding
the effect on consolidated shareholder's equity.
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.
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. Loans in foreclosure and loans
considered in-substance foreclosed as of the balance
sheet date are placed on non-accrual status and written
down to the fair value of the existing property to
derive a new cost basis. 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 May, 1993, the FASB issued STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 114 - ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN (SFAS 114). SFAS 114, which
was amended by STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 118 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND
DISCLOSURE in October, 1994, requires the measurement of
impaired loans be 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
loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The
impact on the consolidated financial statements of
adopting SFAS 114 as amended is not expected to be
material. Previously issued consolidated financial
statements shall not be restated. The Company will adopt
SFAS 114 as amended in 1995.
45 of 81
<PAGE> 46
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 and collected. 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 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 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, 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. Beginning January 1, 1994,
deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on
fixed maturity securities available-for-sale. See 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 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.
Future policy benefits and claims for group long-term
disability policies are the present value (primarily
discounted at 5.5%) 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 policies are not discounted.
46 of 81
<PAGE> 47
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
Participating business represents approximately 45%
(48% in 1993 and 1992) of the Company's ordinary
life insurance in force, 72% (72% in 1993; 71% in 1992)
of the number of policies in force, and 41% (45% in 1993
and 1992) 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 13.
(h) Federal Income Tax
NLIC, FHLIC, 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 will file 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.
Prior to 1993, the Company applied the deferred method
of accounting for income tax which recognized deferred
income tax for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for
the year of calculation. Under the deferred method,
deferred tax is not adjusted for subsequent changes in tax
rates. See note 7.
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.
(k) Reclassification
Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform to the 1994
presentation.
47 of 81
<PAGE> 48
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(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 a new accounting standard by the FASB
as described in Note 2(b). 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>
<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
========
</TABLE>
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:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 7) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296), (note 11) (20,979)
--------
Net cumulative effect of changes in accounting principles $ 5,365
========
</TABLE>
(4) Basis of Presentation
The consolidated financial statements have been prepared in
accordance with GAAP. Annual Statements for NLIC and FHLIC, WCLIC,
ELICW and NCC, filed with the Department of Insurance of the State of
Ohio, 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 following reconciles the statutory net income of NLIC as
reported to regulatory authorities to the net income as shown
in the accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Statutory net income $ 76,532 185,943 33,812
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 14,350 19,545 21,519
Increase in deferred policy acquisition costs, net 167,166 89,860 78,731
Future policy benefits (76,310) (70,640) (63,355)
Deferred Federal income tax (expense) benefit (9,657) (31,634) 13,660
Equity in earnings of affiliates 1,013 7,121 4,618
Valuation allowances and other than temporary
declines accounted for directly in surplus 6,275 (6,638) 3,402
Interest maintenance reserve (7,332) 13,754 7,588
Cumulative effect of changes in accounting principles,
net of tax - 5,365 -
Other, net 11,689 (1,168) (3,158)
-------- ------- -------
Net income per accompanying consolidated
statements of income $183,726 211,508 96,817
======== ======= =======
</TABLE>
48 of 81
<PAGE> 49
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The following reconciles the statutory capital shares and
surplus of NLIC as reported to regulatory authorities to the
shareholder's equity as shown in the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Statutory capital shares and surplus $1,262,861 992,631 647,307
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 1,064,159 811,944 722,084
Nonadmitted assets and furniture and equipment charged to
income in the year of acquisition, net of accumulated
depreciation 16,120 22,573 15,712
Asset valuation reserve 153,387 105,596 138,727
Interest maintenance reserve 18,843 21,069 7,315
Future policy benefits (310,302) (238,231) (167,591)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 36,515 (31,659) (82,724)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (32,275) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (272,959) - -
Other, net (60,145) (480) 149,412
---------- ---------- ----------
Shareholder's equity per accompanying consolidated
balance sheets $1,908,479 1,651,168 1,430,242
========== ========== ==========
</TABLE>
(5) Investments
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 674,346 - -
Equity securities 550 7,230 6,949
Fixed maturities held-to-maturity 193,009 800,255 754,876
Mortgage loans on real estate 376,783 364,810 334,769
Real estate 40,280 39,684 27,410
Short-term 6,990 5,080 7,298
Other 42,831 33,832 30,717
---------- -------- --------
Total investment income 1,334,789 1,250,891 1,162,019
Less investment expenses 45,288 46,465 41,862
---------- ---------- ----------
Net investment income $1,289,501 1,204,426 1,120,157
========== ========== ==========
</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>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (703,851) - -
Equity securities (1,990) (128,837) (9,195)
Fixed maturities held-to-maturity (421,427) 223,392 17,774
----------- -------- --------
$(1,127,268) 94,555 8,579
=========== ======== ========
</TABLE>
49 of 81
<PAGE> 50
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
An analysis of realized gains (losses) on investments by investment
type follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $(13,720) - -
Equity securities 1,427 129,728 7,215
Fixed maturities - 21,159 13,399
Mortgage loans on real estate (16,130) (17,763) (30,334)
Real estate and other 5,765 (12,813) (12,997)
---------- -------- --------
(22,658) 120,311 (22,717)
---------- -------- --------
Valuation allowances:
Securities available-for-sale:
Fixed maturities 6,600 - -
Fixed maturities - (934) 1,792
Mortgage loans on real estate (4,332) (10,478) (5,969)
Real estate and other 4,006 4,774 7,579
---------- -------- --------
6,274 (6,638) 3,402
---------- -------- --------
$(16,384) 113,673 (19,315)
========== ======== ========
</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:
US Treasury securities and obligations of US
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 18,373 6,636 (296) 24,713
----------- ---------- ---------- ----------
$8,337,238 77,887 (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>
50 of 81
<PAGE> 51
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 investments of fixed
maturity securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 287,738 18,204 (392) 305,550
Obligations of states and political
subdivisions 16,519 2,700 (5) 19,214
Debt securities issued by foreign governments 137,092 7,719 (1,213) 143,598
Corporate securities 6,819,355 647,778 (15,648) 7,451,485
Mortgage-backed securities 2,860,274 121,721 (15,022) 2,966,973
----------- ---------- ---------- ----------
$10,120,978 798,122 (32,280) 10,886,820
=========== ========== ========== ==========
</TABLE>
As of December 31, 1993 the net unrealized gain on equity
securities, before providing for deferred Federal income tax, was
$8,330, comprised of gross unrealized gains of $8,345 and gross
unrealized losses of $15.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale and fixed maturity securities
held-to-maturity as of December 31, 1994, 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 $ 294,779 294,778
Due after one year through five years 2,553,825 2,490,886
Due after five years through ten years 1,382,311 1,327,089
Due after ten years 544,091 558,514
---------- -----------
4,775,006 4,671,267
Mortgage-backed securities 3,543,859 3,374,639
---------- -----------
$8,318,865 8,045,906
========== ===========
Fixed maturity securities held-to-maturity
Due in one year or less $ 333,517 333,000
Due after one year through five years 1,953,179 1,942,260
Due after five years through ten years 1,080,069 1,013,083
Due after ten years 322,022 313,967
---------- -----------
$3,688,787 3,602,310
========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during
1994 were $247,876, while proceeds from sales of investments in
fixed maturity securities during 1993 were $33,959 ($123,422 during
1992). Gross gains of $3,406 ($2,413 in 1993 and $3,194 in 1992) and
gross losses of $21,866 ($39 in 1993 and $513 in 1992) were realized
on those sales.
Investments that were non-income producing for the twelve month
period preceding December 31, 1994 amounted to $11,513 ($13,158 for
1993) and consisted of $11,111 ($10,907 in 1993) in real estate and
$402 ($2,251 in 1993) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$29,275 in 1994 ($24,717 in 1993) and valuation allowances of $27,330
in 1994 ($31,357 in 1993). Other valuation allowances are $0 in 1994
($6,680 in 1993) on fixed maturities and $47,892 in 1994 ($42,350 in
1993) on mortgage loans on real estate.
51 of 81
<PAGE> 52
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company generally initiates foreclosure proceedings on all
mortgage loans on real estate delinquent sixty days. Foreclosures
of mortgage loans on real estate were $37,187 in 1994 ($39,281 in
1993) and mortgage loans on real estate in process of foreclosure or
in-substance foreclosed as of December 31, 1994 totaled $19,878
($24,658 as of December 31, 1993), which approximates fair value.
Investments with an amortized cost of $11,137 and $11,383 as of
December 31, 1994 and 1993, 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 traditional life and
individual health policies has been established based upon the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
Year of issue Life Health
------------- ---- ------
<S> <C> <C>
1994 7.2 %, not graded - permanent contracts with loan provisions; 5.0%
6.0%, not graded - all other contracts
1984-1993 7.4% to 10.5%, not graded 5.0% to 6%
1966-1983 6% to 8.1%, graded over 20 years to 4% to 6.6% 3.5% to 6%
1965 and prior generally lower than post 1965 issues 3.5% to 4%
</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.
The liability for future policy benefits for investment contracts
(approximately 81% and 80% of the total liability for future policy
benefits as of December 31, 1994 and 1993, respectively) has been
established based on policy term, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 6.5%, 7.0% and 7.5% for the years ended December 31, 1994,
1993 and 1992, respectively.
Future policy benefits and claims for group long-term disability
policies are the present value (primarily discounted at 5.5%) 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 policies are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Balance as of January 1 $591,258 760,312 672,581
Less reinsurance recoverables 429,798 547,786 445,934
--------- -------- --------
Net balance as of January 1 161,460 212,526 226,647
--------- -------- --------
Incurred related to:
Current year 273,299 309,721 360,545
Prior years (26,156) (26,248) (17,433)
--------- -------- --------
Total incurred 247,143 283,473 343,112
--------- -------- --------
Paid related to:
Current year 175,700 208,978 226,886
Prior years 73,889 125,561 130,347
--------- -------- --------
Total paid 249,589 334,539 357,233
--------- -------- --------
Unpaid claims of ELICW (note 14) 40,223 - -
--------- -------- --------
Net balance as of December 31 199,237 161,460 212,526
Plus reinsurance recoverables 457,694 429,798 547,786
--------- -------- --------
Balance as of December 31 $656,931 591,258 760,312
======== ======== ========
</TABLE>
52 of 81
<PAGE> 53
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
As a result of changes in estimates for insured events of prior
years, the provision for claims and claim adjustment expenses
decreased in each of the three years ended December 31, 1994 due to
lower-than-anticipated costs to settle accident and health claims.
(7) Federal Income Tax
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 is approximately $35,344 as of
December 31, 1994.
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109 - ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993.
See note 3. The 1992 consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $9,657 29,930
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 1,704
------ ------
$9,657 31,634
====== ======
</TABLE>
For the year ended December 31, 1992, the deferred income tax
benefit results from timing differences in the recognition of
income and expense for income tax and financial reporting purposes.
The primary sources of those timing differences were deferred policy
acquisition costs (deferred expense of $16,457) and reserves for future
policy benefits (deferred benefit of $32,045).
Total Federal income tax expense for the years ended December 31,
1994, 1993 and 1992 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
------- ---- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $95,631 35.0 $109,515 35.0 $44,390 34.0
Tax exempt interest and dividends
received deduction (194) (0.1) (2,322) (0.7) (4,172) (3.2)
Current year increase in U.S. Federal
income tax rate - - 1,704 0.5 - -
Real estate valuation allowance
adjustment - - - - (3,463) (2.7)
Other, net (5,933) (2.1) (2,139) (0.7) (3,013) (2.3)
------- ---- -------- ---- ------- ----
Total (effective rate of each
year) $89,504 32.8 $106,758 34.1 $33,742 25.8
======= ==== ======== ==== ======= ====
</TABLE>
Total Federal income tax paid was $87,576, $58,286 and $63,124 during
the years ended December 31, 1994, 1993 and 1992, respectively.
53 of 81
<PAGE> 54
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $124,044 129,995
Fixed maturity securities available-for-sale 95,536 -
Liabilities in Separate Accounts 94,783 64,722
Mortgage loans on real estate and real estate 25,632 24,020
Other policyholder funds 7,137 7,759
Other assets and other liabilities 57,528 41,390
-------- ---------
Total gross deferred tax assets 404,660 267,886
-------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 317,224 243,731
Fixed maturities, equity securities and other
long-term investments 3,620 11,137
Other 47,301 44,677
-------- ---------
Total gross deferred tax liabilities 368,145 299,545
-------- ---------
Net deferred tax asset (liability) $ 36,515 (31,659)
======== =========
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date of
adoption of SFAS 109) based on its analysis of future deductible
amounts. 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.
(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. In cases where quoted market prices are not available,
fair value is based on estimates using present value or other valuation
techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities that
are classified as investment contracts, are specifically exempted from
SFAS 107 disclosures, estimated fair value of policy reserves on
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 Investment and Policy Loans: The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
54 of 81
<PAGE> 55
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Investment 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 valued at 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 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.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31:
<TABLE>
<CAPTION>
1994 1993
---------------------------- ----------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $ 8,045,906 8,045,906 - -
Equity securities 24,713 24,713 16,593 16,593
Fixed maturities held-to-maturity 3,688,787 3,602,310 10,120,978 10,886,820
Mortgage loans on real estate 4,222,284 4,173,284 3,871,560 4,175,271
Policy loans 340,491 340,491 315,898 315,898
Short-term investments 131,643 131,643 41,797 41,797
Cash 7,436 7,436 21,835 21,835
Assets held in Separate Accounts 12,222,461 12,222,461 9,006,388 9,006,388
Liabilities
-----------
Investment contracts 12,189,894 11,657,556 10,332,661 10,117,288
Policy reserves on insurance contracts 3,170,085 2,934,384 2,945,120 2,873,503
Policyholders' dividend accumulations 338,058 338,058 322,686 322,686
Other policyholder funds 72,770 72,770 71,959 71,959
Liabilities related to Separate Accounts 12,222,461 11,807,331 9,006,388 8,714,586
</TABLE>
55 of 81
<PAGE> 56
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(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 $243,200 extending into 1995 were outstanding as of December 31,
1994.
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 22% (23% in 1993) in any geographic area and no more than 2%
(2% in 1993) with any one borrower. The summary below depicts loans
by remaining principal balance as of each December 31:
<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
==========
1993:
East North Central $109,208 108,478 470,755 158,964 847,405
East South Central 27,562 1,460 117,341 69,991 216,354
Mountain 3,228 4,742 105,560 23,065 136,595
Middle Atlantic 56,664 52,766 132,821 15,414 257,665
New England 10,565 48,398 142,530 8 201,501
Pacific 174,409 185,116 389,428 65,497 814,450
South Atlantic 112,640 58,165 391,102 238,337 800,244
West North Central 104,933 13,458 78,408 3,917 200,716
West South Central 50,955 47,103 183,420 161,033 442,511
-------- --------- ------- --------- ----------
$650,164 519,686 2,011,365 736,226 3,917,441
======== ========= ========= =========
Less valuation allowances and unamortized discount 45,881
----------
Total mortgage loans on real estate, net $3,871,560
==========
</TABLE>
56 of 81
<PAGE> 57
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
NLIC, FHLIC, WCLIC, NCC, and NFS participate 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. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of any
three 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.
Pension costs charged to operations by the Company during the years
ended December 31, 1994, 1993 and 1992 were $10,451, $6,702 and
$4,613, respectively.
The Company's net accrued pension expense as of December 31, 1994
and 1993 was $1,836 and $1,472, respectively.
The net periodic pension cost for the plan as a whole for the years
ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
-------- -------- --------
Net periodic pension cost $55,046 34,067 25,970
======== ======== ========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit
obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
57 of 81
<PAGE> 58
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
In addition to the defined benefit pension plan, NLIC, FHLIC, WCLIC,
NCC and NFS participate with other affiliated companies in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
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 life insurance contributions are based on age
and coverage amount of each retiree. Postretirement health care
benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. The accounting for the
health care plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to increase the retiree contribution amount annually for expected
health care inflation. The Company's policy is to fund the cost of
health care benefits in amounts determined at the discretion of
management. The Company began funding in 1994. Plan assets are
invested 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. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
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 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. Net periodic
postretirement benefit cost for 1994 was $4,627. The Company's
accrued postretirement benefit obligation as of December 31, 1994 and
1993 was $36,001 and $35,277, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
--------- ---------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
--------- ---------
Plan assets less than accumulated postretirement benefit
obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
--------- ---------
Accrued postretirement benefit obligation $(150,264) (184,120)
========= =========
</TABLE>
58 of 81
<PAGE> 59
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
------- ------
Net periodic postretirement benefit cost $22,597 21,018
======= ======
</TABLE>
The health care cost trend rate assumption has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866 and
$2,377, respectively.
(12) Portfolio Transfer of Credit Life and Credit Accident and Health
On March 13, 1992, WCLIC entered into an assignment and assumption
agreement with American Bankers Life Assurance Company of Florida
(ABLAC) under which ABLAC assumed, by portfolio transfer, substantially
all of WCLIC's credit life and accident and health policies in force as
of January 1, 1992. A pre-tax loss of approximately $15,000 was
recognized from this transaction in 1992. The loss represents
approximately $34,000 of amortization of deferred policy acquisition
costs, less approximately $27,000 in ceded commissions earned, plus
death benefits incurred and other expenses. Under the terms defined in
the assignment and assumption agreement, WCLIC is contingently liable
for adverse development of claims activity up to a defined limit. As
of December 31, 1994, WCLIC has provided for a contingent liability
based on the development of claims experience through December 31,
1994. As of December 31, 1993, WCLIC had provided for the maximum
contingent liability in the absence of conclusive claims experience
development.
(13) 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, at the year-end shall
inure to the benefit of the shareholders. 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.
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.
59 of 81
<PAGE> 60
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
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 $1,904,664, $1,647,353, and $1,426,427 as of December 31,
1994, 1993 and 1992, respectively. The amount thereof not
presently available for dividends to the shareholder due to the New
York restrictions and to adjustments relating to GAAP was $929,934,
$954,037 and $841,583 as of December 31, 1994, 1993 and 1992,
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 of Insurance of the State
of Ohio 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, $1,707,110, of shareholder's
equity, as presented in the accompanying consolidated financial
statements, is restricted as to dividend payments in 1995.
California law limits the payment of dividends to shareholders of
WCLIC. The maximum dividend that may be paid by WCLIC without
prior approval of the Commissioner of the State of California
Department of Insurance is limited to the greater of WCLIC's
statutory net income of the preceding calendar year or 10% of
WCLIC's statutory shareholder's surplus as of the prior December 31.
Therefore, $126,489 of WCLIC's shareholder's equity is restricted as
to dividend payments in 1995.
Wisconsin law limits the payment of dividends to shareholders of ELICW.
The maximum dividend that may be paid by ELICW without prior approval
of the Commissioner of the State of Wisconsin is limited to the greater
of ELICW's statutory net income of the preceding calendar year or 10%
of ELICW s statutory surplus as of the prior December 31, Therefore,
$135,369 of ELICW's shareholder's equity is restricted as to dividend
payments in 1995.
Michigan law limits the payment of dividends to shareholders of NCC.
The maximum dividend that may be paid by NCC without prior approval
of the Commissioner of the State of Michigan Bureau of Insurance is
limited to the greater of NCC's statutory net income, not including
realized capital gains, of the preceding calendar year or 10% of
NCC's statutory shareholder's surplus as of the prior December 31.
Therefore, $66,564 of NCC's shareholder's equity is restricted as to
dividend payments in 1995. In addition, prior approval is not required
for a dividend which does not increase gross leverage to a point in
excess of the United States consolidated industry average for the most
recent available year.
(14) Transactions With Affiliates
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of ELICW from Wausau Service Corporation (WSC) for an
amount approximating $165,000, subject to specified adjustments, if
any, subsequent to year end. 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. An accrual approximating $10,000
is reflected in the accompanying consolidated balance sheet. 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.
The deferred compensation annuity line of business of the Company
is primarily sold through Public Employees Benefit Services
Corporation (PEBSCO). The Company paid PEBSCO commissions and
administrative fees of $26,699, $22,681 and $20,146 in 1994, 1993 and
1992, respectively. PEBSCO is a wholly owned subsidiary of Corp.
The Company and NEA Valuebuilder Investor Services, Inc. (NEAVIS) have
contracted with the National Education Association (NEA) to provide
individual annuity contracts to be marketed exclusively to members of
the NEA. The Company paid NEAVIS a marketing development fee of
$11,095, $9,229 and $6,426 in 1994, 1993 and 1992, respectively.
NEAVIS is a wholly owned subsidiary of Corp.
The Company shares home office, other facilities, equipment and
common management and administrative services with affiliates.
60 of 81
<PAGE> 61
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
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 1994 and 1993 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, 1994. These contracts are immaterial to
the consolidated financial statements.
NCC participates in several 100% quota share reinsurance agreements
with NMIC. NCC serves as the licensed insurer as required for an
affiliated excess and surplus lines company and cedes 100% of direct
written premiums to NMIC. In 1989, NCC transferred 100% of assets and
unearned premiums and loss reserves related to a discontinued block of
assumed reinsurance to NMIC (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%). Effective January 1, 1993, NCC entered into
a 100% quota share reinsurance agreement to cede to NMIC 100% of all
written premiums not subject to any other reinsurance agreements.
As a result of these agreements, and in accordance with STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 113 - ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS, the
following amounts are included in the consolidated financial statements
as of December 31, 1994 and 1993 for reinsurance ceded:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reinsurance recoverable $575,721 533,401
Unearned premium reserves (118,092) (102,644)
Loss and claim reserves (371,974) (352,303)
Loss and expense reserves (85,655) (78,454)
-------- --------
$ 0 0
======== ========
</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.
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 $92,531 and $28,683 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying consolidated balance sheets.
(15) Bank Lines of Credit
As of December 31, 1994 and 1993, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization. Additionally, NFS had $27,000 of confirmed
but unused bank lines of credit.
61 of 81
<PAGE> 62
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) 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.
(17) Major Lines of Business
The Company operates in the life and accident and health lines of
business in the life insurance and property and casualty insurance
industries. Life insurance operations include whole life, universal
life, variable universal life, endowment and term life insurance and
annuity contracts issued to individuals and groups. Accident and
health operations also provide coverage to individuals and groups.
The following table summarizes the revenues and income before Federal
income tax and cumulative effect of changes in accounting principles
for the years ended December 31, 1994, 1993 and 1992 and assets as of
December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Life insurance $ 1,577,809 1,479,956 1,406,417
Accident and health 345,544 339,764 475,290
Investment income allocated to capital and surplus 122,847 214,806 51,611
----------- --------- ---------
Total $ 2,046,200 2,034,526 1,933,318
=========== ========= =========
Income before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 141,650 83,917 78,627
Accident and health 13,220 15,043 436
Investment income allocated to capital and surplus 118,360 213,941 51,496
----------- --------- ---------
Total $ 273,230 312,901 130,559
=========== ========= =========
Assets:
Life insurance 28,351,628 22,982,186 19,180,561
Accident and health 852,026 773,007 343,535
Capital and surplus 1,908,479 1,651,168 1,430,242
----------- --------- ---------
Total $31,112,133 25,406,361 20,954,338
=========== ========= =========
</TABLE>
Included in life insurance revenues are premiums from certain annuities
with life contingencies of $20,134 ($35,341 and $54,066 for the years
ended December 31, 1993 and 1992, respectively) as well as universal
life and investment product policy charges of $239,021 ($188,057 and
$148,464 for the years ended December 31, 1993 and 1992 respectively)
for the year ended December 31, 1994.
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized gains allocable to policyholders in 1994
were $1,193,292 and $1,775, respectively.
(18) Subsequent Event
On January 30, 1995, FHLIC received approval from the Ohio Secretary of
State to change its name to Nationwide Life and Annuity Insurance
Company.
62 of 81
<PAGE> 63
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) Financial Statements:
(1) Financial statements and schedule included PAGE
in Prospectus
(Part A):
Condensed Financial Information 12
(2) Financial statements and schedule included 39
in Part B:
Those financial statements required by Item 23 to
be included in Part B have been incorporated by
reference to the Prospectus (Part A).
Nationwide Fidelity Advisor Variable Account:
Independent Auditors' Report. N/A
Nationwide Life Insurance Company:
Independent Auditors' Report. 39
Consolidated Balance Sheets as of December 40
31, 1994 and 1993.
Consolidated Statements of Income for the 41
years ended December 31, 1994, 1993 and
1992.
Consolidated Statements of Shareholder's 42
Equity for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for 43
the years ended December 31, 1994, 1993
and 1992.
Notes to Consolidated Financial Statements. 44
</TABLE>
63 of 81
<PAGE> 64
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with the
Registration Statement (File No. 33-82190)
on November 8, 1994, and hereby incorporated
by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Filed previously with the
Registration Statement (File No. 33-82190)
on November 8, 1994, and hereby incorporated
by reference.
(4) The form of the variable annuity contract -
Filed previously with the Registration Statement
(File No. 33-82190) on November 8, 1994, and
hereby incorporated by reference.
(5) Variable Annuity Application -
Filed previously with the Registration Statement
(File No. 33-82190) on November 8, 1994, and
hereby incorporated by reference.
(6) Articles of Incorporation of Depositor -
Filed previously with the Registration
Statement (File No. 33-82190) on
November 8, 1994, and hereby incorporated
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
the Registration Statement (File No. 33-82190)
on November 8, 1994, and hereby incorporated by
reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule; Filed previously with the Registration
Statement (File No. 33-82190) on November 8, 1994,
and hereby incorporated by reference.
64 of 81
<PAGE> 65
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 Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
65 of 81
<PAGE> 66
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon 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
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product 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
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
Joseph F. Ciminero Vice President-
One Nationwide Plaza Financial Operations
Columbus, OH 43215
</TABLE>
66 of 81
<PAGE> 67
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/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
67 of 81
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Mutual Insurance Ohio Insurance Company
Company (Casualty)
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Nationwide General Insurance Ohio Insurance Company
Company
Nationwide Property & Casualty Ohio Insurance Company
Insurance Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Insurance Group
SVM Sales GMBH, Neckura Insurance Germany Sales support for
Group Neckura Insurance Group
</TABLE>
68 of 81
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Texas Insurance Company
Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted
Redevelopment Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and
manages commercial
real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York Workers Compensation
New York Claims Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
69 of 81
<PAGE> 70
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<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 Health Care Corporation Ohio Develops and operates
Managed Care Delivery
System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery
System
** West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Self-Insurance
Nevada Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
70 of 81
<PAGE> 71
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
** Nationwide Property Management, Ohio Owns, leases, manages
Inc. and deals in Real
Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer
in Deferred
Compensation Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and
Corporation Administration of
Deferred Employee
Compensation Plans for
Public Employees
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation
Plans for Public
Employees
</TABLE>
71 of 81
<PAGE> 72
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation
Plans for Public
Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation
Plans for Public
Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation
Plans for Public
Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation
Plans for Public
Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial
Health and Medicare
Supplement Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Wisconsin Insurance and
Company Reinsurance Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and
Reinsurance Company
Wausau Underwriters Insurance Wisconsin Insurance Company
Company
Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
</TABLE>
72 of 81
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess
and Surplus Lines
Insurance Underwriting
Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance California Insurance Broker
Services of California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan
administration, record
keeping and consulting
and compensation
consulting
Companies Agency of Phoenix, Inc. Arizona 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 Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Pennsylvania Insurance Broker
Inc.
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
</TABLE>
73 of 81
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Nationwide Financial Institution Oklahoma Life Insurance Agency
Distributors Agency of Oklahoma, Inc.
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Institution Ohio Insurance Agency
Distributors Agency of Ohio, Inc.
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Nationwide Financial Institution Alabama Life Insurance Agency
Distributors Agency of Alabama, Inc.
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Nationwide Financial Institution Texas Life Insurance Agency
Distributors Agency of Texas, Inc.
Colonial General Insurance Agency, Arizona Insurance Agency
Inc.
The Beak and Wire Corporation Ohio Radio Tower Joint
Venture
Video Eagle, Inc. Ohio Operates Several Video
Cable Systems
</TABLE>
74 of 81
<PAGE> 75
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Insuer of Life Insurance
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Multi-Flex Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide Variable Account-II Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide DC Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity
Annuity Separate Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Variable Account-5 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity
Annuity Separate Contracts
Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity
Annuity Separate Contracts
Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity
Annuity Separate Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
</TABLE>
75 of 81
<PAGE> 76
<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 |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | 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 IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | 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. (AMU) |
| | |
| | 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 |
| | (WISCONSIN) | | 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> 77
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | 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 |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | 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 |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | 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 $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | 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 |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
| |
| _____________________________ | __________________________
| | 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
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
76 of 81
<PAGE> 78
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENCY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
December 31, 1994
Page 2
</TABLE>
77 of 81
<PAGE> 81
Item 27. NUMBER OF CONTRACT OWNERS
The number of Contract Owners as of June 30, 1995 was 867.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by the Company of any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that such person
is or was a director, officer or employee of the Company, against
expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law of
the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) The principal underwriter is Fidelity Investments Institutional
Services Company, Inc. which does not act as principal
underwriter, depositor, sponsor, or investment adviser to any
other investment company.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
<S> <C>
William F. Devin Director
Edward C. Johnson 3d Director
Richard G. Malconian President
Charles Delle Donne Senior Vice President and Regional Manager
David Liebrock Senior Vice President and Regional Manager
Nishan Vartabedian Senior Vice President and Regional Manager
James M. McKinney Senior Vice President
Lorrayne Chu Senior Vice President
Thomas T. Bienier Senior Vice President
Marie Harrigan Senior Vice President
Brian A. Clancey Senior Vice President
William Adair Senior Vice President, Broker/Dealer
Gregory Brakovich Senior Vice President, Broker/Dealer
Virginia M. Meany Senior Vice President, Client Services
Robert MacDonald Senior Vice President, Insurance Market
Reed Tupper Senior Vice President, Insurance Market
Arthur S. Loring Senior Vice President, Clerk and General Counsel
Susan Pfau Vice President, Finance
Joseph Collins Vice President, Human Resources
Robert Sauvageau Vice President, Systems
</TABLE>
78 of 81
<PAGE> 82
Michael P. Castellano Financial Operations Officer
Lois Towers Compliance Officer
Steven Jonas Treasurer
John D. Crumrine Assistant Treasurer
David C. Weinstein Assistant Clerk
(c) Not applicable.
The address for each person named in Item 29 is 82 Devonshire
Street, Boston, Massachusetts 02109.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Joseph F. Ciminero
Nationwide Life Insurance Company
One Nationwide
Plaza Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, is issued by the Registrant
in reliance upon, and in compliance with, the Securities and Exchange
Commission's industry-wide no-action letter to the American Council of
Life Insurance (publicly available November 28, 1988) which permits
withdrawal restrictions to the extent necessary to comply with IRC
Section 403(b)(11).
79 of 81
<PAGE> 83
ACCOUNTANTS' CONSENT
The Board of Directors
Nationwide Life Insurance Company and the Contract Holders
of the Nationwide Fidelity Advisor Variable Account:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
Columbus, Ohio KPMG Peat Marwick LLP
August 28, 1995
<PAGE> 84
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT, certifies
that it meets the requirements of Securities Act Rule 485(b), for effectiveness
of this Post-Effective Amendment and has caused this Post-Effective Amendment to
be signed on its behalf in the City of Columbus, and State of Ohio, on this 28th
day of August, 1995.
NATIONWIDE FIDELITY ADVISOR VARIABLE
ACCOUNT
------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 28th day of
August, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ----------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- ----------------------------
Willard J. Engel
FRED C. FINNEY Director
- ----------------------------
Fred C. Finney
PETER F. FRENZER President/Chief Operating
- ---------------------------- Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- ----------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- ---------------------------- and Director
Henry S. Holloway
D. RICHARD MCFERSON Chief Executive Officer and Director
- ----------------------------
D. Richard McFerson
DAVID O. MILLER Director
- ----------------------------
David O. Miller
C. RAY NOECKER Director
- ----------------------------
C. Ray Noecker
Executive Vice President-
ROBERT A. OAKLEY Chief Financial Officer
- ----------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ---------------------------- -------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ROBERT H. RICKEL Director
- ----------------------------
Robert H. Rickel
ARDEN L. SHISLER Director
- ----------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ----------------------------
Harold W. Weihl
</TABLE>
81 of 81
