<PAGE>
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-82174
'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. 6 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 7 [x]
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in
respect of the Prospectus, 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
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ X ] on November 3, 1997 pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed its Rule 24f-2 Notice for
the fiscal year ended December 31, 1996 on February 25, 1997.
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NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page ................................................ 8
Item 2. Definitions ............................................... 10
Item 3. Synopsis or Highlights .................................... 17
Item 4. Condensed Financial Information ........................... 18
Item 5. General Description of Registrant, Depositor, and
Portfolio Companies ....................................... 19
Item 6. Deductions and Expenses ................................... 22
Item 7. General Description of Variable Annuity Contracts ......... 24
Item 8. Annuity Period ............................................ 32
Item 9. Death Benefit and Distributions ........................... 32
Item 10. Purchases and Contract Value .............................. 24
Item 11. Redemptions ............................................... 28
Item 12. Taxes ..................................................... 38
Item 13. Legal Proceedings ......................................... 46
Item 14. Table of Contents of the Statement of Additional
Information ............................................... 46
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page .............................................. 49
Item 16. Table of Contents ....................................... 49
Item 17. General Information and History ......................... 49
Item 18. Services ................................................ 49
Item 19. Purchase of Securities Being Offered .................... 49
Item 20. Underwriters ............................................ 50
Item 21. Calculation of Performance Information .................. 50
Item 22. Annuity Payments ........................................ 53
Item 23. Financial Statements .................................... 54
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits ....................... 87
Item 25. Directors and Officers of the Depositor ................. 89
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant ................................. 91
Item 27. Number of Contract Owners ............................... 101
Item 28. Indemnification ......................................... 101
Item 29. Principal Underwriter ................................... 101
Item 30. Location of Accounts and Records ........................ 102
Item 31. Management Services ..................................... 102
Item 32. Undertakings ............................................ 102
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SUPPLEMENT DATED NOVEMBER 3, 1997 TO
PROSPECTUS DATED MAY 1, 1997 FOR
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
This Supplement updates certain information contained in your Prospectus.
Please read it and keep it with your Prospectus for future reference.
1. The section entitled "SUMMARY OF CONTRACT EXPENSES" located on page 7
of the Prospectus is hereby replaced with the following:
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1) . . . . . . . . . . . 7 %
----------------------------------------------------------------
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
Number of Completed Years Contingent Deferred Sales
from Date of Purchase Payment Charge Percentage
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
----------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges ........................... 1.25 %
Administration Charge ........................................ 0.15 %
Total Separate Account Annual Expenses ....................... 1.40 %
Optional Long Term Care Facility and Death Benefit Riders(2) 0.15 %
(1) Each Contract Year, the Contract Owner may withdraw without a Contingent
Deferred Sales Charge (CDSC) an amount equal to 10% of the total sum of
all Purchase Payments made at the time of withdrawal. In addition, any
amount withdrawn in order for the Contract to meet minimum distribution
requirements under the Code shall be free of CDSC. Withdrawals may be
restricted for Contracts issued pursuant to the terms of a Tax Sheltered
Annuity Plan. This CDSC-free withdrawal privilege is non-cumulative;
that is, free amounts not taken during any given Contract Year cannot be
taken as free amounts in a subsequent Contract Year (see "Contingent
Deferred Sales Charge" for additional waiver provisions).
(2) For Contracts issued on or after the later of November 3, 1997, or the
date upon which the proper insurance authorities approve applicable
Contract modifications, the Contract Owner at the time of application,
may select one of two Long Term Care Facility and Death Benefit Riders
in lieu of receiving the Standard Contractual Death Benefit option which
does not include any additional Long Term Care Facility benefits (see
"Long Term Care Facility and Death Benefit Charges" provision for
additional information). There is no additional charge deducted for the
Standard Contractual Death Benefit option; however, should the applicant
choose a Rider Option, the Company will deduct an additional charge
equal to an annual rate of up to 0.15% of the daily asset value of the
Variable Account.
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2. The "EXAMPLE" table located on page 9 of the Prospectus is hereby
amended to state "EXAMPLE (For Contracts Issued Without a Long Term Care
Facility and Death Benefit Rider)."
3. The "EXAMPLE" table located on page 9 of the Prospectus is further amended
to include the following additional table information:
EXAMPLE
(For Contracts Issued With a Long Term Care Facility
and Death Benefit Rider)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your
Contract at the end of your Contract at the Contract at the end of
the applicable time end of the applicable the applicable time
period time period period
- ------------------------------------------------------------------ ---------------------------- ----------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
- ------------------------------------------------------------------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Variable Insurance Products Fund:
Equity-Income Portfolio 85 114 145 254 22 69 118 254 * 69 118 254
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products
Fund: Growth Portfolio 87 117 151 265 24 72 124 265 * 72 124 265
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund:
High Income Portfolio 87 118 152 267 24 73 125 267 * 73 125 267
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund:
Overseas Portfolio 89 125 164 290 26 80 137 290 * 80 137 290
- ------------------------------------------------------------------ ---------------------------- -----------------------------
Variable Insurance Products Fund:
Money Market Portfolio 82 105 130 223 19 60 103 223 * 60 103 223
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund II:
Asset Manager Portfolio 87 119 154 271 24 74 127 271 * 74 127 271
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund II:
Asset Manager: Growth Portfolio 88 123 160 284 25 78 133 284 * 78 133 284
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund II:
Contrafund Portfolio 87 119 154 271 24 74 127 271 * 74 127 271
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund II:
Index 500 Portfolio 82 104 129 221 19 59 102 221 * 59 102 221
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund II:
Investment Grade Bond Portfolio 85 114 145 254 22 69 118 254 * 69 118 254
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund III:
Balanced Portfolio 87 118 153 268 24 73 126 268 * 73 126 268
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund III:
Growth Opportunities Portfolio 87 120 155 274 24 75 128 274 * 75 128 274
- ------------------------------------------------------------------ ---------------------------- ----------------------------
Variable Insurance Products Fund III:
Growth & Income Portfolio 87 118 152 266 24 73 125 266 * 73 125 266
- ------------------------------------------------------------------ ---------------------------- ----------------------------
</TABLE>
* The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The Example above takes into consideration the additional charge of 0.15%
assessed for the election of one of two optional death benefit riders (see
"Long Term Care Facility and Death Benefit Rider Charge" and "Death Benefit
Payment Provisions" for additional details on the rider charges assessed).
However, the actual charge may be less and the expenses in the Example would
be reduced accordingly.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of
the Variable Account as well as those of the Mutual Funds are reflected in
the Example. For more complete descriptions of the expenses of the Variable
Account, see "Variable Account Charges, and Other Deductions." For more
complete information regarding expenses paid out of the assets of the
underlying Mutual Funds, see the underlying Mutual Fund prospectuses.
Deductions for premium taxes may also apply but are not reflected in the
Example shown above (see "Premium Taxes").
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4. The "SYNOPSIS" located on page 10 of the Prospectus is hereby amended to
include the following paragraph:
For Contracts issued on or after the later of November 3, 1997, or
the date upon which the proper insurance authorities approve applicable
Contract modifications, the Company will deduct a Long Term Care Facility
and Death Benefit Charge equal to an annual rate of up to 0.15% of the
daily net asset value of the Variable Account for those contracts which
have elected one of the Long Term Care Facility and Death Benefit Riders
(see "Long Term Care Facility and Death Benefit Charges", "Long Term Care
Facility Riders Provision" and "Death Benefit Payment Provision" for
additional information).
5. The "EXPENSES OF VARIABLE ACCOUNT" sub-section located in the "VARIABLE
ACCOUNT CHARGES AND OTHER DEDUCTIONS" section on page 15 of the Prospectus
is hereby amended to read as follows:
The Variable Account is responsible for the following types of
expenses: (1) administrative expenses relating to the issuance and
maintenance of the Contracts; (2) a mortality risk charge associated
with guaranteeing the annuity purchase rates at issue for the life of
the Contracts; and (3) an expense risk charge associated with
guaranteeing that the Mortality Risk and Expense Risk and
Administration Charges described in this prospectus will not change
regardless of actual expenses. In addition, a charge will be deducted
for those Contracts issued on or after the later of November 3, 1997
which have a Long Term Care Facility and Death Benefit Rider in lieu
of the Standard Contractual Death Benefit. If these charges are
insufficient to cover these expenses, the loss will be borne by the
Company.
For 1996, the Variable Account incurred total expenses equal to
1.54% of its average net assets, relating to the administrative,
sales, mortality and expense risk charges described above for all
Contracts outstanding during that year. Deductions from and expenses
paid out of the assets of the underlying Mutual Funds are described
in each underlying Mutual Fund prospectus.
All of the charges described in this section apply to Variable
Account (underlying Mutual Fund) allocations. Allocations to the Fixed
Account are subject to Contingent Deferred Sales Changes and Premium
Tax deductions, if applicable, but are not subject to charges
exclusive to the Variable Account (i.e., the Mortality Risk Charge,
the Expense Risk Charge, the Administration Charge and, if
applicable, the Death Benefit Rider Charge).
In addition, the "VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS" section of
the Prospectus is hereby amended to include the following information:
LONG TERM CARE FACILITY AND DEATH BENEFIT RIDER CHARGE
For those Contracts issued on or after the later of November 3, 1997
which have a Long Term Care Facility and Death Benefit Rider as chosen
at the time of application, the Company will deduct a charge equal to
an annual rate of up to 0.15% of the daily net asset value of the
Variable Account. The Long Term Care Facility and Death Benefit
Rider is designed to reimburse the Company for increases in the
mortality and expense risks. The Company may generate a profit
through assessing this charge.
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LONG TERM CARE FACILITY RIDERS PROVISION
Beginning at the third Contract Anniversary Date, for those Contracts
which have an Optional Long Term Care Facility and Death Benefit Rider
selected at the time of application, surrender charges on withdrawals
will not apply if a Contract Owner is confined to a Long Term Care
Facility or Hospital, as defined by the applicable endorsement to the
Contract and has been confined in such facility for a continuous 90 day
period. In addition, upon receipt of a physician's letter at the
Company's Home Office, no surrender charges will be deducted upon
withdrawals if the Contract Owner has been diagnosed by that
physician to have a terminal illness, as defined by the applicable
endorsement to the Contract.
The Contract Owner may be subject to income tax on all or a portion
of any such withdrawals and to a tax penalty if the Contract Owner takes
withdrawals prior to age 59 1/2 (see "FEDERAL TAX CONSIDERATIONS -
Non-Qualified Contracts - Natural Persons as Owners").
6. The "DEATH BENEFIT PAYMENT PROVISIONS" sub-section located in the "ANNUITY
PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS" section on page 28
of the Prospectus is hereby amended to include the following information:
DEATH BENEFIT PAYMENT PROVISIONS (FOR CONTRACTS ISSUED ON OR AFTER THE
LATER OF NOVEMBER 3, 1997)
For Contracts issued on or after the later of November 3, 1997, or
the date upon which the proper insurance authorities approve applicable
Contract modifications, the Contract Owner may, at the time of
application, select one of three death benefits available under the
Contract as listed below; if no selection is made at the time of
application, the Death Benefit will be the Standard Contractual
Death Benefit.
- STANDARD CONTRACTUAL DEATH BENEFIT
If the Annuitant dies at any time prior to the Annuitization Date,
the dollar amount of the death benefit will be the greatest of: (1) the
Contract Value; (2) the sum of all Purchase Payments, less an adjustment
for amounts surrendered; or (3) the Contract Value as of the most recent
five year Contract Anniversary occurring prior to the Annuitant's 86th
birthday, less an adjustment for amounts surrendered, plus Purchase
Payments received after that five-year Contract Anniversary Date.
The adjustment for amounts surrendered will reduce items (2) and
(3) above in the same proportion that the Contract Value was reduced
on the date of the partial surrender.
No additional charge will be assessed to the Contract Owner for
election of the Standard Contractual Death Benefit.
- RIDER OPTION 1
If the Annuitant dies at any time prior to the Annuitization Date,
the dollar amount of the death benefit will be the greatest of: (1) the
Contract Value; (2) the sum of all Purchase Payments, less an
adjustment for amounts surrendered; or (3) the maximum anniversary
value.
The maximum anniversary value is equal to the greatest anniversary
value attained from the following: as of the date proper proof of death
is received by the Company, the Contract Value on each Contract
Anniversary Date prior to the deceased Annuitant's attained age 86,
less an adjustment for amounts subsequently surrendered, plus Purchase
Payments subsequently received after that Contract Anniversary Date.
The adjustment for amounts surrendered will reduce items (2) and
(3) above in the same proportion that the Contract Value was reduced
on the date of the partial surrender.
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For Death Benefit Rider Option 1, the Company deducts a charge at
an annual rate of up to 0.15% computed on a quarterly basis of the daily
net asset value of the Variable Account. This charge is designed only
to reimburse the Company for increases in the mortality and expense
risks, and consequently the Company may lower this charge at any time
without prior notice to the Contract Owner. However, the Company may
generate a profit through assessing this charge.
- RIDER OPTION 2
If the Annuitant dies at any time prior to Annuitization Date, the
dollar amount of the death benefit will be the greater of: (1) the
Contract Value; or (2) the 5% interest anniversary value.
The 5% interest anniversary value is equal to the net of Purchase
Payments and amounts surrendered, accumulated at 5% interest from the
date of each payment or surrender to the most recent Contract
Anniversary Date prior to the deceased Annuitant's 86th birthday, less
an adjustment for amounts subsequently surrendered, plus Purchase
Payments received since that most recent Contract Anniversary Date.
Such total accumulated amount shall not exceed 200% of the net of
Purchase Payments and amounts surrendered. The adjustment for
amounts subsequently surrendered after the most recent Contract
Anniversary Date will reduce the 5% interest anniversary value in
the same proportion that the Contract Value was reduced on the date of
the partial surrender.
For Death Benefit Rider Option 2, the Company deducts a charge at
an annual rate of up to 0.15% computed on a quarterly basis of the
daily net asset value of the Variable Account. This charge is designed
only to reimburse the Company for increases in the mortality and expense
risks, and consequently, the Company may lower this charge at any time
without prior notice to the Contract Owner. However, the Company may
generate a profit through assessing this charge.
FOR ANY DEATH BENEFIT OPTION SELECTED, IF THE ANNUITANT DIES
AFTER THE ANNUITIZATION DATE, ANY PAYMENT THAT MAY BE PAYABLE WILL
BE DETERMINED ACCORDING TO THE SELECTED ANNUITY PAYMENT OPTION.
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NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE
P.O. BOX 182610
COLUMBUS, OHIO 43216, 1-800-573-5775
VOICE RESPONSE (AVAILABLE 24 HOURS) 1-800-573-2447
TDD 1-800-238-3035
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
The Individual Modified Single Premium Deferred Variable Annuity
Contracts described in this prospectus are modified single purchase payment
contracts (collectively referred to as the "Contracts"). Reference
throughout the prospectus to such Contracts shall also mean "Certificates"
issued under Group Modified Single Premium Retirement Contracts. For such
Group Contracts, references to "Contract Owner" shall mean the "Participant"
unless the Plan otherwise permits or requires the Contract Owner to exercise
contractual rights under the authority of the Plan terms. The Contracts are
sold in connection with the following types of Contracts: (1) Non-Qualified
Contracts; (2) Individual Retirement Annuities with contributions rolled-over
from certain tax-qualified plans such as Tax Sheltered Annuity Plans,
Qualified Plans or Individual Retirement Annuities; and (3) Tax Sheltered
Annuities with contributions rolled over or transferred from other Tax
Sheltered Annuity Plans. 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 is divided into
Sub-Accounts, each of which invests in shares of one of the underlying Mutual
Fund options described below:
VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio*
Money Market Portfolio
Overseas Portfolio
VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Asset Manager: Growth Portfolio
Contrafund Portfolio
Investment Grade Bond Portfolio
Index 500 Portfolio
VARIABLE INSURANCE PRODUCTS FUND III
Balanced Portfolio (formerly Fidelity Advisor Annuity Income & Growth Fund)
Growth & Income Portfolio
Growth Opportunities Portfolio (formerly Fidelity Advisor Annuity Growth
Opportunities Fund)
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
This prospectus provides you with the basic information you should know
about the Individual Modified Single Premium 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 dated May 1, 1997, 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 43216.
1
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INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE
NOT GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL
FUNDS IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
ANY INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY
INCLUDE THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1997, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 39 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
2
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the
Variable Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payments involving life contingencies
depends. This person must be age 85 or younger at the time of Contract
issuance unless the Company has approved a request for a Designated Annuitant
of greater age.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence at
Annuitization.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled
to commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Contract Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options
are available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior
to the Annuitization Date. The Beneficiary can be changed by the Contract
Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT ANNUITANT- The Contingent 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 Annuitant is designated
and the Designated Annuitant dies before the Annuitization Date, the
Contingent Annuitant becomes the Designated Annuitant. A Contingent
Annuitant may not be named for Contracts issued as Individual Retirement
Annuities, or Tax Sheltered Annuities.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated
to be the Beneficiary if the named Beneficiary is not living at the time of
the death of the Designated Annuitant.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. For Contracts
issued in the State of New York, references throughout this prospectus to
"Contingent Owner" shall mean "Owner's Beneficiary." A Contingent Owner may
not be named for Contracts issued as Individual Retirement Annuities, or Tax
Sheltered Annuities.
CONTRACT- The Individual Modified Single Premium Deferred Variable Annuity
Contract described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER- The Contract Owner is the person who possesses all rights
under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment Option, and
the Annuity Commencement Date. The Contract Owner is the person named as
Owner in the application, unless changed.
CONTRACT VALUE- The sum of the value of all Accumulation Units attributable
to the Contract, plus any amount held under the Contract in the Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the
Date of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit which is payable upon the death of the Designated
Annuitant (or the Contingent Annuitant, if applicable). This benefit does
not apply upon the death of the Contract Owner when the Contract 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. The Designated Annuitant may be
changed prior to the Annuitization Date with the consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value.
3
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ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company
other than those in the Variable Account or any other segregated asset
account of the Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY - An annuity contract which qualifies for
favorable tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
is guaranteed to remain the same. For new Purchase Payments allocated to the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter
at least one year (but not more than 15 months) from deposit or transfer. At
the end of an Interest Rate Guarantee Period, a new interest rate is declared
with an Interest Rate Guarantee Period starting at the end of the prior
period and ending at the end of the calendar quarter one year later.
JOINT CONTRACT OWNER- The Joint Owner, if any, possesses an undivided
interest in the entire Contract in conjunction with the Owner. IF A JOINT
OWNER IS NAMED, REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS PROSPECTUS
WILL APPLY TO BOTH THE CONTRACT OWNER AND JOINT CONTRACT OWNER. JOINT
CONTRACT OWNERS MUST BE SPOUSES AT THE TIME JOINT OWNERSHIP IS REQUESTED.
MUTUAL FUND- A registered management investment company in which the assets
of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 or 403(a) (Qualified Plans),
408 (IRAs) or 403(b) (Tax-Sheltered Annuities) of the Code.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term
"Purchase Payment" does not include transfers between the Variable Account
and Fixed Account, or transfers among the Sub-Accounts.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to
which specific underlying Mutual Fund shares are allocated and for which
Accumulation Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a
sufficient degree of trading of the Variable Account's underlying Mutual Fund
shares that the current net asset value of its Accumulation Units might be
materially affected.
VALUATION PERIOD- The period of time commencing at the close of a Valuation
Date and ending at the close of business for the next succeeding Valuation
Date.
VARIABLE ACCOUNT- The Nationwide Fidelity Advisor Variable Account, a
separate investment account of the Company into which Variable Account
Purchase Payments are allocated. The Variable Account is divided into
Sub-Accounts, each of which invests in the shares of a separate underlying
Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
4
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<PAGE>
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS...................................................3
SUMMARY OF CONTRACT EXPENSES................................................7
CONTRACT OWNER TRANSACTION EXPENSES....................................7
SEPARATE ACCOUNT ANNUAL EXPENSES.......................................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES......................................8
EXAMPLE.....................................................................9
SYNOPSIS...................................................................10
CONDENSED FINANCIAL INFORMATION............................................11
NATIONWIDE LIFE INSURANCE COMPANY..........................................12
THE VARIABLE ACCOUNT.......................................................12
Underlying Mutual Fund Options........................................12
Fidelity Variable Insurance Products Fund.............................12
Fidelity Variable Insurance Products Fund II..........................13
Variable Insurance Products Fund III (formerly Fidelity
Advisor Annuity Fund)..............................................14
Voting Rights.........................................................15
Substitution of Securities............................................15
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS..............................15
Expenses of Variable Account..........................................15
Mortality Risk Charge.................................................16
Expense Risk Charge...................................................16
Administration Charge.................................................16
Contingent Deferred Sales Charge......................................16
Waiver of Contingent Deferred Sales Charge............................17
Premium Taxes.........................................................17
OPERATION OF THE CONTRACT..................................................17
Investments of the Variable Account...................................17
Allocation of Purchase Payments and Contract Value....................17
Value of an Accumulation Unit.........................................18
Net Investment Factor.................................................18
Valuation of Assets...................................................19
Determining the Contract Value........................................19
Right to Revoke.......................................................19
Transfers.............................................................19
Contract Ownership Provisions.........................................20
Joint Ownership Provisions............................................20
Contingent Ownership Provisions.......................................21
Beneficiary Provisions................................................21
Surrender (Redemption)................................................21
Surrenders Under a Tax Sheltered Annuity Contract.....................22
Loan Privilege........................................................22
Assignment............................................................23
Contract Owner Services...............................................24
Asset Rebalancing.....................................................24
Dollar Cost Averaging.................................................24
Systematic Withdrawals................................................24
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS.............25
Annuity Commencement Date.............................................25
Change in Annuity Commencement Date...................................25
Annuity Payment Period-Variable Account...............................26
Value of an Annuity Unit..............................................26
Assumed Investment Rate...............................................26
Frequency and Amount of Annuity Payments..............................26
Change in Form of Annuity.............................................26
Annuity Payment Options...............................................26
Death of Contract Owner Provisions-Non-Qualified Contracts............27
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<PAGE>
Death of Annuitant Provisions- Non-Qualified Contracts................27
Death of the Owner/Annuitant Provisions...............................28
Death Benefit Payment Provisions......................................28
Required Distribution Provisions for Non-Qualified Contracts..........28
Required Distributions for Tax Sheltered Annuities....................29
Required Distributions for Individual Retirement Annuities............30
Generation-Skipping Transfers.........................................30
FEDERAL TAX CONSIDERATIONS.................................................31
Federal Income Taxes..................................................31
Non-Qualified Contracts-Natural Persons as Owners.....................31
Non-Qualified Contracts-Non-Natural Persons as Owners.................32
Individual Retirement Annuities, and Tax Sheltered Annuities..........32
Withholding...........................................................33
Non-Resident Aliens...................................................33
Federal Estate, Gift, and Generation Skipping Transfer Taxes..........34
Charge for Tax Provisions.............................................34
Diversification.......................................................34
Tax Changes...........................................................34
GENERAL INFORMATION........................................................35
Contract Owner Inquiries..............................................35
Statements and Reports................................................35
Advertising...........................................................35
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY.................................37
Standardized Average Annual Total Return..............................37
Non-Standardized Average Annual Total Return..........................38
LEGAL PROCEEDINGS..........................................................39
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...................39
APPENDIX A.................................................................40
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<PAGE>
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1)................. 7 %
- -------------------------------------------------------------------------------
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
Number of Completed Years from Contingent Deferred Sales Charge
Date of Purchase Payment Percentage
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- -------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges......................... 1.25 %
Administration Charge...................................... 0.15 %
Total Separate Account Annual Expenses................... 1.40 %
(1) Each Contract Year, the Contract Owner may withdraw without a
Contingent Deferred Sales Charge (CDSC) an amount equal to 10%
of the total sum of all Purchase Payments made at the time of
withdrawal. In addition, any amount withdrawn in order for the
Contract to meet minimum distribution requirements under the Code
shall be free of CDSC. Withdrawals may be restricted for
Contracts issued pursuant to the terms of a Tax Sheltered Annuity
Plan. This CDSC-free withdrawal privilege is non-cumulative;
that is, free amounts not taken during any given Contract Year
cannot be taken as free amounts in a subsequent Contract Year
(see "Contingent Deferred Sales Charge" for additional waiver
provisions).
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<PAGE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Total Mutual
Fees Other Expenses Fund Expenses
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 0.51% 0.07% 0.58%(1)
Equity - Income Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 0.61% 0.08% 0.69%(1)
Growth Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 0.59% 0.12% 0.71%
High Income Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 0.21% 0.09% 0.30%
Money Market Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 0.76% 0.17% 0.93%(1)
Overseas Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 0.64% 0.10% 0.74%(1)
Asset Manager Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 0.65% 0.22% 0.87%(1)
Asset Manager: Growth Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 0.61% 0.13% 0.74%(1)
Contrafund Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 0.45% 0.13% 0.58%
Investment Grade Bond Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 0.13% 0.15% 0.28%(2)
Index 500 Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III- 0.48% 0.24% 0.72%
Balanced Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III- 0.50% 0.20% 0.70%
Growth & Income Portfolio
-------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III- 0.61% 0.16% 0.77%(1)
Growth Opportunities Portfolio
-------------------------------------------------------------------------------------------------------
</TABLE>
* The Mutual Fund expenses shown above are assessed at the underlying
Mutual Fund level and are not direct charges against separate account
assets or reductions from Contract Values. These underlying Mutual
Fund expenses are taken into consideration in computing each
underlying Mutual Fund's net asset value, which is the share price
used to calculate unit values of the Variable Account.
The management fees and other expenses are more fully described
in the prospectus for each individual underlying mutual fund.
The information relating to the underlying Mutual Fund expenses
was provided by the underlying Mutual Fund and was not independently
verified by the Company.
(1) A portion of the brokerage commissions that certain funds pay was
used to reduce funds expenses. In addition, certain funds have
entered into arrangements with their custodian and transfer agent
whereby interest earned on uninvested cash balances was used to
reduce custodian and transfer agent expenses. Including these
reductions, the total operating expenses presented in the table
would have been .56% for Equity-Income Portfolio, .67% for Growth
Portfolio, .92% for Overseas Portfolio, .73% for Asset Manager
Portfolio, .71% for Contrafund Portfolio, .85% for Asset
Manger: Growth portfolio, .76% for Growth Opportunities Portfolio,
and .71% for Balanced Portfolio.
(2) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses
during the period. Without this reimbursement, the fund's management
fee, other expenses and total expenses would have been .28%, .15% and
.43% respectively.
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<PAGE>
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 investment and 5% annual
return. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may
be greater or lesser than those shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C>
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.
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund- 83 106 132 227 20 61 105 227 * 61 105 227
Equity - Income
Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund- 85 113 143 249 22 68 116 249 * 68 116 249
Growth Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund- 84 110 139 241 21 65 112 241 * 65 112 241
High Income Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund- 80 97 117 195 17 52 90 195 * 52 90 195
Money Market Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund- 86 117 150 264 23 72 123 264 * 72 123 264
Overseas Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund II- 84 111 140 244 21 66 113 244 * 66 113 244
Asset Manager Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund II- 86 115 147 258 23 70 120 258 * 70 120 258
Asset Manager Growth
Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund II- 84 111 140 244 21 66 113 244 * 66 113 244
Contrafund Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund II- 83 106 132 227 20 61 105 227 * 61 105 227
Investment Grade Bond
Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund II- 80 96 116 193 17 51 89 193 * 51 89 193
Index 500 Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund III- 84 110 139 242 21 65 112 242 * 65 112 242
Balanced Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund III- 84 110 138 240 21 65 111 240 * 65 111 240
Growth & Income
Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
Variable Insurance
Products Fund III- 85 112 142 247 22 67 115 247 * 67 115 247
Growth Opportunities
Portfolio
- ------------------------------------------------------------- --------------------------------- ---------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist
the Contract Owner in understanding the various costs and expenses that will
be borne directly or indirectly when investing in the Contract. The expenses
of the Variable Account as well as those of the Mutual Funds are reflected in
the Example. For more complete descriptions of the expenses of the Variable
Account, see "Variable Account Charges, and Other Deductions." For more
complete information regarding expenses paid out of the assets of the
underlying Mutual Funds, see the underlying Mutual Fund prospectuses.
Deductions for premium taxes may also apply but are not reflected in the
Example shown above (see "Premium Taxes").
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<PAGE>
SYNOPSIS
The Individual Modified Single Premium Deferred Variable Annuity
Contracts described in this prospectus are designed for use in connection
with the following types of Contracts: (1) Non-Qualified; (2) Individual
Retirement Annuities with contributions rolled-over or transferred from
certain tax-qualified plans such as Tax Sheltered Annuity Plans, Qualified
Plans or Individual Retirement Annuities; and (3) Tax Sheltered Annuities
with contributions rolled-over or transferred from other Tax Sheltered
Annuity Plans.
The initial first year Purchase Payment must be at least $15,000 and
subsequent Purchase Payments, if any, must be at least $1,000. Subsequent
Purchase Payments are not permitted for Contracts issued in the states of New
York, Oregon, and Washington. The cumulative total of all Purchase Payments
under Contracts issued on the life of any one Designated Annuitant may not
exceed $1,000,000 without the prior consent of the Company (see "Allocation
of Purchase Payments and Contract Value").
The Company does not deduct a sales charge from Purchase Payments
made for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct
from the Contract Owner's Contract Value a Contingent Deferred Sales Charge
not to exceed 7% of the lesser of the total of all Purchase Payments made
within 84 months prior to the date of the request to surrender, or the amount
surrendered. This charge, when applicable, is imposed to permit the Company
to recover sales expenses which have been advanced by the Company (see
"Contingent Deferred Sales Charge").
The Company will assess an Administration Charge equal to an annual
rate of 0.15% of the daily net asset value of the Variable Account. This
charge is to reimburse the Company for administrative expenses related to the
issue and maintenance of the Contracts. The Company does not expect to
recover from this charge an amount in excess of accumulated administrative
expenses (see "Administration Charge"). The Company also 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"). In addition, an Expense Risk Charge equal to an
annual rate of 0.45% of the daily net asset value of the Variable Account is
deducted as compensation for the Company's risk by undertaking not to
increase administrative charges on the Contracts regardless of the actual
administrative costs (see "Expense Risk Charge").
Upon Annuitization, the selected Annuity Payment Option will begin
(see "Annuity Payment Option"). However, if the net amount to be applied to
any Annuity Payment Option at the Annuitization Date is less than $5,000, the
Contract Value may be distributed in one lump sum in lieu of annuity
payments. If any annuity payment would be less than $50, the Company shall
have the right to change the frequency of payments to such intervals as will
result in payments of at least $50. In no event, however, will annuity
payments be made less frequently than annually (see "Frequency and Amount of
Annuity Payments").
The Company will charge against the Purchase Payments or the
Contract Value, the amount of any premium taxes levied by a state or any
other governmental entity (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract,
the Contract Owner has a ten day free look. Within ten days of the date the
Contract is received, it may be returned to the Home Office of the Company,
at the address shown on page 1 of this prospectus. If a Contract is returned
to the Company in a timely manner, the Company will void the Contract and
refund the Contract Value in full unless otherwise required by state and/or
federal law. State and/or federal law may provide additional free look
privileges. All Individual Retirement Annuity refunds will be return of
Purchase Payments (see "Right to Revoke").
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<PAGE>
CONDENSED FINANCIAL INFORMATION(3)
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>
Variable Insurance Products 10.000000 10.221866 2.22% 2,287 1996
Fund - High Income
Portfolio-Q(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.221866 2.22% 12,210 1996
Fund - High Income
Portfolio -NQ(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.063199 0.63% 77,545 1996
Fund - Money Market
Portfolio-Q(1*)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.063199 0.63% 62,978 1996
Fund - Money Market
Portfolio -NQ(1*)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.518503 5.19% 4,339 1996
Fund - Overseas
Portfolio-Q(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.518503 5.19% 17,196 1996
Fund - Overseas
Portfolio-NQ(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.059105 0.59% 8,008 1996
Fund II - Investment Grade Bond
Portfolio - Q(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products 10.000000 10.059105 0.59% 1,732 1996
Fund II - Investment Grade Bond
Portfolio - NQ(1)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Product Fund 11.234358 12.181451 8.43% 2,291,575 1996
III - Balanced Portfolio-Q(2) 10.000000 11.234358 12.34% 975,789 1995
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Product Fund 11.234358 12.181451 8.43% 5,374,512 1996
III - Balanced Portfolio-NQ(2) 10.000000 11.234358 12.34% 2,441,208 1995
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 13.069019 15.239855 16.61% 6,415,213 1996
III - Growth Opportunities 10.000000 13.069019 30.69% 2,965,497 1995
Portfolio-Q(2)
- -----------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 13.069019 15.239855 16.61% 16,114,264 1996
III - Growth Opportunities 10.000000 13.069019 30.69% 8,130,130 1995
Portfolio-NQ(2)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* The 7-day yield on the Fidelity Variable Insurance Products Fund Money
Market Portfolio as of December 31, 1996 was 3.85%
(1) The Variable Insurance Products Fund - High Income Portfolio, Variable
Insurance Products Fund- Money Market Portfolio, Variable Insurance Pro-
ducts Fund- Overseas Portfolio and the Variable Insurance Products
Fund II - Investment Grade Bond Portfolio were added to the Variable
Account effective October 26, 1996. Consequently, the Condensed Financial
Information reflects the reporting period between October 26, 1996 to
December 31, 1996.
Pursuant to an Order issued by the Securities and Exchange Commission on
February 24, 1997, the Fidelity Variable Insurance Products Fund - High
Income Portfolio, Fidelity Variable Insurance Products Fund- Money Market
Fund, Fidelity Variable Insurance Products Fund-Overseas Portfolio and
Fidelity Variable Insurance Products Fund II - Investment Grade Bond
Portfolio replaced the Fidelity Advisor Annuity High Yield Fund, Fidelity
Advisor Annuity Money Market Fund, Fidelity Advisor Annuity Overseas Fund
and the Fidelity Advisor Annuity Government Investment Fund, respectively.
The Exchange of the respective funds took place on March 14, 1997.
(2) The Variable Insurance Products Fund III - Growth Opportunities Portfolio
and the Variable Insurance Products Fund III -Balanced Portfolio were
formerly known as Fidelity Advisor Annuity Growth Opportunities Fund and
Fidelity Advisor Annuity Income & Growth Fund, respectively.
(3) The Variable Insurance Products Fund - Equity Income Portfolio, Variable
Insurance Products Fund-Growth Portfolio, Variable Insurance Products
Fund II - Asset Manager Portfolio, Variable Insurance Products
Fund II - Asset Manager: Growth Portfolio, Variable Insurance Products
Fund II - Contrafund Portfolio, Variable Insurance Products
Fund II - Index 500 Portfolio and the Variable Insurance Products
Fund II - Growth & Income Portfolio were added to the Variable Account
effective January 20, 1997.
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<PAGE>
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 Offices at One Nationwide
Plaza, Columbus, Ohio 43215. The Company offers a complete line of life
insurance, including annuities and accident and health insurance. It is
admitted to do business in the District of Columbia, Puerto Rico, and in all
states.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on August 3, 1995,
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
options designated by the Contract Owner. A separate Sub-Account is
established within the Variable Account for each of the underlying Mutual
Fund options that may be designated by the Contract Owner.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different
Sub-Account options. A summary of investment objectives is contained in the
descriptions of each underlying Mutual Fund below.
VARIABLE INSURANCE PRODUCTS FUND
The Fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 33, 1981. The Fund's
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.
-EQUITY - INCOME PORTFOLIO
INVESTMENT OBJECTIVE: To seek reasonable income by investing
primarily in income-producing equity securities. When choosing
these securities, FMR will also consider the potential for capital
appreciation. The Portfolio's goal is to achieve a yield that
exceeds the composite yield on the securities comprising the
Standard & Poors Composite Stock Price Index.
-GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: To seek to achieve capital appreciation.
This Portfolio will invest in the securities of both
well-known and established companies, and smaller, less well-known
companies which may have narrow product line or whose securities
are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security.
FMR's analysis and expertise plays an integral role in the
selection of securities and, therefore, the performance of the
Portfolio. Many securities which FMR believes would have the
greatest potential may be regarded as speculative, and investment
in the Portfolio may involve greater risk than is inherent in other
mutual funds. It is also important to point out that the Portfolio
makes most sense for you if you can afford to ride out changes in
the stock market, because it invests primarily in common stocks.
FMR also can make temporary investments in securities such as
investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market
conditions warrant.
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<PAGE>
- HIGH INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks high current income by investing
primarily in all types of income-producing debt securities,
preferred stocks, and convertible securities. FMR normally invests
at least 65% of the fund's total assets in these securities. In
choosing investments, the fund also considers growth of capital.
- MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to obtain as high a level of current
income as is consistent with preserving capital and providing
liquidity. The Portfolio will invest only in high quality U.S.
dollar-denominated money market securities of domestic and foreign
issuers while seeking to maintain a stable $1.00 share price.
- OVERSEAS PORTFOLIO
INVESTMENT OBJECTIVE: Seeks long-term growth of capital by
investing primarily in securities of issuers whose principal
activities are outside of the U.S. FMR normally invests at least
65% of the fund's total assets in securities of issuers from at
least three different countries outside of North America (the U.S.,
Canada, Mexico, and Central America). The fund expects to invest a
majority of its assets in equity securities, but may also invest in
debt securities of any quality.
VARIABLE INSURANCE PRODUCTS FUND II
Fidelity Variable Insurance Products Fund II is an open-end,
diversified, management investment company organized as a Massachusetts
business trust on March 21, 1988. The Fund's shares are purchased by
insurance companies to fund benefits under variable life insurance and
annuity contracts. FMR is the Fund's manager.
-ASSET MANAGER PORTFOLIO
INVESTMENT OBJECTIVE: Seeks high total return with reduced risk
over the long term by allocating its assets among the following
classes or types of investments in a neutral mix: stock class, the
bond class, and short-term class/money market class.
Asset Manager Range Neutral Mix
------------- ----- -----------
Stock Class 30-70% 50%
Bond Class 20-60% 40%
Short-term Class 0-50% 10%
-ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks maximum total return over the long-term
by allocating assets among the following classes or types of
investment in a neutral mix: the stock class, the bond class,
short-term class/ money market class. The Portfolio's more
aggressive approach focuses primarily on stocks for high potential
returns.
Asset Manager: Growth Range Neutral Mix
--------------------- ----- -----------
Stock Class 50-100% 75%
Bond Class 0-50% 25%
Short-term Class 0-50% 5%
-CONTRAFUND PORTFOLIO
INVESTMENT OBJECTIVE: To seek capital appreciation by investing
primarily in companies that the fund manager believes to be
undervalued due to an overly pessimistic appraisal by the public.
This strategy can lead to investments in domestic or foreign stock,
and securities convertible into common stock.
-INDEX 500 PORTFOLIO
INVESTMENT OBJECTIVE: To seek investment results that correspond to the
total return of common stocks that comprise the Standard & Poor's 500
Composite Stock Price Index (S&P 500). Normally, at least
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<PAGE>
80% of the Portfolio's assets will be invested in equity securities
of companies that comprise the S&P 500. Although the Portfolio
tries to allocate its assets similarly to those of the S&P 500, the
Portfolio's composition may not always be identical to that of the
S&P. In seeking a 98% or better long-term correlation of the
fund's FMR may choose, if extraordinary circumstances warrant, to
exclude a stock held in the S&P 500 and include a similar stock in
its place if doing so will help the Portfolio achieve its objective.
* Investments in the Money Market Portfolio are neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that
the fund will maintain a stable $1.00 share price.
- INVESTMENT GRADE BOND PORTFOLIO
INVESTMENT OBJECTIVE: Seeks a high level of current income as is
consistent with preservation of capital 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 Portfolio's total assets will be invested in
investment-grade fixed-income securities such as debentures, bonds
and notes. government securities.
VARIABLE INSURANCE PRODUCTS FUND III (VIP III) FORMERLY FIDELITY ADVISOR ANNUITY
FUND
The Fund (originally organized as the Fidelity Advisor Annuity Fund)
is an open-end, diversified, management investment company organized as a
Massachusetts business trust on July 14, 1994. The Fund's name was changed
on December 30, 1996 from the Fidelity Advisor Annuity Fund to the Fidelity
Variable Insurance Products Fund III. The Fund's shares are purchased by
insurance companies to fund benefits under variable life insurance and
annuity contracts. FMR is the Fund's manager.
-BALANCED PORTFOLIO (FORMERLY FIDELITY ADVISOR ANNUITY INCOME &
GROWTH FUND)
INVESTMENT OBJECTIVE: Seeks both income and growth of capital
using a balanced approach to provide the best possible total return
from investments in a diversified portfolio of equity and
fixed-income securities with income, growth of income and capital
appreciation potential. FMR manages the Portfolio to maintain a
balance between stocks and bonds. When FMR's outlook is neutral,
it will invest approximately 60% of the Funds assets in stocks or
other equity securities and the remainder in bonds. The Fund will
always invest at least 25% of its total assets in fixed-income
senior securities.
-GROWTH & INCOME PORTFOLIO
INVESTMENT OBJECTIVE: Seeks high total return through a
combination of current income and capital appreciation by investing
mainly in equity securities.
-GROWTH OPPORTUNITIES PORTFOLIO (FORMERLY FIDELITY ADVISOR ANNUITY
GROWTH OPPORTUNITIES FUND)
INVESTMENT OBJECTIVE: Seeks long-term capital growth by investing
primarily in common stocks and securities convertible into common
stocks. Under normal circumstances, at least 65% of the
Portfolio's total assets will be invested in securities of
companies that FMR believes have long-term growth potential. The
Fund has the ability to purchase foreign securities, and preferred
stock and bonds that may produce capital appreciation.
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 and should be read in conjunction with this
prospectus. A copy of each prospectus may be obtained without charge from
Nationwide Life Insurance Company by calling 1-800-573-5775, Voice Response
(available 24 hours) 1-800-573-2447, TDD 1-800-238-3035 or writing P.O. Box
182610, Columbus, Ohio 43216.
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 Fund options.
A conflict may occur due to a change in law affecting the operations of
variable life and variable annuity separate accounts, differences in the
voting instructions of the Contract Owners and those of other companies, or
some other reason. In the event of conflict, the Company will take any steps
necessary to protect the Contract Owners and variable annuity payees,
including withdrawal of the Variable Account from participation in the
underlying Mutual Fund or Mutual Funds which are involved in the conflict.
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VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to
Purchase Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company
will vote the shares of the underlying Mutual Funds held in the Variable
Account at regular and special meetings of the shareholders of the underlying
Mutual Funds. These shares will be voted in accordance with instructions
received from Contract Owners who have an interest in the Variable Account.
If the Investment Company Act of 1940 or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a
result the Company determines that it is permitted to vote the shares of the
underlying Mutual Funds in its own right, it may elect to do so.
The Contract Owner shall be the person who has the voting interest
under the Contract. The number of underlying Mutual Fund shares attributable
to each Contract Owner is determined by dividing the Contract Owner's
interest in each respective Sub-Account of the Variable Account by the net
asset value of the underlying Mutual Fund corresponding to the Sub-Account.
The number of shares which a person has the right to vote will be determined
as of the date to be chosen by the Company not more than 90 days prior to the
meeting of the underlying Mutual Fund. Each person having a voting interest
will receive periodic reports relating to the underlying Mutual Fund, proxy
material and a form with which to give such voting instructions.
Voting instructions will be solicited by written communication at
least 21 days prior to such meeting. Underlying Mutual Fund shares held in
the Variable Account as to which no timely instructions are received will be
voted by the Company in the same proportion as the voting instructions which
are received with respect to all Contracts participating in the Variable
Account.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options described in
this prospectus should no longer be available for investment by the Variable
Account or if, in the judgment of the Company's management, further
investment in such underlying Mutual Fund shares should become inappropriate,
the Company may eliminate Sub-Accounts, combine two or more Sub-Accounts, or
substitute shares of another underlying Mutual Fund for underlying Mutual
Fund shares already purchased or to be purchased in the future with Purchase
Payments under the Contract. No substitution of securities in the Variable
Account may take place without prior approval of the Securities and Exchange
Commission, under such requirements as it may impose.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of
expenses: (1) administrative expenses relating to the issuance and
maintenance of the Contracts; (2) a mortality risk charge associated with
guaranteeing the annuity purchase rates at issue for the life of the
Contracts; and (3) an expense risk charge associated with guaranteeing that
the Mortality Risk, Expense Risk and Administration Charges described in this
prospectus will not change regardless of actual expenses. If these charges
are insufficient to cover these expenses, the loss will be borne by the
Company.
For 1996, the Variable Account incurred total expenses equal to
1.54% of its average net assets, relating to the administrative, sales,
mortality and expense risk charges described above for all Contracts
outstanding during that year. Deductions from and expenses paid out of the
assets of the underlying Mutual Funds are described in each underlying Mutual
Fund prospectus.
All of the charges described in this section apply to Variable
Account (underlying Mutual Fund) allocations. Allocations to the Fixed
Account are subject to Contingent Deferred Sales Changes and Premium Tax
deductions, if applicable, but are not subject to charges exclusive to the
Variable Account; i.e the Mortality Risk Charge, the Expense Risk Charge and
the Administration Charge.
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MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the
death rates of persons receiving annuity payments or of the general
population.
For assuming this mortality risk, the Company deducts a Mortality
Risk Charge from the Variable Account. 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.
ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal on an annual
basis to 0.15% of the daily net asset value of the Variable Account. The
deduction of the Administration Charge is made from each Sub-Account in the
same proportion that the value in that Sub-Account bears to the total
Contract Value in the Variable Account value. The Administrative Charge is
designed only to reimburse the Company for administrative expenses, and the
Company will monitor these charges to ensure that they do not exceed annual
administration expenses.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct a
Contingent Deferred Sales Charge not to exceed 7% of the lesser of the total
of all Purchase Payments made within 84 months prior to the date of the
request to surrender, or the amount surrendered. The Contingent Deferred
Sales Charge, when it is applicable, will be used to cover expenses relating
to the sale of the Contracts, including commissions paid to sales personnel,
the costs of preparation of sales literature and other promotional activity.
The Company attempts to recover its distribution costs relating to the sale
of the Contracts from the Contingent Deferred Sales Charge. Any shortfall
will be made up from the general account of the Company, which may indirectly
include portions of the Mortality and Expense Risk Charges, since the Company
expects to generate a profit from these charges. The maximum amount that may
be paid to a selling agent on the sale of these Contracts is 6.25% of
Purchase Payments.
The Contingent Deferred Sales Charge is calculated by multiplying
the applicable Contingent Deferred Sales Charge percentages noted below by
the Purchase Payments that are surrendered. For purposes of calculating the
Contingent Deferred Sales Charge, surrenders are considered to come first
from the oldest Purchase Payment made to the Contract, then the next oldest
Purchase Payment and so forth. For tax purposes, a surrender is usually
treated as a withdrawal of earnings first.
The Contingent Deferred Sales Charge applies to Purchase Payments as
follows:
<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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WAIVER OF CONTINGENT DEFERRED SALES CHARGE
In any Contract Year, the Contract Owner may withdraw, without a
Contingent Deferred Sales Charge (CDSC), the greater of: (a) an amount equal
to 10% of that Purchase Payment; or (b) any amount withdrawn from the
Contract to meet minimum distribution requirements under the Code. This
CDSC-free withdrawal privilege is non-cumulative; that is, free amounts not
taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
In addition, no Contingent Deferred Sales Charge will be deducted:
(1) upon the Annuitization of Contracts which have been in force for at least
two years; (2) upon payment of a death benefit pursuant to the death of the
Annuitant; or (3) from any values which have been held under a Contract for
at least 84 months. A Contingent Deferred Sales Charge does not apply upon
the transfer of value among the Sub-Accounts or between or among the Fixed
Account and the Variable Account.
When a Contract described in this prospectus is exchanged for
another Contract issued by the Company or any of its affiliated insurance
companies, of the type and class which the Company determines is eligible for
such an exchange, the Company may waive the Contingent Deferred Sales Charge
on the first Contract. A Contingent Deferred Sales Charge may apply to one
Contract received in the exchange.
When a Contract is held by a Charitable Remainder Trust, the amount
which may be withdrawn from this Contract without application of a Contingent
Deferred Sales Charge, shall be the larger of (a) or (b), where (a) is the
amount which would otherwise be available for withdrawal without application
of a Contingent Deferred Sales Charge and where (b) is the difference between
the total Purchase Payments made to the Contract as of the date of the
withdrawal (reduced by previous withdrawals of such Purchase Payments), and
the Contract Value at the close of the day prior to the date of the
withdrawal.
The Contract Owner may be subject to income tax on all or a portion
of any such withdrawals and to a tax penalty if the Contract Owner takes
withdrawals prior to age 591/2 (See "FEDERAL TAX CONSIDERATIONS-
Non-Qualified Contracts-Natural Persons as Owners").
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any
person, or where it is prohibited by state law.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon
Purchase Payments received by the Company. Premium taxes currently imposed
by certain jurisdictions range from 0% to 3.5%. This range is subject to
change. The method used to recoup premium tax expense will be determined by
the Company at its sole discretion and in compliance with applicable state
law. The Company currently deducts such charges from a Contract Owner's
Contract Value either: (1) at the time the Contract is surrendered; (2) at
Annuitization; or (3) at such earlier date as the Company may become subject
to such taxes.
OPERATION OF THE CONTRACT
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application each Contract Owner elects to have
Purchase Payments attributable to his or her participation in the Variable
Account allocated among one or more of the Sub-Accounts which consist of
shares in the underlying Mutual Funds. Shares of the respective underlying
Mutual Funds specified by the Contract Owner are purchased at net asset value
for the respective Sub-Account(s) and converted into Accumulation Units. The
Contract Owner may change the election as to allocation of Purchase Payments
or may elect to exchange amounts among the Sub-Account options pursuant to
such terms and conditions applicable to such transactions as may be imposed
by each of the underlying Mutual Funds, in addition to those set forth in the
Contract.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to the Fixed Account or 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.
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The initial first year Purchase Payment must be at least $15,000.
Subsequent Purchase Payments, if any, must be at least $1,000. Subsequent
Purchase Payments are not permitted in the states of New York, Oregon, and
Washington. The cumulative total of all Purchase Payments under Contracts
issued on the life of any one Designated Annuitant may not exceed $1,000,000
without prior consent of the Company.
The initial Purchase Payment allocated to designated Sub-Accounts of
the Variable Account will be priced no later than 2 business days after
receipt of an order to purchase if the application and all information
necessary for processing the purchase order are complete. The Company may,
however, retain the Purchase Payment for up to 5 business days while
attempting to complete an incomplete application. If the application cannot
be made complete within 5 days, the prospective purchaser will be informed of
the reasons for the delay and the Purchase Payment will be returned
immediately unless the prospective purchaser specifically consents to the
Company retaining the Purchase Payment until the application is complete.
Thereafter, subsequent Purchase Payments will be priced on the basis of the
Accumulation Value next computed for the appropriate Sub-Account after the
additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF AN ACCUMULATION UNIT
The value of an Accumulation Unit for each Sub-Account was
arbitrarily set initially at $10 when underlying Mutual Fund shares in that
Sub-Account were available for purchase. The value for any subsequent
Valuation Period is determined by multiplying the Accumulation Unit value for
each Sub-Account for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation
Period to Valuation Period. The number of Accumulation Units will not change
as a result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual
Fund held in the Sub-Account determined at the end of
the current Valuation Period; plus
(2) the per share amount of any dividend or capital gain
Distributions made by the underlying Mutual Fund held
in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period.
(b) is the net of:
(1) the net asset value per share of the underlying Mutual
Fund held in the Sub-Account determined at the end of
the immediately preceding Valuation Period; plus or
minus
(2) the per share charge or credit, if any, for any taxes
reserved for in the immediately preceding Valuation
Period (see "Charge For Tax Provisions").
(c) is a factor representing the daily Mortality Risk Charge,
Expense Risk Charge and Administration Charge deducted from
the Variable Account. Such factor is equal to an annual rate
of 1.40% 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 (Variable Insurance Products Fund -
Money Market Portfolio), 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.
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VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The Contract Value is the sum of all Accumulation Units attributable to
the Contract and amounts credited to the Fixed Account. If part or all of
the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and the Fixed Account bears to the total Contract Value.
RIGHT TO REVOKE
Unless otherwise required by state and/or federal law, the Contract
Owner may revoke the Contract 10 days after receipt of the Contract and
receive a refund of the Contract Value. All Individual Retirement Annuity
refunds will be a 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
Transfers between the Fixed and Variable Account and among the Variable
Account Sub-Accounts must be made prior to the Annuitization Date. The
Contract Owner may request a transfer of up to 100% of the Variable Account
Contract Value to the Fixed Account, without penalty or adjustment. The
Company reserves the right to restrict transfers from the Variable Account to
the Fixed Account to 25% of the Contract Value for any 12 month period. All
amounts transferred to the Fixed Account must remain on deposit in the Fixed
Account until the expiration of the current Interest Rate Guarantee Period.
In addition, transfers from the Fixed Account may not be made prior to the
end of the then current Interest Rate Guarantee Period. The Interest Rate
Guarantee Period for any amount allocated to the Fixed Account expires on the
final day of a calendar quarter during which the one year anniversary of the
allocation to the Fixed Account occurs. Transfers must also be made prior to
the Annuitization Date. For all transfers involving the Variable Account,
the Contract Owner's value in each Sub-Account will be determined as of the
date the transfer request is received in the Home Office in good order. The
Company reserves the right to refuse transfers or Purchase Payments into the
Fixed Account in greater than or equal to 30% of the total Contract Value.
The Contract Owner may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The amount that may be transferred from the Fixed Account to the
Variable Account will be determined by the Company, at its sole discretion,
but will not be less than 10% of the total value of the portion of the Fixed
Account that is maturing. The amount that may be transferred from the Fixed
Account will be declared upon the expiration date of the then current
Interest Rate Guarantee Period. Transfers from the Fixed Account must be
made within 45 days after the expiration date of the guarantee period.
Contract Owners who have entered into a Dollar Cost Averaging agreement with
the Company (see "Dollar Cost Averaging") may transfer from the Fixed Account
to the Variable Account under the terms of that agreement.
Transfers may be made either in writing or, in states allowing such
transfers, by telephone. This telephone exchange privilege is made available
to Contract Owners automatically without the Contract Owner's election. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include any or
all of the following: 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; or such other procedures as the Company may deem
reasonable. 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
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reasonably believed to be genuine shall be borne by the Contract Owner. The
Company may withdraw the telephone exchange privilege upon 30 days written
notice to Contract Owners.
Contracts described in this prospectus may in some cases be sold to
individuals who independently utilize the services of a firm or individual
engaged in market timing. Generally, such firms or individuals obtain
authorization from multiple Contract Owners to make transfers and exchanges
among the Sub-Accounts (the underlying Mutual Funds) on the basis of
perceived market trends. Because of the unusually large transfers of funds
associated with some of these transactions, the ability of the Company or
underlying Mutual Funds to process such transactions may be compromised, and
the execution of such transactions may possibly disadvantage or work to the
detriment of other Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the
Sub-Accounts may be subject to modification if such rights are exercised by a
market timing firm or any other third party authorized to initiate transfer
or exchange transactions on behalf of multiple Contract Owners. THE RIGHTS
OF INDIVIDUAL CONTRACT OWNERS TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS
ARE SUBMITTED DIRECTLY BY THE CONTRACT OWNER, OR BY THE CONTRACT OWNER'S
REPRESENTATIVE OF RECORD AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE
LIMITED POWER OF ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In
modifying such rights, the Company may, among other things, not accept: (1)
the transfer or exchange instructions of any agent acting under a power of
attorney on behalf or more than one Contract Owner; or (2) the transfer or
exchange instructions of individual Contract Owners who have executed
pre-authorized transfer or exchange forms which are submitted by market
timing firms or other third parties on behalf of more than one Contract Owner
at the same time. The Company will not impose any such restrictions or
otherwise modify exchange rights unless such action is reasonably intended to
prevent the use of such rights in a manner that will disadvantage or
potentially impair the contract rights of other Contract Owners.
CONTRACT OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS
OWNER, THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. Prior to the
Annuitization Date, the Contract Owner may name a new Contract Owner in
Non-Qualified Contracts. Such change may be subject to state and federal
gift taxes and may also result in federal income taxation. Any change of
Contract Owner designation will automatically revoke any prior Contract Owner
designation. Once proper notice of the change is received and recorded by
the Company, the change will become effective as of the date the written
request is recorded. A change of Contract Owner will not apply and will not
be effective with respect to any payment made or action taken by the Company
prior to the time that the change was received and recorded by the Company.
Prior to the Annuitization Date, the Contract Owner may request a change
in the Designated Annuitant, the Contingent Annuitant, Contingent Owner,
Beneficiary, or Contingent Beneficiary. Such a request must be made in
writing on a form acceptable to the Company and must be signed by both the
Contract Owner and the person to be named as Designated Annuitant, Contingent
Annuitant, or Contingent Owner, as applicable. Such request must be received
by the Company at its Home Office prior to the Annuitization Date. Any such
change is subject to underwriting and approval by the Company. If the
Contract Owner is not a natural person and there is a change of the
Designated Annuitant, such change shall be treated as the death of a Contract
Owner and Distributions shall be made as if the Contract Owner died at the
time of such change.
On and after the Annuitization Date, the Annuitant shall become the
Contract Owner.
JOINT OWNERSHIP PROVISIONS
Joint Owners must be spouses at the time joint ownership is requested.
If a Joint Owner is named, the Joint Owner will possess an undivided interest
in the Contract. Unless otherwise provided, the exercise of any ownership
rights in the Contract (including the right to surrender or partially
surrender the Contract, to change the Contract Owner, the Contingent Owner,
the Designated Annuitant, the Contingent Annuitant, the Beneficiary, the
Contingent Beneficiary, the Annuity Payment Option or the Annuitization Date)
shall require a written request signed by both Joint Owners.
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CONTINGENT OWNERSHIP PROVISIONS
The Contingent Owner is the person who may receive certain benefits
under the Contract if the Contract Owner, who is not the Designated
Annuitant, dies prior to the Annuitization Date and there is no surviving
Joint Owner. If more than one Contingent Owner survives the Contract Owner,
each will share equally unless otherwise specified in the Contingent Owner
designation. If no Contingent Owner survives a Contract Owner and there is
no surviving Joint Owner, all rights and interest of the Contingent Owner
will vest in the Contract Owner's estate. If a Contract Owner, who is also
the Designated Annuitant, dies before the Annuitization Date, then the
Contingent Owner does not have any rights in the Contract; however, if the
Contingent Owner is also the Beneficiary, the Contingent Owner will have all
the rights of a Beneficiary.
Subject to the terms of any existing assignment, the Contract Owner may
change the Contingent Owner prior to the Annuitization Date by written notice
to the Company. The change, upon receipt and recording by the Company at its
Home Office, will take effect as of the time the written notice was signed,
whether or not the Contract Owner is living at the time of recording, but
without further liability as to any payment or settlement made by the Company
before receipt of such change.
BENEFICIARY PROVISIONS
The Beneficiary is the person or persons who may receive certain
benefits under the Contract in the event the Designated Annuitant dies prior
to the Annuitization Date. If more than one Beneficiary survives the
Designated Annuitant, each will share equally unless otherwise specified in
the Beneficiary designation. If no Beneficiary survives the Designated
Annuitant, all rights and interest of the Beneficiary shall vest in the
Contingent Beneficiary, and if more than one Contingent Beneficiary survives,
each will share equally unless otherwise specified in the Contingent
Beneficiary designation. If no Contingent Beneficiary survives the
Designated Annuitant, all rights and interest of the Contingent Beneficiary
will vest with the Contract Owner or the estate of the last surviving
Contract Owner.
Subject to the terms of any existing assignment, the Contract Owner may
change the Beneficiary or Contingent Beneficiary during the lifetime of the
Designated Annuitant by written notice to the Company. The change, upon
receipt and recording by the Company at its Home Office, will take effect as
of the time the written notice was recorded, whether or not the Designated
Annuitant is living at the time of recording, but without further liability
as to any payment or settlement made by the Company before receipt of such
change.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company
will, upon proper written application by the Contract Owner deemed by the
Company to be in good order, allow the Contract Owner to surrender a portion
or all of the Contract Value. "Proper written application" means that the
Contract Owner must request the surrender in writing and include the
Contract. In some cases (for example, requests by a corporation, partnership,
agent, fiduciary, or surviving spouse), the Company will require additional
documentation of a customary nature. The Company may require that the
signature(s) be guaranteed by a member firm of a major stock exchange or
other depository institution qualified to give such a guaranty.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all
Sub-Accounts in which the Contract Owner has an interest, and the Fixed
Account. The number of Accumulation Units surrendered from each Sub-Account
and the amount surrendered from the Fixed Account will be in the same
proportion that the Contract Owner's interest in the Sub-Accounts and Fixed
Account bears to the total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of
any payment of any benefit or values for any Valuation Period: (1) when the
New York Stock Exchange ("Exchange") is closed; (2) when trading on the
Exchange is restricted; (3) when an emergency exists as a result of which
disposal of securities held in the Variable Account is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Variable Account's net assets; or (4) during any other period
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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.
SURRENDERS UNDER A TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of
the Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code, may be executed only:
1. when the Contract Owner attains age 591/2, separates from service,
dies, or becomes disabled (within the meaning of Code Section
72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case of
hardship may not include any income attributable to salary reduction
contributions.
B. The surrender limitations described in A. above 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 or Tax Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event
of a ten-day free look, the Company will agree to transfer the proceeds to
another contract which meets the requirements of Section 403(b) of the Code,
upon proper direction by the Contract Owner. The foregoing is the Company's
understanding of the withdrawal restrictions which are currently applicable
under Code Section 401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling
90-24. Such restrictions are subject to legislative change and/or
reinterpretation from time to time. Distributions pursuant to Qualified
Domestic Relations Orders will not be considered to be a violation of the
restrictions stated in this provision.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Tax Sheltered Annuity
Contract may receive a loan from the Contract Value subject to the terms of
the Contract, the Plan, and the Code, which may impose restrictions on loans.
Loans from 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.
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For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other
named collateral where the loan from a Contract exceeds 50% of the Contract
Value.
All loans are made from the 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 transfer to the collateral fixed account the Variable Account
units from the Contract Owner's investment options in proportion to the asset
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 any transfers 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 manner as a purchase payment. Both loan
repayments and purchase payments will be allocated to the Contract in
accordance with the most current allocation unless the Contract Owner and the
Company agree otherwise.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan
is outstanding, the Contract Value will be reduced by the amount of the
outstanding loan plus accrued interest. Until the loan is repaid, the
Company reserves the right to restrict any transfer of the Contract which
would otherwise qualify as a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to
accrue. A grace period may be available under the terms of the loan
agreement. If a loan payment is not made when due, or by the end of the
applicable grace period, the entire loan will be treated as a deemed
Distribution, may be taxable to the borrower, and may be subject to the early
withdrawal tax penalty. Interest which subsequently accrues on defaulted
amounts may also be treated as additional deemed Distributions each year.
Any defaulted amounts, plus accrued interest, will be deducted from the
Contract when the participant becomes eligible for a Distribution of at least
that amount, and this amount may again be treated as a Distribution where
required by law. Additional loans may not be available while a previous loan
remains in default.
Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract
may still be taxable in whole or part if the participant has additional loans
from other plans or contracts. The Company will calculate the maximum
nontaxable loan based on the information provided by the participant or the
employer.
Loan repayments must be identified as such or else they will be treated
as Purchase Payments and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term
or procedures if there is a change in applicable law. The Company also
reserves the right to assess a loan processing fee.
Individual Retirement Annuities and Non-Qualified Contracts are not
eligible for loans.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all of the rights
under the Contract at any time during the lifetime of the Designated
Annuitant prior to the Annuitization Date. Such assignment will take effect
upon receipt and recording by the Company at its Home Office of a written
notice executed by the Contract Owner. The Company assumes no responsibility
for the validity or tax consequences of any assignment. The Company shall not
be liable as to any payment or other settlement made by the Company before
recording of
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the assignment. Where necessary for the proper administration of the terms
of the Contract, an assignment will not be recorded until the Company has
received sufficient direction from the Contract Owner and assignee as to the
proper allocation of Contract rights under the assignment.
Any portion of Contract Value which is pledged or assigned shall be
treated as a Distribution and shall be included in gross income to the extent
that the cash value exceeds the investment in the Contract for the taxable
year in which it was pledged or assigned. In addition, any Contract Values
assigned may, under certain conditions, be subject to a tax penalty equal to
10% of the amount which is included in gross income. All rights in this
Contract are personal to the Contract Owner and may not be assigned without
written consent of the Company. Assignment of the entire Contract Value may
cause the portion of the Contract Value which exceeds the total investment in
the Contract and previously taxed amounts to be included in gross income for
federal income tax purposes each year that the assignment is in effect.
Individual Retirement Annuities, and Tax Sheltered Annuities may not be
assigned, pledged or otherwise transferred except under such conditions as
may be allowed by law.
CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic
reallocation of Contract Values to the underlying Mutual Fund options on a
predetermined percentage basis every three months or based on another
frequency authorized by the Company. If the last day of the three month
period falls on a Saturday, Sunday, recognized holiday or any other day when
the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the first business day after that day. An Asset Rebalancing request
must be in writing on a form provided by the Company. The Contract Owner may
want to contact a financial adviser in order to discuss the use of Asset
Rebalancing in his or her Contract.
Contracts issued to a Tax Sheltered Annuity Plan as defined by the Code
may have superseding plan restrictions with regard to the frequency of fund
exchanges and underlying Mutual Fund options.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days written notice; such discontinuation will not affect Asset
Rebalancing programs which have already commenced. The Company also reserves
the right to assess a processing fee for this service.
DOLLAR COST AVERAGING- If the Contract Value is $15,000 or more, the
Contract Owner may direct the Company to automatically transfer a specified
amount from the Variable Insurance Products Fund - Money Market Portfolio
("Money Market Portfolio") or the Fixed Account to any other Sub-Account
within the Variable Account on a monthly basis or as frequently as otherwise
authorized by the Company. This service is intended to allow the Contract
Owner to utilize Dollar Cost Averaging, a long-term investment program which
provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect
against loss in a declining market. The minimum Dollar Cost Averaging
transfer is $100. In addition, Dollar Cost Averaging transfers from the
Fixed Account must be equal to or less than 1/30th of the Fixed Account value
when the Dollar Cost Averaging program is requested. Transfers out of the
Fixed Account, other than for Dollar Cost Averaging, may be subject to
certain additional restrictions (see "Transfers"). A written election of
this service, on a form provided by the Company, must be completed by the
Contract Owner in order to begin transfers. Once elected, transfers from the
Money Market Portfolio or the Fixed Account will be processed monthly or on
another approved frequency until either the value in the Money Market
Portfolio or the Fixed Account is depleted or the Contract Owner instructs
the Company in writing to cancel the transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days written notice; such discontinuation will not affect
Dollar Cost Averaging programs which have already commenced. The Company
also reserves the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals of a specified dollar
amount (of at least $100) on a monthly, quarterly, semi-annual, or annual
basis. The Company will process the withdrawals as directed by surrendering
on a pro-rata basis Accumulation Units from all Sub-Accounts in which the
Contract Owner has an interest and the Fixed Account. A Contingent Deferred
Sales Charge may also apply to Systematic Withdrawals in accordance with the
considerations set forth in the "Contingent Deferred Sales Charge" section.
Each Systematic Withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on
Systematic Withdrawals if the Contract Owner is under age 591/2. Unless
directed by the Contract Owner, the Company will withhold federal income
taxes from each Systematic Withdrawal. Unless, the Contract Owner has
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made an irrevocable election of Distributions of substantially equal
payments, the Systematic Withdrawals may be discontinued at any time by
notifying the company in writing.
If the Contract Owner withdraws amounts pursuant to a Systematic
Withdrawal program, then the Contract Owner may withdraw each Contract Year
without a CDSC an amount up to the greater of: (1) 10% of the total sum of
all Purchase Payments made to the Contract at the time of withdrawal; (2) an
amount withdrawn from any Individual Retirement Annuity Contract or Tax
Sheltered Annuity, in order to meet minimum Distribution requirements; (3)
the specified percentage of the Contract Value based on the Contract Owner's
age, as shown in the following table:
Contract Owner's Percentage of
Age Contract Value
------------------ ----------------
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
If the total amounts withdrawn in any Contract Year exceed the CDSC-free
amount as calculated under the Systematic Withdrawal method described above,
then such total withdrawn amounts will be eligible only for the 10% of
Purchase Payment CDSC-free withdrawal privilege described in the "Contingent
Deferred Sales Charge" section, and the total amount of CDSC charged during
the Contract Year will be determined in accordance with that provision.
The Contract Value and the Contract Owner's age for purposes of applying
the CDSC-free withdrawal percentage described in this provision are
determined as of the date the request for a Systematic Withdrawal program is
received and recorded by the Company at its Home Office. (In the case of
Joint Owners, the older Owner's age will be used.) The Contract Owner may
elect to take such CDSC-free amounts only once each Contract Year.
Furthermore, this CDSC-free withdrawal privilege for Systematic Withdrawals
is non-cumulative; free amounts not taken during any given Contract Year
cannot be taken as free amounts in a subsequent Contract Year.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days written notice; such discontinuation will not affect
any Systematic Withdrawal programs already commenced. The Company also
reserves the right to assess a processing fee for this service. Systematic
Withdrawals are not available prior to the expiration of the ten day free
look provision of the Contract or of applicable state/federal law.
ANNUITY PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS
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 or any
other agreed upon date and must be at least 2 years after the Date of Issue.
In the event the Contract is issued subject to the terms of Tax Sheltered
Annuity Plan, Annuitization may occur during the first 2 years subject to
approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
If the Contract Owner requests in writing, and the Company approves the
request, the Annuity Commencement Date may be deferred. The new date must
comply with the Annuity Commencement Date provisions above.
If the Contract Owner requests in writing, (see "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. The amount of the Death Benefit will be limited to the Contract
Value if the Annuity Commencement Date is postponed beyond the first day of
the calendar month after the Designated Annuitant's 86th birthday.
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ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected and the amount of the first such
payment shall be determined in accordance with the Annuity Table in the
Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an
Annuity Unit as of the Annuitization Date to establish the number of Annuity
Units representing each monthly annuity payment. This number of Annuity
Units remains fixed during the annuity payment period. The dollar amount of
the second and subsequent payments is not predetermined and may change from
month to month. The dollar amount of each subsequent payment is determined by
multiplying the fixed number of Annuity Units by the Annuity Unit Value for
the Valuation Period in which the payment is due. The Company guarantees that
the dollar amount of each payment after the first will not be affected by
variations in mortality experience from mortality assumptions used to
determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an
Annuity Unit for a Sub-Account for any subsequent Valuation Period is
determined by multiplying the Annuity Unit Value for the immediately
preceding Valuation Period by the Net Investment Factor for the Valuation
Period for which the Annuity Unit Value is being calculated, and multiplying
the result by an interest factor to neutralize the assumed investment rate of
3.5% per annum (see "Net Investment Factor").
ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the Annuity Tables
contained in the Contracts. A higher assumption would mean a higher initial
payment but more slowly rising or more rapidly falling subsequent payments.
A lower assumption would have the opposite effect. If the actual investment
rate is at the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$5,000, the Company shall have the right to pay such amount in one lump sum
in lieu of the payments otherwise provided. In addition, if the payments
provided for would be or become less than $50, the Company shall have the
right to change the frequency of payments to such intervals as will result in
payments of at least $50. In no event will the Company make payments under
an annuity option less frequently than annually.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment
Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
OPTION 1-LIFE ANNUITY-An annuity payable periodically, but at least
annually during the lifetime of the Annuitant, ceasing with the last
payment due prior to the death of the Annuitant. IT WOULD BE POSSIBLE
UNDER THIS OPTION FOR THE ANNUITANT TO RECEIVE ONLY ONE ANNUITY PAYMENT
IF HE OR SHE DIED BEFORE THE SECOND ANNUITY PAYMENT DATE, TWO ANNUITY
PAYMENTS IF HE OR SHE DIED BEFORE THE THIRD ANNUITY PAYMENT DATE, AND SO
ON.
OPTION 2-JOINT AND LAST SURVIVOR ANNUITY-An annuity payable
periodically, but at least annually during the joint lifetimes of the
Annuitant and designated second person and continuing thereafter during the
lifetime of the survivor. AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS
NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE
UPON THE DEATH OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF
PAYMENTS RECEIVED.
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OPTION 3-LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED-An
annuity payable periodically, but at least annually during the lifetime of
the Annuitant with the guarantee that if at the death of the Annuitant
payments have been made for fewer than 120 or 240 months, as selected,
payments will be made as follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments will
be continued during the remainder of the selected period to such
recipient as chosen by the Annuitant at the time the Annuity Payment
Option was selected. In the alternative, the recipient may, at any
time, elect to have the present value of the guaranteed number of
annuity payments remaining paid in a lump sum as specified in section
(2) below.
(2) If someone other than the Annuitant is the payee, the present
value, computed as of the date on which notice of death is received by
the Company at its Home Office, of the guaranteed number of annuity
payments remaining after receipt of such notice and to which the
deceased would have been entitled had he or she not died, computed at
the Assumed Investment Rate effective in determining the Annuity
Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states.
The Contract Owner may request an alternative non-guaranteed option by giving
notice in writing prior to Annuitization. If such a request is approved by
the Company, it will be permitted under the Contract.
If the Contract Owner of a Non-Qualified Contract fails to elect an
Annuity Payment Option, no Distribution will be made until an effective
Annuity Payment Option has been elected. Individual Retirement Annuities and
Tax Sheltered Annuities are subject to the minimum Distribution requirements
set forth in the Plan, Contract or Code.
DEATH OF CONTRACT OWNER PROVISIONS - NON-QUALIFIED CONTRACTS
For Non-Qualified Contracts, if the Contract Owner and the Designated
Annuitant are not the same person and such Contract Owner dies prior to the
Annuitization Date, then the Joint Owner, if any, becomes the new Contract
Owner. If there is no surviving Joint Owner, the Contingent Owner becomes
the new Contract Owner. If there is no surviving Contingent Owner, the last
surviving Contract Owner's estate becomes the Contract Owner. The entire
interest in the Contract Value, less any applicable deductions (which may
include a Contingent Deferred Sales Charge), must be distributed in
accordance with the "Required Distribution Provisions - Non-Qualified
Contracts" provisions.
DEATH OF THE ANNUITANT PROVISIONS - NON-QUALIFIED CONTRACTS
If the Contract Owner and Designated Annuitant are not the same person,
and the Designated Annuitant dies prior to the Annuitization Date, a Death
Benefit will be payable to the Beneficiary, the Contingent Beneficiary, the
Contract Owner, or the last surviving Contract Owner's estate, as specified
in the "Beneficiary Provisions", unless there is a surviving Contingent
Annuitant. In such case, the Contingent Annuitant becomes the Designated
Annuitant and no Death Benefit is payable.
The Beneficiary may elect to receive such Death Benefits in the form of:
(1) a lump sum Distribution; (2) election of an annuity payout; or (3) any
Distribution that is permitted under state and federal regulations and is
acceptable by the Company. Such election must be received by the Company
within 90 days of the Designated Annuitant's death. If the election is made
more than 60 days after the lump sum first becomes payable, the election
would be ignored for tax purposes, and the entire amount of the lump sum
would be subject to immediate tax. If the election is made within the 60 day
period, each Distribution would be taxable when it is paid.
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be paid according to the selected Annuity Payment Option.
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DEATH OF THE CONTRACT OWNER/ANNUITANT PROVISIONS
If any Contract Owner and Designated Annuitant are the same person, and
such person dies before the Annuitization Date, a Death Benefit will be
payable to the Beneficiary, the Contingent Beneficiary, the Contract Owner,
or the last surviving Contract Owner's estate, as specified in the
Beneficiary Provisions and in accordance with the appropriate "Required
Distributions Provisions."
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be paid according to the selected Annuity Payment Option.
DEATH BENEFIT PAYMENT PROVISIONS
The value of the Death Benefit will be determined as of the Valuation
Date coincident with or next following the date the Company receives in
writing at the Home Office the following three items: (1) proper proof of the
Annuitant's death; (2) an election specifying the Distribution method; and
(3) any applicable state required form(s).
If the Designated Annuitant dies prior to his or her 86th birthday the
dollar amount of the death benefit will be the greater of: (1) the Contract
Value; or, (2) the sum of all purchase payments, less any amounts
surrendered, or (3) the Contract Value as of the most recent five year
Contract Anniversary, less any amounts surrendered since that five year
anniversary.
If the Annuitant dies after the Annuitization Date, any payment that may
be payable will be determined according to the selected Annuity Payment
Option.
If the Annuitant dies on or after his 86th birthday, the Death Benefit
will be equal to the Contract Value.
REQUIRED DISTRIBUTION PROVISIONS FOR NON-QUALIFIED CONTRACTS
Upon the death of any Contract Owner or Joint Owner (including an
Annuitant who becomes the Owner of the Contract on the Annuitization Date)
(each of the foregoing "a deceased Owner"), certain Distributions for
Non-Qualified Contracts are required by Section 72(s) of the Code.
Notwithstanding any provision of the Contract to the contrary, the following
Distributions shall be made in accordance with such requirements:
1. If any deceased Contract Owner died on or after the Annuitization
Date and before the entire interest under the Contract has been
distributed, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of Distribution
in effect as of the date of such deceased Contract Owner's death.
2. If any deceased Contract Owner died prior to the Annuitization
Date, then the entire interest in the Contract (consisting of
either the Death Benefit or the Contract Value reduced by certain
charges as set forth elsewhere in the Contract) shall be distributed
within 5 years of the death of the deceased Contract Owner, provided
however:
(a) If any portion of such interest is payable to or for the
benefit of a natural person who is a surviving Contract
Owner, Contingent Owner, Joint Owner, Designated Annuitant,
Contingent Annuitant, Beneficiary, or Contingent Beneficiary
as the case may be (each a "designated beneficiary"), such
portion may, at the election of the designated Beneficiary, be
distributed over the life of such designated Beneficiary, or over
a period not extending beyond the life expectancy of such
designated Beneficiary, provided that payments begin within
one year of the date of the deceased Contract Owner's death
(or such longer period as may be permitted by federal income
tax regulations); and
(b) If the designated Beneficiary is the surviving spouse of the
deceased Contract Owner, such spouse may elect to become
the Contract Owner of this Contract, in lieu of a Death
Benefit, and the Distributions required under these distribution
rules will be made upon the death of such spouse.
In the event that this Contract is owned by a person that is not a
natural person (e.g., a trust or corporation), then, for purposes of these
Distribution provisions: (1) the death of the Designated Annuitant shall be
treated as the death of any Contract Owner; (2) any change of the Designated
Annuitant shall be treated as the death of any Contract Owner, and (3) in
either case the appropriate Distribution required under these distribution
rules shall be made upon such death or change, as the case may be. The
Designated Annuitant is the primary annuitant as defined in Section
72(s)(6)(B) of the Code.
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These distribution provisions shall not be applicable to any Contract
that is not required to be subject to the provisions of 72(s) of the Code by
reason of Section 72(s)(5) or any other law or rule (including Tax Sheltered
Annuities, Individual Retirement Annuities and Qualified Plans).
Upon the death of a "deceased owner", the designated Beneficiary must
elect a method of Distribution which complies with these above Distribution
provisions and which is acceptable to the Company. Such election must be
received by the Company within 90 days of the deceased Contract Owner's
death. The Code requires that any election to receive an annuity rather than
a lump sum payment must be made within 60 days after the lump sum becomes
payable (generally, the election must be made within 60 days after the death
of a Contract Owner or the Designated Annuitant). If the election is made
more than 60 days after the lump sum first becomes payable, the election
would be ignored for tax purposes, and the entire amount of the lump sum
would be subject to immediate tax. If the election is made within the 60 day
period, each Distribution would be taxable when it is paid.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Tax Sheltered Annuity
Contract will be distributed in a manner consistent with the Minimum
Distribution and Incidental Benefit (MDIB) provisions of Section 401(a)(9) of
the Code and applicable regulations and will be paid, notwithstanding
anything else contained herein, to the Annuitant under the Annuity Payments
Option selected, over a period not exceeding:
A. the life of the Annuitant or the lives of the Annuitant and the
Annuitant's designated Beneficiary under the selected Annuity
Payment Option; or
B. a period not extending beyond the life expectancy of the Annuitant
or the life expectancy of the Annuitant and the Annuitant's
designated Beneficiary under the selected annuity Payment Option.
No Distributions will be required from this Contract if Distributions
otherwise required from this Contract are being withdrawn from another Tax
Sheltered Annuity Contract of the Annuitant.
If the Annuitant's entire interest in a Tax Sheltered Annuity is to be
distributed in equal or substantially equal payments over a period described
in (a) or (b), above, such payments will commence no later than: (1) the
first day of April following the calendar year in which the Annuitant attains
age 701/2; or (2) when the Annuitant retires, whichever is later (the
"required beginning date").
If the Annuitant dies prior to the commencement of his or her
Distribution, the interest in the Tax Sheltered Annuity must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or
her death occurs unless:
(a) the Annuitant names his or her surviving spouse as the Beneficiary
and such spouse elects to receive Distribution of the account in
substantially equal payments over his or her life (or a period not
exceeding his or her life expectancy) and commencing not later than
December 31 of the year in which the Annuitant would have attained
age 701/2; or
(b) the Annuitant names a Beneficiary other than his or her surviving
spouse and such Beneficiary elects to receive a Distribution of the
account in substantially equal payments over his or her life (or a
period not exceeding his or her life expectancy) commencing not later
than December 31 of the year following the year in which the
Annuitant dies.
If the Annuitant dies after Distribution has commenced, Distribution
must continue at least as rapidly as under the schedule being used prior to
his or her death.
Payments commencing on the required beginning date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Annuitant by the life expectancy of the Annuitant, or the joint and last
survivor expectancy of the Annuitant and the Annuitant's designated
Beneficiary (if the Annuitant dies prior to the required beginning date) or
the Beneficiary under the selected Annuity Payment Option (if the Annuitant
dies after the required beginning date) whichever is applicable under the
applicable minimum Distribution or MDIB provisions. Life expectancy and
joint and last survivor expectancy are computed by the use of return
multiples contained in Section 1.72-9 of the Treasury Regulations.
If the amounts distributed to the Annuitant are less than those
mentioned above, a penalty tax of 50% is levied on the excess of the amount
that should have been distributed for that year over the amount that actually
was distributed for that year.
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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 701/2. Distribution may be accepted in a lump sum or in
substantially equal payments over: (a) the Contract Owner's life or the lives
of the Contract Owner and his or her spouse or designated Beneficiary, or (b)
a period not extending beyond the life expectancy of the Contract Owner or
the joint life expectancy of the Contract Owner and the Contract Owner's
designated Beneficiary.
If the Contract Owner dies prior to the commencement of his or her
Distribution, the interest in the Individual Retirement Annuity must be
distributed by December 31 of the calendar year in which the fifth
anniversary of his or her death occurs, unless:
(a) The Contract 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 701/2; or
(b) The Contract 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 Contract Owner dies.
No Distribution will be required from this Contract if Distributions
otherwise required from this Contract are being withdrawn from another
Individual Retirement Annuity or Individual Annuity Account of the Contract
Owner.
If the Contract Owner dies after Distribution has commenced,
Distribution must continue at least as rapidly as under the schedule being
used prior to his or her death, except that a surviving spouse who is the
Beneficiary under the Annuity Payment Option, may treat this Contract as his
or her own, in the same manner as is described in section (a)(i) of this
provision.
If the amounts distributed to the Contract Owner are less than those
mentioned above, a penalty tax of 50% is levied on the excess of the amount
that should have been distributed for that year over the amount that actually
was distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income
tax rates. The portion of the Distribution which is taxable is based on the
ratio between the amount by which non-deductible Purchase Payments exceed
prior non-taxable Distributions and total account balances at the time of the
Distribution. The Contract Owner of an Individual Retirement Annuity must
annually report the amount of non-deductible Purchase Payments, the amount of
any Distribution, the amount by which non-deductible Purchase Payments for
all years exceed non-taxable Distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum Distribution from a Qualified Plan. If
the Contract 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 determine whether the Death Benefit or any other payment
constitutes a direct skip as defined in Section 2612 of the Code, and the
amount of the tax on the generation-skipping transfer resulting from such
direct skip. If applicable, such payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
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FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
Section 72 of the Code governs federal income taxation of annuities in
general. That section sets forth different rules for: (1) Individual
Retirement Annuities; (2) Tax Sheltered Annuities; and (3) Non-Qualified
Contracts. Each type of annuity is discussed below.
Distributions to participants from Tax Sheltered Annuities are generally
taxed when received. A portion of each Distribution is excludable from
income based on the ratio between the after tax investment of the
Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned
by Individual Retirement Accounts are also generally taxed when received.
The portion of each such payment which is excludable is based on the ratio
between the amount by which nondeductible Purchase Payments to all such
Contracts exceeds prior non-taxable Distributions from such Contracts, and
the total account balances in such Contracts at the time of the Distribution.
The Contract Owner of such Individual Retirement Annuities or the Annuitant
under Contracts held by Individual Retirement Accounts must annually report
to the Internal Revenue Service the amount of nondeductible Purchase
Payments, the amount of any Distribution, the amount by which nondeductible
Purchase Payments for all years exceed non-taxable Distributions for all
years, and the total balance in all Individual Retirement Annuities and
Accounts.
A change of the Designated Annuitant or Contingent Annuitant may be
treated by the Internal Revenue Service as a taxable transaction.
NON-QUALIFIED CONTRACTS - NATURAL PERSONS AS OWNERS
The rules applicable to Non-Qualified Contracts provide that a portion
of each annuity payment received is excludable from taxable income based on
the ratio between the Contract Owner's investment in the Contract and the
expected return on the Contract until the investment has been recovered;
thereafter the entire amount is includable in income. The maximum amount
excludable from income is the investment in the Contract. If the Annuitant
dies prior to excluding from income the entire investment in the Contract,
the Annuitant's final tax return may reflect a deduction for the balance of
the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are
taxable to the Contract Owner to the extent that the cash value of the
Contract exceeds the Contract Owner's investment at the time of the
Distribution. Distributions, for this purpose, include partial surrenders,
dividends, loans, or any portion of the Contract which is assigned or
pledged; or for Contracts issued after April 22, 1987, any portion of the
Contract transferred by gift. For these purposes, a transfer by gift may
occur upon Annuitization if the Contract Owner and the Annuitant are not the
same individual. In determining the taxable amount of a Distribution, all
annuity contracts issued after October 21, 1988, by the same company to the
same contract owner during any 12 month period, will be treated as one
annuity contract. Additional limitations on the use of multiple contracts
may be imposed by Treasury Regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested
prior to August 14, 1982, are treated first as a recovery of the investment
in the Contract as of that date. A Distribution in excess of the amount of
the investment in the Contract as of August 14, 1982, will be treated as
taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such
entities are taxed currently on the earnings on the Contract which are
attributable to contributions made to the Contract after February 28, 1986.
There are exceptions for immediate annuities and certain Contracts owned for
the benefit of an individual. An immediate annuity, for purposes of this
discussion, is a single premium Contract on which payments begin within one
year of purchase. If this Contract is issued as the result of an exchange
described in Section 1035 of the Code, for purposes of determining whether
the Contract is an immediate annuity, it will generally be considered to have
been purchased on the purchase date of the contract given up in the exchange.
Code Section 72 also provides for a penalty tax, equal to 10% of the
portion of any Distribution that is includable in gross income, if such
Distribution is made prior to attaining age 591/2. The penalty tax does not
apply if the Distribution is attributable to the Contract Owner's death,
disability or is one of a series of
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substantially equal periodic payments made over the life or life
expectancy of the Contract Owner (or the joint lives or joint life
expectancies of the Contract Owner and the beneficiary selected by the
Contract Owner to receive payment under the Annuity Payment Option selected
by the Contract Owner) or for the purchase of an immediate annuity, or is
allocable to an investment in the Contract before August 14, 1982. A
Contract Owner wishing to begin taking Distributions to which the 10% tax
penalty does not apply should forward a written request to the Company. Upon
receipt of a written request from the Contract Owner, the Company will inform
the Contract Owner of the procedures pursuant to Company policy and subject
to limitations of the Contract including but not limited to first year
withdrawals. Such election shall be irrevocable and may not be amended or
changed.
In order to qualify as an annuity contract under Section 72 of the Code,
the contract must provide for Distribution of the entire contract to be made
upon the death of a Contract Owner. If a Contract Owner dies prior to the
Annuitization Date, then the Joint Contract Owner, the Contingent Owner or
other named recipient must receive the Distribution within 5 years of the
Contract Owner's death. However, the recipient may elect for payments to be
made over his/her life or life expectancy provided that such payments begin
within one year from the death of the Contract Owner. If the Joint Contract
Owner, Contingent Owner or other named recipient is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. In the event the
Contract Owner dies on or after the Annuitization Date and before the entire
interest has been distributed, the remaining portion must be distributed at
least as rapidly as under the method of Distribution being used as of the
date of the Contract Owner's death (see "Required Distribution For Tax
Sheltered Annuities"). If the Contract Owner is not an individual, the death
of the Designated Annuitant (or a change in the Designated Annuitant) will
result in a Distribution pursuant to these rules, regardless of whether a
Contingent Annuitant is named.
The Code requires that any election to receive an annuity rather than a
lump sum payment must be made within 60 days after the lump sum becomes
payable (generally, the election must be made within 60 days after the death
of an Contract Owner or the Annuitant). If the election is made more than 60
days after the lump sum first becomes payable, the election would be ignored
for tax purposes, and the entire amount of the lump sum would be subject to
immediate tax. If the election is made within the 60 day period, each
Distribution would be taxable when it is paid.
NON-QUALIFIED CONTRACTS - NON-NATURAL PERSONS AS CONTRACT OWNERS
The foregoing discussion of the taxation of Non-Qualified Contracts
applies to Contracts owned (or, pursuant to Section 72(u) of the Code, deemed
to be owned) by individuals; it does not apply to Contracts where one or more
non-individuals is an Owner.
As a general rule, contracts owned by corporations, partnerships, trusts,
and similar entities ("Non-Natural Persons"), rather than by one or more
individuals, are not treated as annuity contracts for most purposes under the
Code; in particular, they are not treated as annuity contracts for purposes
of Section 72. Therefore, the taxation rules for Distributions, as described
above, do not apply to Non-Qualified Contracts owned by Non-Natural Persons.
Rather, THE INCOME EARNED UNDER A NON-QUALIFIED CONTRACT THAT IS OWNED BY A
NON-NATURAL PERSON IS TAXED AS ORDINARY INCOME DURING THE TAXABLE YEAR THAT
IT IS EARNED, AND IS NOT DEFERRED, EVEN IF THE INCOME IS NOT DISTRIBUTED OUT
OF THE CONTRACT TO THE CONTRACT OWNER.
The foregoing Non-Natural Contract Owner rule does not apply to all
entity-owned contracts. First, for this purpose, a Contract that is owned by
a Non-Natural Person as an agent for an individual is treated as owned by the
individual. This exception does not apply, however, to a Non-Natural Person
who is an employer that holds the Contract under a non-qualified deferred
compensation arrangement for one or more employees.
The Non-Natural Person rules also do not apply to a Contract that is: (1)
acquired by the estate of a decedent by reason of the death of the decedent;
(2) issued in connection with certain qualified retirement plans and
individual retirement plans; (3) used in connection with certain structured
settlements; (4) purchased by an employer upon the termination of certain
qualified retirement plans; or (5) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES AND TAX SHELTERED ANNUITIES
The Contract may be purchased as an Individual Retirement Annuity or a
Tax Sheltered Annuity. The Contract Owner should seek competent advice as to
the tax consequences associated with the use of a Contract as an Individual
Retirement Annuity.
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For information regarding eligibility, limitations on permissible amounts
of Purchase Payments, and the tax consequences of distributions from Tax
Sheltered Annuities, Individual Retirement Annuities and other plans that
receive favorable tax treatment, the purchasers of such contracts should seek
competent advice. The terms of such plans may limit the rights available
under the Contracts.
Pursuant to Section 403(b)(1)(E) Code, a Contract that is issued as a
Tax-Sheltered Annuity is required to limit the amount of the Purchase Payment
for any year to an amount that does not exceed the limit set forth in Section
402(g) of the Code ($7,000), as it is from time to time increased to reflect
increases in the cost of living. This limit may be reduced by any deposits,
contributions or payments made to any other Tax-Sheltered Annuity or other
plan, contract or arrangement by or on behalf of the Owner.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans or Individual Retirement Annuities. Most
Distributions from Tax-Sheltered Annuities may be rolled into another
Tax-Sheltered Annuity, Individual Retirement Annuity, or an Individual
Retirement Account. Distributions that may not be rolled over are those
which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: (1) over the life (or life expectancy)
of the Contract Owner; (2) over the joint lives (or joint
life expectancies) of the Contract Owner and the Contract
Owner's designated Beneficiary; or (3) for a specified period
of ten years or more, or
2. a required minimum distribution.
Any Distribution eligible for rollover will be subject to federal
tax withholding at a rate of twenty percent (20%) unless the Distribution
is transferred directly to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities
may not provide life insurance benefits. If the Death Benefit exceeds the
greater of the cash value of the Contract or the sum of all Purchase Payments
(less any surrenders), it is possible the Internal Revenue Service could
determine that the Individual Retirement Account or Individual Retirement
Annuity did not qualify for the desired tax treatment.
WITHHOLDING
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner
or other payee. The Contract Owner or other payee is entitled to elect not
to have federal income tax withheld from any such Distribution, but may be
subject to penalties in the event insufficient federal income tax is withheld
during a calendar year. However, if the Internal Revenue Service notifies the
Company that the Contract Owner or other payee has furnished an incorrect
taxpayer identification number, or if the Contract Owner or other payee fails
to provide a taxpayer identification number, the Distributions may be subject
to back-up withholding at the statutory rate, which is presently 31%, and
which cannot be waived by the Contract Owner or other payee.
NON-RESIDENT ALIENS
Distributions to nonresident aliens (NRAs) are generally subject to
federal income tax and tax withholding, at a statutory rate of thirty percent
(30%) of the amount of income that is distributed. The Company may be
required to withhold such amount from the Distribution and remit it to the
Internal Revenue Service. Distributions to certain NRAs may be subject to
lower, or in certain instances, zero tax and withholding rates, if the
United States has entered into an applicable treaty. However, in order to
obtain the benefits of such treaty provisions, the NRA must give to the
Company sufficient proof of his or her residency and citizenship in the form
and manner prescribed by the Internal Revenue Service. In addition, for any
Distribution made after December 31, 1997, the NRA must obtain an Individual
Taxpayer Identification Number from the Internal Revenue Service, and furnish
that number to the Company prior to the Distribution. If the Company does
not have the proper proof of citizenship or residency and (for Distributions
after December 31, 1997) a proper Individual Taxpayer Identification Number
prior to any Distribution, the Company will be required to withhold 30% of
the income, regardless of any treaty provision.
A payment may not be subject to withholding where the recipient
sufficiently establishes to the Company that such payment is effectively
connected to the recipient's conduct of a trade or business in the United
States and that such payment is includable in the recipient's gross income
for United States federal income tax purposes. Any such Distributions will
be subject to the rules set forth in the section entitled "Withholding."
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FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
A transfer of the Contract from one Contract Owner to another, or the
payment of a Distribution under the Contract to someone other than a Contract
Owner, may constitute a gift for federal gift tax purposes. Upon the death
of the Contract Owner, the value of the Contract may be included in his or
her gross estate, even if a all or a portion of the value is also subject to
federal income taxes.
The Company may be required to determine whether the Death Benefit or any
other payment or Distribution constitutes a "direct skip" as defined in
Section 2612 of the Code, and the amount of the generation skipping transfer
tax, if any, resulting from such direct skip. A direct skip may occur when
property is transferred to, or a Death Benefit or other Distribution is made
to: (1) an individual who is two or more generations younger than the
Contract Owner; or (2) certain trusts, as described in Section 2613 of the
Code (generally, trusts that have no beneficiaries who are not 2 or more
generations younger than the Contract Owner). If the Contract Owner is not
an individual, then for this purpose only, "Owner" refers to any person who
would be required to include the Contract, Death Benefit, Distribution, or
other payment in his federal gross estate at his death, or who is required to
report the transfer of the Contract, Death Benefit, Distribution, or other
payment for federal gift tax purposes.
If the Company determines that a generation skipping transfer tax is
required to be paid by reason of such direct skip, the Company is required to
reduce the amount of such Death Benefit, Distribution, or other payment by
such tax liability, and pay the tax liability directly to the Internal
Revenue Service.
Federal estate, gift and generation skipping transfer tax consequences,
and state and local estate, inheritance, succession, generation skipping
transfer, and other tax consequences, of owning or transferring a Contract,
and of receiving a Distribution, Death Benefit, or other payment, depend on
the circumstances of the person owning or transferring the Contract, or
receiving a Distribution, Death Benefit, or other payment.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to
assets held in the Company's Variable Account for such Contracts are not
taxable to the Company. However, the Company reserves the right to implement
and adjust the tax charge in the future, if the tax laws change.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under
Section 817(h) of the Code relating to diversification standards for the
investments underlying a variable annuity contract. The regulations provide
that a variable annuity contract which does not satisfy the diversification
standards will not be treated as an annuity contract, unless the failure to
satisfy the regulations was inadvertent, the failure is corrected, and the
Contract 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
Contract Owner if the income, for the period the contract was not
diversified, had been received by the Contract Owner. If the failure to
diversify is not corrected in this manner, the Owner of an annuity contract
will be deemed the Contract Owner of the underlying securities and will be
taxed on the earnings of his or her account. The Company believes, under its
interpretation of the Code and regulations thereunder, that the investments
underlying this Contract meet these diversification standards.
Representatives of the Internal Revenue Service have suggested, from
time to time, that the number of underlying Mutual Funds available or the
number of transfer opportunities available under a variable product may be
relevant in determining whether the product qualifies for the desired tax
treatment. No formal guidance has been issued in this area. Should the
Secretary of the Treasury issue additional rules or regulations limiting the
number of underlying Mutual Funds, transfers between underlying Mutual Funds,
exchanges of underlying Mutual Funds or changes in investment objectives of
underlying Mutual Funds such that the Contract would no longer qualify as an
annuity under Section 72 of the Code, the Company will take whatever steps
are available to remain in compliance.
TAX CHANGES
In the recent past, the Code has been subjected to numerous
amendments and changes, and it is reasonable to believe that it will continue
to be revised. The United States Congress has, in the past, considered
numerous legislative proposals that, if enacted, could change the tax
treatment of the Contracts. It is reasonable
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to believe that such proposals, and other proposals will be considered in the
future, and some of them may be enacted into law. In addition, the Treasury
Department may amend existing regulations, issue new regulations, or adopt
new interpretations of existing law that may be in variance with its current
positions on these matters. In addition, current state law (which is not
discussed herein), and future amendments to state law, may affect the tax
consequences of the Contract.
The foregoing discussion, which is based on the Company's understanding
of federal tax laws as they are currently interpreted by the Internal
Revenue Service, is general and is not intended as tax advice. Statutes,
regulations, and rulings are subject to interpretation by the courts. The
courts may determine that a different interpretation than the currently
favored interpretation is appropriate, thereby changing the operation of the
rules that are applicable to annuity contracts.
Any of the foregoing may change from time to time without any notice,
and the tax consequences arising out of a Contract may be changed
retroactively. There is no way of predicting whether, when, and to what
extent any such change may take place. No representation is made as to the
likelihood of the continuation of these current laws, interpretations, and
policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING
TO ANNUITY CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND
SHOULD NOT TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL
ADVISOR.
GENERAL INFORMATION
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 182610, Columbus, Ohio 43216, or calling
1-800-573-5775, TDD 1-800-238-3035.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable laws or
regulations. 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 Owner's
Variable Account Contract Value, such as making additional Purchase Payments,
transfers, exchanges or withdrawals. Quarterly statements are also mailed
detailing the Contract activity during the calendar quarter. Instead of
receiving an immediate confirmation of transactions made pursuant to some
types of periodic payment plan (such as a dollar cost averaging program) or
salary reduction arrangement, the Contract Owner may receive confirmation of
such transactions in their quarterly statements. The Contract Owner should
review the information in these statements carefully. All errors or
corrections must be reported to the Company immediately to assure proper
crediting to the Owner's Contract. The Company will assume all transactions
are accurately reported on quarterly statements or confirmation statements
unless the Contract Owner notifies the Company otherwise within 30 days after
receipt of the statement. The Company will also send to Contract Owners each
year an annual report and a semi-annual report containing financial
statements for the Variable Account, as of December 31 and June 30,
respectively.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Variable
Insurance Products Fund Money Market Portfolio. "Yield" is a measure of the
net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage
of the offering price of the Sub-Account's units. Yield is an annualized
figure, which means that it is assumed that the Sub-Account generates the
same level of net income over a 52-week period. The "effective yield" is
calculated similarly but includes the effect of assumed compounding,
calculated under rules prescribed by the Securities and Exchange Commission.
The effective yield will be slightly higher than yield due to this
compounding effect.
The Company may also from time to time advertise the performance of the
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual funds with similar or
different objectives, or the investment industry as a whole. Other
investments to which the Sub-Accounts may be compared include, but are not
limited to: precious metals; real estate; stocks and bonds; closed-end
funds; CDs; bank money market deposit accounts and passbook savings; and the
Consumer Price Index.
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The Sub-Accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2 Year CD Rates; and
Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/ Wiesenberger,
Morningstar, Donoghue's; magazines such as MONEY, FORBES, KIPLINGER'S
PERSONAL FINANCE MAGAZINE, FINANCIAL WORLD, CONSUMER REPORTS, BUSINESS WEEK,
TIME, NEWSWEEK, NATIONAL UNDERWRITER, U.S. NEWS AND WORLD REPORT; rating
services such as LIMRA, VALUE, BEST'S AGENT GUIDE, WESTERN ANNUITY GUIDE,
COMPARATIVE ANNUITY REPORTS; and other publications such as the WALL STREET
JOURNAL, BARRON'S, INVESTOR'S DAILY, and Standard & Poor's OUTLOOK. In
addition, Variable Annuity Research & Data Service (THE VARDS REPORT) is an
independent rating service that ranks over 500 variable annuity funds based
upon total return performance. These rating services and publications rank
the performance of the underlying Mutual Funds against all underlying mutual
funds over specified periods and against 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.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE
COMPANY IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE
FUTURE RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE
OR LESS THAN ORIGINAL COST.
Standardized average annual return and non-standardized total returns are
calculated as described above, for each of the Sub-Accounts available within
the Variable Account for which there is significant investment history.
These figures are based upon historical earnings and are not necessarily
representative of future results.
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UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR TO 5 YEARS TO LIFE OF FUND DATE FUND
SUB-ACCOUNT OPTIONS 12-31-96 12/31/96 TO 12/31/96 EFFECTIVE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund- 7.29% 16.15% 12.16%* 10-08-76
Equity - Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 7.70% 13.35% 13.56%* 10-09-86
Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 7.04% 13.15% 9.58%* 09-19-85
High Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- -1.48% 2.74% 4.47%* 04-01-82
Money Market Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 6.23% 7.34% 6.39% 01-28-87
Overseas Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 7.61% 9.46% 10.13% 09-01-89
II-
Asset Manager Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 12.97% N/A 17.64% 01-03-95
II-
Asset Manager: Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund -3.66% 4.85% 6.69% 12-05-88
II-
Investment Grade Bond Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 14.22% N/A 26.34% 01-03-95
II-
Contrafund Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 15.72% N/A 15.44% 08-27-92
II-
Index 500 Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 3.03% N/A 7.92% 01-03-95
III-**
Balanced Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund N/A N/A N/A 12-31-96
III-
Growth & Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 11.21% N/A 21.32% 01-03-95
III-**
Growth Opportunities Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/96.
**The Variable Insurance Products Fund III - Growth Opportunities Portfolio and
the Variable Insurance Products Fund III - Balanced Portfolio were formerly know
as Fidelity Advisor Annuity Growth Opportunities Fund and Fidelity Advisor
Annuity Income & Growth Fund, respectively.
37
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<PAGE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR TO 5 YEARS TO LIFE OF FUND DATE FUND
SUB-ACCOUNT OPTIONS 12-31-96 12/31/96 TO 12/31/96 EFFECTIVE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund- 12.69% 16.35% 12.16%* 10-08-76
Equity - Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 13.10% 13.57% 13.56%* 10-09-86
Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 12.44% 13.37% 9.58%* 09-19-85
High Income Portfolio
---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 3.92% 3.06% 4.47%* 04-01-82
Money Market Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 11.63% 7.61% 6.39% 01-28-87
Overseas Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 13.01% 9.71% 10.13% 09-01-89
II-
Asset Manager Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 18.37% N/A 19.93% 01-03-95
II-
Asset Manager: Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 1.74% 5.15% 6.69% 12-05-88
II-
Investment Grade Bond Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 19.62% N/A 28.47% 01-03-95
II-
Contrafund Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 21.12% N/A 15.82% 08-27-92
II-
Index 500 Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 8.43% N/A 10.41% 01-03-95
III-**
Balanced Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund N/A N/A N/A 12-31-96
III-
Growth & Income Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund 16.61% N/A 23.54% 01-03-95
III-**
Growth Opportunities Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/96.
**The Variable Insurance Products Fund III - Growth Opportunities Portfolio and
the Variable Insurance Products Fund III - Balanced Portfolio were formerly know
as Fidelity Advisor Annuity Growth Opportunities Fund and Fidelity Advisor
Annuity Income & Growth Fund, respectively.
38
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<PAGE>
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected
to have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants
in lawsuits, including class action lawsuits, relating to life insurance
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements. In October 1996, a policyholder of
Nationwide Life filed a complaint in Alabama state court against Nationwide
Life and an agent of Nationwide Life (WAYNE M. KING V. NATIONWIDE LIFE
INSURANCE COMPANY AND DANNY NIX) related to the sale of a whole life policy
on a "vanishing premium" basis and seeking unspecified compensatory and
punitive damages. In February 1997, Nationwide Life was named as a defendant
in a lawsuit filed in New York Supreme Court also related to the sale of
whole life policies on a "vanishing premium" basis (JOHN H. SNYDER V.
NATIONWIDE MUTUAL INSURANCE COMPANY, NATIONWIDE MUTUAL INSURANCE CO. AND
NATIONWIDE LIFE INSURANCE CO.). The plaintiff in such lawsuit seeks to
represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit is in an early
stage and has not been certified as a class action. Nationwide Life intends
to defend these cases vigorously. There can be no assurance that any future
litigation relating to pricing and sales practices will not have a material
adverse effect on the Company.
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
PAGE
General Information and History ........................................... 1
Services .................................................................. 1
Purchase of Securities Being Offered ...................................... 1
Underwriters .............................................................. 2
Calculations of Performance ............................................... 2
Underlying Mutual Fund Performance Summary ................................ 4
Annuity Payments .......................................................... 5
Financial Statements ...................................................... 6
39
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<PAGE>
APPENDIX
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 Variable Account and any other segregated asset
account. Fixed Account Purchase Payments will be allocated to the Fixed
Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from
such Fixed Account assets will be allocated by the Company between itself and
the Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts
will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. The Company assumes
this "mortality risk" by virtue of annuity rates incorporated in the Contract
which cannot be changed. In addition, the Company guarantees that it will not
increase charges for maintenance of the Contracts regardless of its actual
expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion
of the Company at such rate or rates as the Company prospectively declares
from time to time. Any such rate or rates so determined will remain effective
for a period of not less than twelve months, and remain at such rate unless
changed. However, the Company guarantees that it will credit interest at not
less than 3.0% per year (or as otherwise required under state law, or at such
minimum rate as stated in the contract when sold). ANY INTEREST CREDITED TO
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED
THE MINIMUM GUARANTEE OF 3.0% FOR ANY GIVEN YEAR. 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
Account Sub-Accounts to the Fixed Account and amounts maturing in the Fixed
Account at the expiration of an Interest Rate Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the Purchase Payments allocated to
the Fixed Account, plus interest credited as described above, less the sum of
all administrative charges, any applicable premium taxes, and less any
amounts surrendered. If the Contract Owner effects a surrender, the amount
available from the Fixed Account will be reduced by any applicable Contingent
Deferred Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The maximum percentage that may be transferred will be determined by
the Company at its sole discretion, but will not be less than 10% of the
total value of the portion of the Fixed Account that is maturing and will be
declared upon the expiration date of the then current Interest Rate Guarantee
Period. The Interest Rate Guarantee Period expires on the final day of a
calendar quarter. Transfers must be made within 45 days after the expiration
date of the guarantee period. Owners who have entered into a
40
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<PAGE>
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.
41
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
THROUGH ITS NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth in the
prospectus and should be read in conjunction with the prospectus dated May 1,
1997. The prospectus may be obtained from Nationwide Life Insurance Company
by writing P.O. Box 182610, Columbus, Ohio 43216, 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
Underlying Mutual Fund Performance Summary.................................4
Annuity Payments...........................................................5
Financial Statements.......................................................6
</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 Financial Services, Inc.
("NFS"), a holding company. NFS has two classes of common stock outstanding
with different voting rights enabling Nationwide Corporation (the holder of
all of the outstanding Class B Common Stock) to control NFS. Nationwide
Corporation is a holding company, as well. All of its common stock is held
by Nationwide Mutual Insurance Company (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%), the ultimate controlling persons of Nationwide
Insurance Enterprise. The Nationwide Insurance Enterprise is one of
America's largest insurance and financial services family of companies, with
combined assets of over $ 67.5 billion as of December 31, 1996.
SERVICES
The Company, which has responsibility for administration of the
Contracts and the Variable Account, maintains records of the name, address,
taxpayer identification number, and other pertinent information for each
Contract Owner and the number and type of Contract issued to each such
Contract Owner and records with respect to the Contract Value of each
Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of
the underlying Mutual Funds. The Company has entered into an agreement with
the adviser of the underlying Mutual Funds. The agreement relates to
administrative services furnished by the Company and provides for an annual
fee based on the average aggregate net assets of the Variable Account (and
other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular underlying Mutual Funds.
These fees in no way affect the net asset value of the underlying Mutual
Funds or fees paid by the Contract Owner.
The financial statements and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the
authority of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange
Act of 1934.
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
6
49 of 109
<PAGE>
Contract Value for any 12 month period. Contract Owners may at the maturity
of an Interest Rate Guarantee Period transfer a portion of the Contract Value
of the Fixed Account to the Variable Account. Such portion will be determined
by the Company at its sole discretion (but will not be less than 10% of the
total value of the portion of the Fixed Account that is maturing), and will
be declared upon the expiration date of the then current Interest Rate
Guarantee Period. The Interest Rate Guarantee Period expires on the final
day of a calendar quarter. Transfers under this provision must be made
within 45 days after the termination date of the guarantee period. Owners
who have entered into a Dollar Cost Averaging agreement with the Company may
transfer from the Fixed Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to
the first Contract Anniversary. Transfers from the Fixed Account may not be
made within 12 months of any prior Transfer. Transfers must also be made
prior to the Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Fidelity Investments Institutional Services Company, Inc. ("Fidelity"), 82
Devonshire Street, Boston, Massachusetts 02109. The Company has paid no
underwriting commission to Fidelity.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Variable Insurance Products Fund
Money Market Portfolio, subject to Rule 482 of the Securities Act of 1933,
shall consist of a seven calendar day historical yield, carried at least to
the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, exclusive of capital changes, in the value of
hypothetical pre-existing account having a balance of one accumulation unit
at the beginning of the base period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the net
change in account value by the value of the account at the beginning of the
period to obtain a base period return, and multiplying the base period return
by (365/7) or (366/7) in a leap year. As of December 31, 1996, the Variable
Insurance Products Fund Money Market Portfolio's seven day current unit value
yield was 3.60%. The Variable Insurance Products Fund Money Market
Portfolio's effective yield shall be computed similarly but includes the
effect of assumed compounding on an annualized basis of the current unit
value yield quotations of the Fund, and for the period ending December 31,
1996 the effective yield was 3.67%.
The Variable Insurance Products Fund Money Market Portfolio's yield and
effective yield will fluctuate daily. Actual yields will depend on factors
such as the type of instruments in the Money Market'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
Portfolio'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
Variable Insurance Products Fund Money Market Portfolio is not guaranteed or
insured. Yield of other money market funds may not be comparable if a
different base period or another method of calculation is used.
Income generated within a bond Sub-Account may be reflected in "30 Day
Yield" quotations. Such quotations are computed by dividing the net
investment income per Accumulation Unit during the 30 day period by the
maximum unit value per Accumulation Unit on the last day of the period. The
formula for arriving at bond fund yield quotations is as follows:
2[((a-b)/cd+1)(6)-1] where: a = net investment income earned by the applicable
portfolio; b = expenses for the period, including contract level fees and
charges; c = the average daily number of Accumulation Units outstanding
during the period; and d = the maximum offering price per Accumulation Unit
on the last day of the period.
All performance advertising shall also include quotations of
standardized average annual total return, calculated in accordance with a
standard method prescribed by rules of the Securities and Exchange
Commission, to facilitate comparison with standardized Average annual total
return advertised for a specific period is found by first taking a
hypothetical $1,000 investment in each of the Sub-Accounts' units on the
first day of the period at the offering price, which is the Accumulation Unit
Value per unit ("initial investment") and computing the ending redeemable
value ("redeemable value") of that investment at the end of the period. The
redeemable value is then divided by the initial investment and this quotient
is taken to the Nth root (N represents the number of years in the period) and
1 is subtracted from the result which is then expressed as a percentage,
carried to at least the nearest hundredth of a percent. Standardized average
annual total return reflects the deduction of a 1.40% Mortality, Expense Risk
and Administration Charge. The redeemable value also reflects
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<PAGE>
the effect of any applicable Contingent Deferred Sales Charge that may be
imposed at the end of the period (see "Contingent Deferred Sales Charge"
located in the prospectus.) No deduction is made for premium taxes which may
be assessed by certain states. Nonstandardized 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 $25,000 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 $25,000 will be used because that figure more closely
approximates the size of a typical Contract than does the $1,000 figure used
in calculating the standardized average annual total return quotations.
The standardized average annual total return and nonstandardized total
return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication.
Both the standardized average annual return and the nonstandardized total
return will be based on 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 standardized 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 standardized average annual total return and
non-standardized total return are based upon historical earnings and will
fluctuate. Any quotation of performance, therefore, would not be considered
a guarantee of future performance. Factors affecting a Sub-Account's
performance include general market conditions, operating expenses and
investment management. A Contract Owner's account when redeemed may be more
or less than original cost.
Standardized average annual return and non-standardized total returns
are calculated as described above, for each of the Sub-Accounts available
within the Variable Account for which there is significant investment
history. These figures are based upon historical earnings and are not
necessarily representative of future results.
8
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<PAGE>
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR TO 5 YEARS TO LIFE OF FUND DATE FUND
SUB-ACCOUNT OPTIONS 12-31-96 12/31/96 TO 12/31/96 EFFECTIVE
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 7.29% 16.15% 12.16%* 10-08-76
Equity - Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 7.70% 13.35% 13.56%* 10-09-86
Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 7.04% 13.15% 9.58%* 09-19-85
High Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- -1.48% 2.74% 4.47%* 04-01-82
Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 6.23% 7.34% 6.39% 01-28-87
Overseas Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 7.61% 9.46% 10.13% 09-01-89
Asset Manager Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 12.97% N/A 17.64% 01-03-95
Asset Manager: Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- -3.66% 4.85% 6.69% 12-05-88
Investment Grade Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 14.22% N/A 26.34% 01-03-95
Contrafund Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 15.72% N/A 15.44% 08-27-92
Index 500 Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III-** 3.03% N/A 7.92% 01-03-95
Balanced Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III- N/A N/A N/A 12-31-96
Growth & Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III-** 11.21% N/A 21.32% 01-03-95
Growth Opportunities Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/96.
**The Variable Insurance Products Fund III - Growth Opportunities Portfolio
and the Variable Insurance Products Fund III - Balanced Portfolio were
formerly know as Fidelity Advisor Annuity Growth Opportunities Fund and
Fidelity Advisor Annuity Income & Growth Fund, respectively.
9
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<PAGE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR TO 5 YEARS TO LIFE OF FUND DATE FUND
SUB-ACCOUNT OPTIONS 12-31-96 12/31/96 TO 12/31/96 EFFECTIVE
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 12.69% 16.35% 12.16%* 10-08-76
Equity - Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 13.10% 13.57% 13.56%* 10-09-86
Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 12.44% 13.37% 9.58%* 09-19-85
High Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 3.92% 3.06% 4.47%* 04-01-82
Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund- 11.63% 7.61% 6.39% 01-28-87
Overseas Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 13.01% 9.71% 10.13% 09-01-89
Asset Manager Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 18.37% N/A 19.93% 01-03-95
Asset Manager: Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 1.74% 5.15% 6.69% 12-05-88
Investment Grade Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 19.62% N/A 28.47% 01-03-95
Contrafund Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II- 21.12% N/A 15.82% 08-27-92
Index 500 Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III-** 8.43% N/A 10.41% 01-03-95
Balanced Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III- N/A N/A N/A 12-31-96
Growth & Income Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund III-** 16.61% N/A 23.54% 01-03-95
Growth Opportunities Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years 10 12/31/96.
**The Variable Insurance Products Fund III - Growth Opportunities Portfolio
and the Variable Insurance Products Fund III - Balanced Portfolio were
formerly know as Fidelity Advisor Annuity Growth Opportunities Fund and
Fidelity Advisor Annuity Income & Growth Fund, respectively.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the
prospectus.
10
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<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Fidelity Advisor Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Fidelity Advisor Variable Account as of
December 31, 1996, and the related statements of operations and changes in
contract owners' equity and schedules of changes in unit value for each of the
years in the two year period then ended. These financial statements and
schedules of changes in unit value are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of the
underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide Fidelity Advisor Variable Account as of December 31,
1996, and the results of its operations and its changes in contract owners'
equity and the schedules of changes in unit value for each of the years in the
two year period then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
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<PAGE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
Fidelity Advisor Annuity Government Investment Fund (FAAGvInv)
1,869,588 shares (cost $20,563,268) ....................... $ 20,060,680
Fidelity Advisor Annuity Growth Opportunities Fund (FAAGrOpp)
24,875,768 shares (cost $322,601,532) ..................... 383,086,825
Fidelity Advisor Annuity High Yield Fund (FAAHiYld)
7,450,140 shares (cost $88,628,848) ....................... 91,040,712
Fidelity Advisor Annuity Income & Growth Fund (FAAIncGr)
8,434,144 shares (cost $93,504,258) ....................... 103,149,577
Fidelity Advisor Annuity Money Market Fund (FAAMyMkt)
29,940,523 shares (cost $29,940,523) ...................... 29,940,523
Fidelity Advisor Annuity Overseas Fund (FAAOSeas)
3,775,845 shares (cost $42,399,385) ....................... 45,196,866
Fidelity VIP - High Income Portfolio (FidVIPHI)
13,449 shares (cost $167,006) ............................. 168,388
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
1,414,117 shares (cost $1,414,117) ........................ 1,414,117
Fidelity VIP - Overseas Portfolio (FidVIPOv)
12,249 shares (cost $226,202) ............................. 230,774
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
8,006 shares (cost $98,408) ............................... 97,996
-----------
Total investments ....................................... 674,386,458
Accounts Receivable ............................................ 10,433
-----------
Total assets ............................................ 674,396,891
===========
CONTRACT OWNERS' EQUITY .......................................... $674,396,891
===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Contract owners' equity represented by: Units Unit Value
----- ----------
<S> <C> <C> <C>
Fidelity Advisor Annuity Classic contracts:
Fidelity Advisor Annuity Government Investment Fund:
Tax qualified ................................... 87,766 $11.558317 $ 1,014,427
Non-tax qualified ............................... 41,334 11.558317 477,751
Fidelity Advisor Annuity Growth Opportunities Fund:
Tax qualified ................................... 1,299,987 15.270633 19,851,624
Non-tax qualified ............................... 1,303,197 15.270633 19,900,643
Fidelity Advisor Annuity High Yield Fund:
Tax qualified ................................... 250,228 13.295788 3,326,978
Non-tax qualified ............................... 222,178 13.295788 2,954,032
Fidelity Advisor Annuity Income & Growth Fund:
Tax qualified ................................... 427,514 12.206048 5,218,256
Non-tax qualified ............................... 372,756 12.206048 4,549,878
Fidelity Advisor Annuity Money Market Fund:
Tax qualified ................................... 85,401 10.790682 921,535
Non-tax qualified ............................... 70,953 10.790682 765,631
Fidelity Advisor Annuity Overseas Fund:
Tax qualified ................................... 177,086 12.115241 2,145,440
Non-tax qualified ............................... 151,077 12.115241 1,830,334
Fidelity VIP - High Income Portfolio:
Non-tax qualified ............................... 1,976 10.223564 20,202
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................... 290 10.520251 3,051
Non-tax qualified ............................... 114 10.520251 1,199
Fidelity Advisor Annuity Select contracts:
Fidelity Advisor Annuity Government Investment Fund:
Tax qualified ................................... 598,689 11.535024 6,905,892
Non-tax qualified ............................... 1,011,100 11.535024 11,663,063
Fidelity Advisor Annuity Growth Opportunities Fund:
Tax qualified ................................... 6,415,213 15.239855 97,766,916
Non-tax qualified ............................... 16,114,264 15.239855 245,579,047
Fidelity Advisor Annuity High Yield Fund:
Tax qualified ................................... 1,803,678 13.269007 23,933,016
Non-tax qualified ............................... 4,584,342 13.269007 60,829,666
Fidelity Advisor Annuity Income & Growth Fund:
Tax qualified ................................... 2,291,575 12.181451 27,914,709
Non-tax qualified ............................... 5,374,512 12.181451 65,469,355
Fidelity Advisor Annuity Money Market Fund:
Tax qualified ................................... 966,655 10.768919 10,409,829
Non-tax qualified ............................... 1,656,190 10.768919 17,835,376
Fidelity Advisor Annuity Overseas Fund:
Tax qualified ................................... 998,224 12.090800 12,069,327
Non-tax qualified ............................... 2,411,166 12.090800 29,152,926
</TABLE>
56 of 109
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fidelity VIP - High Income Portfolio:
Tax qualified ................................... 2,287 10.221866 23,377
Non-tax qualified ............................... 12,210 10.221866 124,809
Fidelity VIP - Money Market Portfolio:
Tax qualified ................................... 77,545 10.063199 780,351
Non-tax qualified ............................... 62,978 10.063199 633,760
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................... 4,339 10.518503 45,640
Non-tax qualified ............................... 17,196 10.518503 180,876
Fidelity VIP-II - Investment Grade Bond Portfolio:
Tax qualified ................................... 8,008 10.059105 80,553
Non-tax qualified ............................... 1,732 10.059105 17,422
------- --------- -----------
$ 674,396,891
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
57 of 109
<PAGE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
Investment activity:
<S> <C> <C>
Reinvested capital gains and dividends ............... $ 11,357,337 5,253,187
Mortality, expense and administration charges (note 2) (7,056,063) (1,324,577)
----------- -----------
Net investment activity ........................ 4,301,274 3,928,610
----------- -----------
Proceeds from mutual fund shares sold ................ 45,891,295 10,325,387
Cost of mutual fund shares sold ...................... (44,457,369) (10,182,494)
----------- -----------
Realized gain (loss) on investments ............... 1,433,926 142,893
Change in unrealized gain (loss) on investments ...... 62,292,552 12,550,359
----------- -----------
Net gain (loss) on investments .................... 63,726,478 12,693,252
----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 68,027,752 16,621,862
----------- -----------
Equity transactions:
Purchase payments received from contract owners ...... 326,836,927 286,274,311
Redemptions .......................................... (20,699,510) (2,222,588)
Annual contract maintenance charge (note 2) .......... (54,534) (251)
Contingent deferred sales charges (note 2) ........... (402,606) (29,016)
Adjustments to maintain reserves ..................... 36,535 8,009
----------- -----------
Net equity transactions ........................ 305,716,812 284,030,465
----------- -----------
Net change in contract owners' equity ................... 373,744,564 300,652,327
Contract owners' equity beginning of period ............. 300,652,327 --
----------- -----------
Contract owners' equity end of period ................... $674,396,891 300,652,327
============ ===========
</TABLE>
See accompanying notes to financial statements.
6
58 of 109
<PAGE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
Nationwide Fidelity Advisor Variable Account (the Account) was
established pursuant to a resolution of the Board of Directors of Nationwide
Life Insurance Company (the Company) on July 22, 1994. The Account has been
registered as a unit investment trust under the Investment Company Act of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts, and Individual Modified Single Premium
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through Fidelity Investments(R).
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase. See note
2 for a discussion of contract expenses.
Contract owners in either the accumulation or the payout phase may
invest in any of the following:
Funds of Fidelity Advisor Annuity Fund;
Fidelity Advisor Annuity Government Investment Fund (FAAGvInv)
Fidelity Advisor Annuity Growth Opportunities Fund (FAAGrOpp)
Fidelity Advisor Annuity High Yield Fund (FAAHiYld)
Fidelity Advisor Annuity Income & Growth Fund (FAAIncGr)
Fidelity Advisor Annuity Money Market Fund (FAAMyMkt)
Fidelity Advisor Annuity Overseas Fund (FAAOSeas)
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Funds II
(Fidelity VIP-II);
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
At December 31, 1996, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain contract expenses (see
note 2). The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company under the
Internal Revenue Code.
7
59 of 109
<PAGE>
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 amounts have been reclassified to conform with the current
year presentation.
(2) Expenses
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge, not to
exceed 7% of the lesser of purchase payments or the amount surrendered, such
charge declining 1% per year, to 0%, after the purchase payment has been held in
the contract for 84 months. No sales charges are deducted on redemptions used to
purchase units in the fixed investment options of the Company.
The following contract charges are deducted by the Company: (a) for the
Fidelity Advisor Annuity Classic contracts an annual contract maintenance charge
of $30, with certain exceptions, which is satisfied by surrendering units; and
(b) for the Fidelity Advisor Annuity Classic contracts a mortality risk charge,
an expense risk charge and an administration charge assessed through the daily
unit value calculation equal to an annual rate of 0.80%, 0.45% and 0.05%,
respectively; for the Fidelity Advisor Annuity Select contracts a mortality risk
charge, an expense risk charge and an administration charge assessed through the
daily unit value calculations equal to an annual rate of 0.80%, 0.45% and 0.15%,
respectively.
(3) Schedule I
Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested dividends and capital gains
(This amount reflects the increase in the unit value due to
dividend and capital gain distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration
charge discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
60 of 109
<PAGE>
===============================================================================
SCHEDULE I
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
FIDELITY ADVISOR ANNUITY CLASSIC CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
FAAGvInv FAAGrOpp FAAHiYld FAAIncGr FAAMyMkt FAAOSeas FidVIPHI FidVIPOv
-------- -------- -------- -------- -------- -------- -------- --------
1996***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $11.504795 13.082083 11.858324 11.245581 10.385538 10.868973 10.000000 10.000000
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Reinvested capital gains
and dividends .563863 .049986 .941213 .050277 .544367 .382665 .000000 .000000
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Unrealized gain (loss) (.362149) 2.319799 .660145 1.059477 .000000 1.013511 .245224 .542388
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Contract charges (.148192) (.181235) (.163894) (.149287) (.139223) (.149908) (.021660) (.022137)
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Ending unit value - Dec. 31 $11.558317 15.270633 13.295788 12.206048 10.790682 12.115241 10.223564 10.520251
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Percentage increase (decrease)
in unit value* (a) 0% 17% 12% 9% 4% 11% 2%(b) 5%(b)
===================================================================================================================================
1995
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 ** **
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Reinvested capital gains
and dividends .562856 .177745 .424612 .217242 .517389 .059248
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Unrealized gain (loss) 1.081135 3.053458 1.576049 1.165103 .000000 .944343
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Contract charges (.139196) (.149120) (.142337) (.136764) (.131851) (.134618)
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Ending unit value - Dec. 31 $11.504795 13.082083 11.858324 11.245581 10.385538 10.868973
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Percentage increase (decrease)
in unit value* (a) 15% 31% 19% 12% 4% 9%
===================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
9
61 of 109
<PAGE>
===============================================================================
SCHEDULE I, CONTINUED
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
FIDELITY ADVISOR ANNUITY SELECT CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
FAAGvInv FAAGrOpp FAAHiYld FAAIncGr FAAMyMkt FAAOSeas FidVIPHI FidVIPMMkt FidVIPOv FidVIPIGBd
-------- -------- -------- -------- -------- -------- -------- ---------- -------- ----------
1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value
- Jan. 1 $11.493314 13.069019 11.846502 11.234358 10.375160 10.858102 10.000000 10.000000 10.000000 10.000000
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Reinvested capital
gains and dividends .562746 .049931 .939358 .050222 .543536 .381915 .000000 .086432 .000000 .000000
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Unrealized gain (loss) (.361605) 2.315879 .659472 1.057486 .000000 1.012051 .245200 .000000 .542354 .082415
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Contract charges (.159431) (.194974) (.176325) (.160615) (.149777) (.161268) (.023334) (.023233) (.023851) (.023310)
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Ending unit value
- Dec. 31 $11.535024 15.239855 13.269007 12.181451 10.768919 12.090800 10.221866 10.063199 10.518503 10.059105
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Percentage increase
(decrease) in unit
value* (a) 0% 17% 12% 8% 4% 11% 2%(b) 1%(b) 5%(b) 1%(b)
===================================================================================================================================
1995
Beginning unit value
- Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 ** ** ** **
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Reinvested capital
gains and dividends .562307 .177572 .424198 .217030 .517131 .059190
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Unrealized gain (loss) 1.080916 3.052053 1.575576 1.164620 .000000 .943888
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Contract charges (.149909) (.160606) (.153272) (.147292) (.141971) (.144976)
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Ending unit value
- Dec. 31 $11.493314 13.069019 11.846502 11.234358 10.375160 10.858102
- - ----------------------------------------------------------------------------------------------------------------------------------
- -
Percentage increase
(decrease) in unit
value* (a) 15% 31% 18% 12% 4% 9%
===================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
</TABLE>
See note 3.
10
62 of 109
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company
We have audited the accompanying consolidated balance sheets of Nationwide
Life Insurance Company and subsidiaries (collectively the Company) as of
December 31, 1996 and 1995, and the related consolidated statements of
income, shareholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Nationwide Life Insurance Company and subsidiaries as of December 31, 1996
and 1995, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
63 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
Assets 1996 1995
------ ----------- -----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------- -----------
18,306,921 17,778,860
----------- -----------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------- -----------
$47,766,246 38,507,633
----------- -----------
----------- -----------
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------- -----------
192,382 281,928
----------- -----------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------- -----------
45,628,372 35,879,121
----------- -----------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------- -----------
2,137,874 2,628,512
----------- -----------
$47,766,246 38,507,633
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
64 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
---------- ---------- ---------
1,992,838 1,798,651 1,599,499
---------- ---------- ---------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
---------- ---------- ---------
1,677,341 1,511,079 1,357,641
---------- ---------- ---------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
---------- ---------- ---------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
---------- ---------- ---------
110,889 99,808 78,589
---------- ---------- ---------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
---------- ---------- ---------
Net income $ 215,932 212,478 183,728
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
65 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
------- ---------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
------ ------- --------- --------- ----------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
------ ------- --------- --------- ----------
------ ------- --------- --------- ----------
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
------ ------- --------- --------- ----------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
------ ------- --------- --------- ----------
------ ------- --------- --------- ----------
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
------ ------- --------- --------- ----------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
------ ------- --------- --------- ----------
------ ------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
66 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
---------- --------- ---------
Net cash provided by operating activities 346,159 187,633 39,880
---------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------- --------- ---------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------- --------- ---------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------- --------- ---------
Net increase (decrease) in cash 34,329 5,832 (16,315)
Cash, beginning of year 9,455 3,623 19,938
---------- --------- ---------
Cash, end of year $ 43,784 9,455 3,623
---------- --------- ---------
---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
67 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned
subsidiary of Nationwide Corporation (Nationwide Corp.). Wholly
owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Employers Life Insurance Company of
Wausau and subsidiaries (ELICW), National Casualty Company (NCC),
West Coast Life Insurance Company (WCLIC), Nationwide Advisory
Services, Inc. (formerly Nationwide Financial Services, Inc.),
Nationwide Investment Services Corporation (formerly PEBSCO
Securities Corporation) (NISC) and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS)
in November 1996 as a holding company for NLIC and the other
companies of the Nationwide Insurance Enterprise that offer or
distribute long-term savings and retirement products. On January
27, 1997, Nationwide Corp. contributed to NFS the common stock of
NLIC and three marketing and distribution companies. NFS is
planning an initial public offering of its Class A common stock
during the first quarter of 1997.
In anticipation of the restructuring described above, on September
24, 1996, NLIC's Board of Directors declared a dividend payable
January 1, 1997 to Nationwide Corp. consisting of the outstanding
shares of common stock of certain subsidiaries (ELICW, NCC and
WCLIC) that do not offer or distribute long-term savings and
retirement products. In addition, during 1996, NLIC entered into
two reinsurance agreements whereby all of NLIC's accident and
health and group life insurance business was ceded to ELICW and
another affiliate effective January 1, 1996. These subsidiaries
and all accident and health and group life insurance business have
been accounted for as discontinued operations for all periods
presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC
intends to make an $850,000 distribution to NFS which will then
make an equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and
retirement products to retail and institutional customers and is
subject to competition from other financial services providers
throughout the United States. The Company is subject to regulation
by the Insurance Departments of states in which it is licensed, and
undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded in
the consolidated financial statements. The Company mitigates this
risk by offering a wide range of products and by operating
throughout the United States, thus reducing its exposure to any
single product or jurisdiction, and also by employing underwriting
practices which identify and minimize the adverse impact of this
risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy, by
maintaining reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
68 of 109
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and
certain other companies that offer or distribute long-term savings
and retirement products. Prior to the contribution by Nationwide
Corp. to NFS of the outstanding common stock of NLIC and other
companies, NLIC effected certain transactions with respect to
certain subsidiaries and lines of business that were unrelated to
long-term savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a
dividend to Nationwide Corp. consisting of the outstanding shares
of common stock of three subsidiaries: ELICW, NCC and WCLIC. ELICW
writes group accident and health and group life insurance business
and maintains it offices in Wausau, Wisconsin. NCC is a property
and casualty company that serves as a fronting company for a
property and casualty subsidiary of Nationwide Mutual Insurance
Company (NMIC), an affiliate. NCC maintains its offices in
Scottsdale, Arizona. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC
and WCLIC have been accounted for as discontinued operations for
all periods presented. NLIC did not recognize any gain or loss on
the disposal of these subsidiaries.
A summary of the combined results of operations, including the
results of the accident and health and group life insurance
business ELICW assumed from NLIC in 1996, and assets and
liabilities of ELICW, NCC and WCLIC as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <S> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business
was ceded to ELICW and NMIC, effective January 1, 1996. See note
13 for a complete discussion of the reinsurance agreements. NLIC
has discontinued its accident and health and group life insurance
business and in connection therewith has entered into reinsurance
agreements to cede all existing and any future writings to other
affiliated companies and will cease writing any new business prior
to December 31, 1997. NLIC's accident and health and group life
insurance business is accounted for as discontinued operations for
all periods presented. NLIC did not recognize any gain or loss on
the disposal of the accident and health and group life insurance
business. The assets, liabilities, results of operations and
activities of discontinued operations are distinguished physically,
operationally and for financial reporting purposes from the
remaining assets, liabilities, results of operations and activities
of NLIC.
69 of 109
<PAGE>
A summary of the results of operations, net of amounts ceded to
ELICW and NMIC in 1996, and assets and liabilities of NLIC's
accident and health and group life insurance business as of and for
the years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP)
which differ from statutory accounting practices prescribed or
permitted by regulatory authorities. Annual Statements for NLIC
and its insurance subsidiaries, filed with the department of
insurance of each insurance company's state of domicile, are
prepared on the basis of accounting practices prescribed or
permitted by each department. Prescribed statutory accounting
practices include a variety of publications of the National
Association of Insurance Commissioners (NAIC), as well as state
laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices
not so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for
the reporting period. Actual results could differ significantly
from those estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for
mortgage loans on real estate and real estate investments and the
liability for future policy benefits and claims. Although some
variability is inherent in these estimates, management believes the
amounts provided are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "Investment in Subsidiaries Classified as
Discontinued Operations" in the accompanying consolidated balance
sheets and "Income for Discontinued Operations" in the accompanying
consolidated statements of income. All significant intercompany
balances and transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity, available-for-
sale or trading. Fixed maturity securities are classified as held-
to-maturity when the Company has the positive intent and ability to
hold the securities to maturity and are stated at amortized cost.
Fixed maturity securities not classified as held-to-maturity and
all equity securities are classified as available-for-sale and are
stated at fair value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and deferred
federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of deferred
policy acquisition costs that would have been required as a charge
or credit to operations had such unrealized amounts been realized.
The Company has no fixed maturity securities classified as held-to-
maturity or trading as of December 31, 1996 or 1995.
70 of 109
<PAGE>
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the fair value of the collateral, if the loan is
collateral dependent. Loans in foreclosure and loans considered to
be impaired are placed on non-accrual status. Interest received on
non-accrual status mortgage loans on real estate are included in
interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are determined
on the basis of specific security identification. Estimates for
valuation allowances and other than temporary declines are included
in realized gains and losses on investments.
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during the
period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result in
recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
investment products and universal life insurance products, deferred
policy acquisition costs are being amortized with interest over the
lives of the policies in relation to the present value of estimated
future gross profits from projected interest margins, asset fees,
cost of insurance, policy administration and surrender charges.
For years in which gross profits are negative, deferred policy
acquisition costs are amortized based on the present value of gross
revenues. For traditional life products, these deferred policy
acquisition costs are predominantly being amortized with interest
over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits. Deferred policy
acquisition costs are adjusted to reflect the impact of unrealized
gains and losses on fixed maturity securities available-for-sale as
described in note 3(b).
71 of 109
<PAGE>
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies have
been calculated using a net level premium method based on estimates
of mortality, morbidity, investment yields and withdrawals which
were used or which were being experienced at the time the policies
were issued, rather than the assumptions prescribed by state
regulatory authorities. See note 6.
Future policy benefits and claims for collectively renewable long-
term disability policies and group long-term disability policies
are the present value of amounts not yet due on reported claims and
an estimate of amounts to be paid on incurred but unreported
claims. The impact of reserve discounting is not material. Future
policy benefits and claims on other group health insurance policies
are not discounted. All health insurance business is accounted for
as discontinued operations. See note 2.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 52% in 1996 (54% in
1995 and 55% in 1994) of the Company's life insurance in force, 78%
in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) FEDERAL INCOME TAX
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability as
if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
72 of 109
<PAGE>
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to affiliates
and is accounted for as discontinued operations. See notes 2 and
13.
(j) RECLASSIFICATION
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS (SFAS) NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. As of January 1, 1994, the Company
classified fixed maturity securities with amortized cost and fair
value of $6,299,665 and $6,721,714, respectively, as available-for-
sale and recorded the securities at fair value. Previously, these
securities were recorded at amortized cost. The effect as of
January 1, 1994 has been recorded as a direct credit to
shareholder's equity as follows:
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
---------
$ 212,553
---------
---------
(5) INVESTMENTS
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ---------- -----------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ---------- -----------
$12,014,768 400,341 (51,339) 12,363,770
------------ ---------- ---------- -----------
------------ ---------- ---------- -----------
</TABLE>
73 of 109
<PAGE>
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
----------- -------- ------- ----------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
----------- -------- ------- ----------
$11,886,173 663,588 (34,244) 12,515,517
----------- -------- ------- ----------
----------- -------- ------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1996, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Amortized Estimated
cost fair value
Fixed maturity securities available-for-sale: ----------- ----------
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
----------- ----------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
----------- ----------
$11,970,878 12,304,639
----------- ----------
----------- ----------
The components of unrealized gains on securities available-for-sale, net,
were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
-------- --------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
-------- --------
$173,592 384,304
-------- --------
-------- --------
</TABLE>
74 of 109
<PAGE>
An analysis of the change in gross unrealized gains (losses) on securities
available-for-sale and fixed maturity securities held-to-maturity follows for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------- --------- ----------
$(280,342) 951,932 (1,075,483)
--------- --------- ----------
--------- --------- ----------
</TABLE>
Proceeds from the sale of securities available-for-sale during
1996, 1995 and 1994 were $299,558, $107,345 and $228,308,
respectively. During 1996, gross gains of $6,606 ($4,838 and
$3,045 in 1995 and 1994, respectively) and gross losses of $6,925
($2,147 and $21,280 in 1995 and 1994, respectively) were realized
on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of
those fixed maturity securities resulted in a gross unrealized loss
of $3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING
FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in
November 1995 the Company transferred all of its fixed maturity
securities previously classified as held-to-maturity to available-
for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,320,093, resulting in
a gross unrealized gain of $155,940.
Investments that were non-income producing for the twelve month
period preceding December 31, 1996 amounted to $26,805 ($27,712 in
1995) and consisted of $248 ($6,982 in 1995) in fixed maturity
securities, $20,633 ($14,740 in 1995) in real estate and $5,924
($5,990 in 1995) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995)
and valuation allowances of $15,219 as of December 31, 1996
($25,819 as of December 31, 1995).
The recorded investment of mortgage loans on real estate considered
to be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND
DISCLOSURE) as of December 31, 1996 was $51,765 ($44,409 as of
December 31, 1995), which includes $41,663 ($23,975 as of December
31, 1995) of impaired mortgage loans on real estate for which the
related valuation allowance was $8,485 ($5,276 as of December 31,
1995) and $10,102 ($20,434 as of December 31, 1995) of impaired
mortgage loans on real estate for which there was no valuation
allowance. During 1996, the average recorded investment in
impaired mortgage loans on real estate was approximately $39,674
($22,181 in 1995) and interest income recognized on those loans was
$2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on
real estate is summarized for the years ended December 31:
1996 1995
------- ------
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------- ------
Allowance, end of year $51,038 49,128
------- ------
------- ------
75 of 109
<PAGE>
An analysis of investment income by investment type follows for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
---------- --------- ---------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
---------- --------- ---------
Net investment income $1,357,759 1,294,033 1,210,811
---------- --------- ---------
---------- --------- ---------
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------- ------ -------
$ (326) (1,724) (16,527)
------- ------ -------
------- ------ -------
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592 as of
December 31, 1996 and 1995, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for
future policy benefits as of December 31, 1996 and 1995,
respectively. The average interest rate credited on investment
product policies was approximately 6.3%, 6.6% and 6.5% for the
years ended December 31, 1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary as follows:
Year of issue Interest rates
------------- --------------------------------------------------
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
76 of 109
<PAGE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a
portion of its general account individual annuity business to The
Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $240,451 and $245,255 as of December 31, 1996
and 1995, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. Under the terms of the contract, Franklin has
established a trust as collateral for the recoveries. The trust
assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102%
of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not
material to either premiums or reinsurance recoverables.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to
significant components of the net deferred tax liability as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
-------- --------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
-------- --------
Net deferred tax assets 441,527 345,748
-------- --------
-------- --------
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
-------- --------
Total gross deferred tax liabilities 603,739 592,375
-------- --------
$162,212 246,627
-------- --------
-------- --------
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of
the total gross deferred tax assets will not be realized. Nearly
all future deductible amounts can be offset by future taxable
amounts or recovery of federal income tax paid within the statutory
carryback period. There has been no change in the valuation
allowance for the years ended December 31, 1996, 1995 and 1994.
77 of 109
<PAGE>
Total federal income tax expense for the years ended December 31,
1996, 1995 and 1994 differs from the amount computed by applying
the U.S. federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- ---------------
Amount % Amount % Amount %
-------------- -------------- ---------------
<S> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
-------------- -------------- ---------------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239 during the
years ended December 31, 1996, 1995 and 1994, respectively.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS (SFAS 107) requires disclosure of fair value
information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial
instrument as the amount at which the financial instrument could be
exchanged in a current transaction between willing parties. In
cases where quoted market prices are not available, fair value is
based on estimates using present value or other valuation
techniques.
These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash
flows. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in
assumptions could cause these estimates to vary materially. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, could not be realized in the immediate settlement of the
instruments. SFAS 107 excludes certain assets and liabilities from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically
exempted from SFAS 107 disclosures, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair
value disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses
can have a significant effect on fair value estimates and have not
been considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender charges.
78 of 109
<PAGE>
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life insurance
and supplementary contracts with life contingencies for which the
estimated fair value is the amount payable on demand. Also
included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
LIABILITIES
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is
a party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to
extend credit in the form of loans. These instruments involve, to
varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
79 of 109
<PAGE>
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a deposit. Commitments extended by the Company are
based on management's case-by-case credit evaluation of the
borrower and the borrower's loan collateral. The underlying
mortgage property represents the collateral if the commitment is
funded. The Company's policy for new mortgage loans on real estate
is to lend no more than 75% of collateral value. Should the
commitment be funded, the Company's exposure to credit loss in the
event of nonperformance by the borrower is represented by the
contractual amounts of these commitments less the net realizable
value of the collateral. The contractual amounts also represent
the cash requirements for all unfunded commitments. Commitments on
mortgage loans on real estate of $327,456 extending into 1997 were
outstanding as of December 31, 1996.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants
mainly commercial mortgage loans on real estate to customers
throughout the United States. The Company has a diversified
portfolio with no more than 21% (20% in 1995) in any geographic
area and no more than 2% (2% in 1995) with any one borrower as of
December 31, 1996.
The Company had a significant reinsurance recoverable balance from
one reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as
of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
-------- ----------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
-------- ----------- --------- ------------ ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
-------- ----------- --------- ------------
-------- ----------- --------- ------------
Less valuation allowances and unamortized discount 58,369
------------
Total mortgage loans on real estate, net $5,272,119
------------
------------
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
-------- ----------- --------- ------------ ------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
-------- ----------- --------- ------------
-------- ----------- --------- ------------
Less valuation allowances and unamortized discount 57,948
------------
Total mortgage loans on real estate, net $4,602,764
------------
------------
</TABLE>
80 of 109
<PAGE>
(10) PENSION PLAN
The Company is a participant, together with other affiliated
companies, in a pension plan covering all employees who have
completed at least one thousand hours of service within a twelve-
month period and who have met certain age requirements. Benefits
are based upon the highest average annual salary of a specified
number of consecutive years of the last ten years of service. The
Company funds pension costs accrued for direct employees plus an
allocation of pension costs accrued for employees of affiliates
whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements
and elected early retirement no later than March 15, 1995. The
entire cost of the enhanced benefit was borne by NMIC and certain
of its property and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau
Insurance Companies Pension Plan to form the Nationwide Insurance
Enterprise Retirement Plan. Immediately prior to the merger, the
plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as
of December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996
and 1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance
Enterprise Retirement Plan as a whole for the year ended December
31, 1996 and for the Nationwide Insurance Companies and Affiliates
Retirement Plan as a whole for the years ended December 31, 1995
and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
-------- -------- --------
$ 72,189 53,866 55,046
-------- -------- --------
-------- -------- --------
Basis for measurements, net periodic pension cost:
1996 1995 1994
-------- -------- --------
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
81 of 109
<PAGE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
------------ -----------
$1,349,703 1,263,233
------------ -----------
------------ -----------
Net accrued pension expense:
Projected benefit obligation for services rendered to date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
------------ -----------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
------------ -----------
$ (26,819) (21,592)
------------ -----------
------------ -----------
Basis for measurements, funded status of plan:
1996 1995
------------ -----------
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company,
together with other affiliated companies, participates in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
generally available to full time employees who have attained age 55
and have accumulated 15 years of service with the Company after
reaching age 40. Postretirement health care benefit contributions
are adjusted annually and contain cost-sharing features such as
deductibles and coinsurance. In addition, there are caps on the
Company's portion of the per-participant cost of the postretirement
health care benefits. These caps can increase annually, but not
more than three percent. The Company's policy is to fund the cost
of health care benefits in amounts determined at the discretion of
management. Plan assets are invested primarily in group annuity
contracts of NLIC.
The Company elected to immediately recognize its estimated
accumulated postretirement benefit obligation; however, certain
affiliated companies elected to amortize their initial transition
obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December
31, 1996 and 1995 was $34,884 and $33,537, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1996, 1995 and
1994 was $3,286, $3,132 and $4,284, respectively.
82 of 109
<PAGE>
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
-------- -------- --------
$17,875 19,076 23,165
-------- -------- --------
-------- -------- --------
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
-------- --------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
-------- --------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
-------- --------
$(159,216) (152,734)
-------- --------
-------- --------
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended
December 31, 1996 by $83.
(12) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance is
determined by a ratio of the company's regulatory total adjusted capital,
as defined by the NAIC, to its authorized control level risk-based
capital, as defined by the NAIC. Companies below specific trigger points
or ratios are classified within certain levels, each of which requires
specified corrective action. NLIC and each of its insurance company
subsidiaries exceed the minimum risk-based capital requirements.
83 of 109
<PAGE>
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State
of Ohio (the Department). NLIC's dividend of the outstanding
shares of common stock of certain companies which was declared on
September 24, 1996 and the anticipated $850,000 dividend (as
discussed in note 1) are deemed extraordinary under Ohio insurance
laws. As a result of such dividends, any dividend paid by NLIC
during the 12-month period immediately following the $850,000
dividend would also be an extraordinary dividend under Ohio
insurance laws. Accordingly, no such dividend could be paid
without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject
to restrictions set forth in the insurance laws of New York that
limit the amount of statutory profits on NLIC's participating
policies (measured before dividends to policyholders) that can
inure to the benefit of the Company and its stockholder.
The Company currently does not expect such regulatory requirements
to impair its ability to pay operating expenses and stockholder
dividends in the future.
(13) TRANSACTIONS WITH AFFILIATES
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and
1994, the Company made lease payments to NMIC and its subsidiaries
of $9,065, $8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC
provides certain operational and administrative services, such as
sales support, advertising, personnel and general management
services, to those subsidiaries. Expenses covered by this
agreement are subject to allocation among NMIC, the Company and
other affiliates. Amounts allocated to the Company were $101,584,
$107,112, and $100,601 in 1996, 1995 and 1994, respectively. The
allocations are based on techniques and procedures in accordance
with insurance regulatory guidelines. Measures used to allocate
expenses among companies include individual employee estimates of
time spent, special cost studies, salary expense, commissions
expense and other methods agreed to by the participating companies
that are within industry guidelines and practices. The Company
believes these allocation methods are reasonable. In addition, the
Company does not believe that expenses recognized under the inter-
company agreements are materially different than expenses that
would have been recognized had the Company operated on a stand
alone basis. Amounts payable to NMIC from the Company under the
cost sharing agreement were $15,111 and $1,186 as of December 31,
1996 and 1995, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the
securities will be repurchased by the seller at the original sales
price plus a price differential. Transactions under the agreements
during 1996 and 1995 were not material. The Company believes that
the terms of the repurchase agreements are materially consistent
with what the Company could have obtained with unaffiliated
parties.
84 of 109
<PAGE>
Intercompany reinsurance contracts exist between NLIC and,
respectively NMIC and ELICW whereby all of NLIC's accident and
health and group life insurance business is ceded on a modified
coinsurance basis. NLIC entered into the reinsurance agreements
during 1996 because the accident and health and group life
insurance business was unrelated to NLIC's long-term savings and
retirement products. Accordingly, the accident and health and
group life insurance business has been accounted for as
discontinued operations for all periods presented. Under modified
coinsurance agreements, invested assets are retained by the ceding
company and investment earnings are paid to the reinsurer. Under
the terms of NLIC's agreements, the investment risk associated with
changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee
is paid by NMIC or ELICW, as the case may be, to NLIC for the
NLIC's retention of such risk. The agreements will remain in force
until all policy obligations are settled. However, with respect to
the agreement between NLIC and NMIC, either party may terminate the
contract on January 1 of any year with prior notice. The ceding of
risk does not discharge the original insurer from its primary
obligation to the policyholder. NLIC believes that the terms of the
modified coinsurance agreements are consistent in all material
respects with what NLIC could have obtained with unaffiliated
parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and
NCC, are summarized in note 2. Amounts ceded to ELICW in 1996
include premiums of $224,224, net investment income and other
revenue of $14,833, and benefits, claims and other expenses of
$246,641. Amounts ceded to NMIC in 1996 include premiums of
$97,331, net investment income of $10,890, and benefits, claims and
other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and
CCMC act as common agents in handling the purchase and sale of
short-term securities for the respective accounts of the
participants. Amounts on deposit with NCMC and CCMC were $4,789
and $9,654 as of December 31, 1996 and 1995, respectively, and are
included in short-term investments on the accompanying consolidated
balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the
outstanding shares, with shareholder equity value of $30, of NISC
to NLIC. NLIC contributed an additional $500 to NISC on August 30,
1996.
On March 1, 1995, Nationwide Corp. contributed all of the
outstanding shares of common stock of Farmland Life Insurance
Company (Farmland) to NLIC. Farmland merged into WCLIC effective
June 30, 1995. The contribution resulted in a direct increase to
consolidated shareholder's equity of $46,918. As discussed in note
2, WCLIC is accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation
(WSC) for $155,000. NLIC transferred fixed maturity securities and
cash with a fair value of $155,000 to WSC on December 28, 1994,
which resulted in a realized loss of $19,239 on the disposition of
the securities. The purchase price approximated both the
historical cost basis and fair value of net assets of ELICW. ELICW
has and will continue to share home office, other facilities,
equipment and common management and administrative services with
WSC. As discussed in note 2, ELICW is accounted for as
discontinued operations.
Certain annuity products are sold through three affiliated
companies which are also subsidiaries of Nationwide Corp. Total
commissions and fees paid to these affiliates for the years ended
December 31, 1996, 1995 and 1994 were $76,922, $57,280 and $50,168,
respectively.
(14) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, established a $600,000
revolving credit facility which provides for a $600,000 loan over a
five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several
and not joint liability with respect to any amount drawn by either
NLIC or NMIC. NLIC and NMIC pay facility and usage fees to the
financial institutions to maintain the revolving credit facility.
All previously existing line of credit agreements were canceled.
85 of 109
<PAGE>
(15) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected
to be material to the Company's financial position or results of
operations.
(16) SEGMENT INFORMATION
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment
consists of annuity contracts that provide the customer with the
opportunity to invest in mutual funds managed by the Company and
independent investment managers, with the investment returns
accumulating on a tax-deferred basis. The Fixed Annuities segment
consists of annuity contracts that generate a return for the
customer at a specified interest rate, fixed for a prescribed
period, with returns accumulating on a tax-deferred basis. The
Life Insurance segment consists of insurance products that provide
a death benefit and may also allow the customer to build cash value
on a tax-deferred basis. In addition, the Company reports
corporate expenses and investments, and the related investment
income supporting capital not specifically allocated to its product
segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other
revenue earned from mutual funds, other than the portion allocated
to the variable annuities and life insurance segments, are reported
in the Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have
been restated to reflect these changes.
The following table summarizes the revenues and income from
continuing operations before federal income tax expense for the
years ended December 31, 1996, 1995 and 1994 and assets as of
December 31, 1996, 1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
---------- ---------- -----------
$ 1,992,838 1,798,651 1,599,499
---------- ---------- -----------
---------- ---------- -----------
Income from continuing operations before
federal income tax expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
---------- ---------- -----------
$ 315,497 287,572 241,858
---------- ---------- -----------
---------- ---------- -----------
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
---------- ---------- -----------
$ 47,766,246 38,507,633 29,246,024
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
86 of 109
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) To be filed by Financial Statements:
(1) Financial statements and schedule included PAGE
in Prospectus
(Part A):
Condensed Financial Information. 18
(2) Financial statements included 54
in Part B:
Those financial statements required by
Item 23 to be included in Part B have been
incorporated therein by reference to the
Statement of Additional Information
(Part A).
Nationwide Fidelity Advisor Variable Account:
Independent Auditors' Report. 54
Statements of Assets, Liabilities 55
and Contract Owners' Equity as of
December 31, 1996.
Statements of Operations and Changes 58
in Contract Owners' Equity for years
ended December 31, 1996, and 1995.
Notes to Financial Statements. 59
Schedules of Changes In Unit Value. 61
Nationwide Life Insurance Company:
Independent Auditors' Report. 63
Consolidated Balance Sheets as of December 31, 1996
and 1995 64
Consolidated Statements of Income for the years 65
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholder's Equity for the 66
years ended December 31, 1996, 1995 and
1994.
Consolidated Statements of Cash Flows for the years 67
ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements. 68
Schedule I - Consolidated Summary of Investments - Other 104
Than Investments in Related Parties
Schedule III - Supplementary Insurance Information 105
Schedule IV - Reinsurance 106
Schedule V - Valuation and Qualifying Accounts 107
87 of 109
<PAGE>
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with this
Registration Statement (File No. 33-82174) and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contracts
between the Registrant and Principal
Underwriter - Filed previously with this
Registration Statement (File No. 33-82174) and hereby
incorporated by reference.
(4) The form of the variable annuity contract -
Filed previously with this Registration
Statement (File No. 33-82174) and hereby incorporated
herein by reference.
(5) Variable Annuity Application - Filed
previously with this Registration
Statement (File No. 33-82174) and hereby incorporated
herein by reference.
(6) Articles of Incorporation of Depositor -
Filed previously with this Registration
Statement (File No. 33-82174) and hereby incorporated
herein by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
this Registration Statement (File No. 33-82174) and hereby
incorporated herein by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with this
Registration Statement (File No. 33-82174) and hereby
incorporated herein by reference.
88 of 109
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board and Director
Darlington, MD 21034
Dimon Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
89 of 109
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
90 of 109
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administration
Columbus, OH 43215 Services
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial statements
filed for unconsolidated subsidiaries
91 of 109
<PAGE>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio Life Insurance Agency
Ohio, Inc.
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
American Marine Florida Underwriting Manager
Underwriters, Inc.
Auto Direkt Insurance Germany Insurance Company
Company
The Beak and Wire Ohio Radio Tower Joint Venture
Corporation
California Cash California Investment Securities Agent
Management Company
Colonial County Mutual Texas Insurance Company
Insurance Company
Colonial Insurance California Insurance Company
Company of California
Columbus Insurance Germany Insurance Broker
Brokerage and Service
GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency California Insurance Broker
Insurance Services of
California
Companies Agency of Alabama Insurance Broker
Alabama, Inc.
Companies Agency of Idaho Insurance Broker
Idaho, Inc.
Companies Agency of Illinois Acts as Collection Agent for
Illinois, Inc. policies placed through
Brokers
Companies Agency of Kentucky Insurance Broker
Kentucky, Inc.
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
Companies Agency of New York Insurance Broker
New York, Inc.
Companies Agency of Pennsylvania Insurance Broker
Pennsylvania, Inc.
Companies Agency of Arizona Insurance Broker
Phoenix, Inc.
Companies Agency of Texas Insurance Broker
Texas, Inc.
Companies Annuity Texas Insurance Broker
Agency of Texas, Inc.
Countrywide Services Delaware Products Liability,
Corporation Investigative and Claims
Management Services
Employers Insurance of Wisconsin Insurance Company
Wausau A Mutual
Company
92 of 109
<PAGE>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
** Employers Life Wisconsin Life Insurance Company
Insurance Company of
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Iowa Insurance Company
Insurance Company
Financial Horizons Alabama Life Insurance Agency
Distributors Agency of
Alabama, Inc.
Financial Horizons Ohio Life Insurance Agency
Distributors Agency of
Ohio, Inc.
Financial Horizons Oklahoma Life Insurance Agency
Distributors Agency of
Oklahoma, Inc.
Financial Horizons Texas Life Insurance Agency
Distributors Agency of
Texas, Inc.
* Financial Horizons Massachusetts Investment Company
Investment Trust
Financial Horizons Oklahoma Broker Dealer
Securities Corporation
Gates, McDonald & Ohio Cost Control Business
Company
Gates, McDonald & Nevada Self-Insurance
Company of Nevada Administration Claims
Examinations and Data
Processing Services
Gates, McDonald & New York Workers Compensation Claims
Company of New York, Administration
Inc.
Gates, McDonald Health Ohio Managed Care Organization
Plus, Inc.
Greater La Crosse Wisconsin Writes Commercial Health and
Health Plans, Inc. Medicare Supplement
Insurance
Insurance Ohio Insurance Broker and
Intermediaries, Inc. Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial New York Life Insurance Agency
Services of New York,
Inc.
Leben Direkt Insurance Germany Life Insurance Company
Company
Lone Star General Texas Insurance Agency
Agency, Inc.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Michigan Insurance Company
Company
National Casualty Great Britain Insurance Company
Company of America, Ltd.
** National Premium and Delaware Insurance Administrative
Benefit Administration Services
Company
** Nationwide Advisory Ohio Registered Broker-Dealer,
Services, Inc. Investment Manager and
Administrator
93 of 109
<PAGE>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
Nationwide Agency, Ohio Insurance Agency
Inc.
Nationwide Iowa Insurance Company
Agribusiness Insurance
Company
Nationwide Asset Massachusetts Investment Company
Allocation Trust
Nationwide Cash Ohio Investment Securities Agent
Management Company
Nationwide Ohio Radio Broadcasting Business
Communications, Inc.
Nationwide Community Ohio Redevelopment of blighted
Urban Redevelopment areas within the City of
Corporation Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of
acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts of
other persons, associations,
corporations, domestic or
foreign and to form or
acquire the control of other
corporations
Nationwide Development Ohio Owns, leases and manages
Company commercial real estate
Nationwide Financial Delaware Insurance Agency
Institution
Distributors Agency,
Inc.
Nationwide Financial Delaware Organized for the purpose of
Services, Inc. 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 General Ohio Insurance Company
Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance
Organization
* Nationwide Indemnity Ohio Reinsurance Company
Company
Nationwide Insurance Ohio Membership Non-Profit
Enterprise Foundation Corporation
Nationwide Insurance Ohio Investment Company
Golf Charities, Inc.
Nationwide Investing Michigan Investment Company
Foundation
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Oklahoma Registered Broker-Dealer
Services Corporation in Deferred Compensation
Market
Nationwide Investors Ohio Stock Transfer Agent
Services, Inc.
** Nationwide Life and Ohio Life Insurance Company
Annuity Insurance
Company
Nationwide Insurance Ohio Membership Non-Profit
Golf Charities, Inc. Corporation
Nationwide Investing Michigan Investment Company
Foundation
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Oklahoma Registered Broker-Dealer in
Services Corporation Deferred Compensation Market
Nationwide Investors Ohio Stock Transfer Agent
Services, Inc.
** Nationwide Life and Ohio Life Insurance Company
Annuity Insurance
Company
94 of 109
<PAGE>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
** Nationwide Life Ohio Life Insurance Company
Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Ohio Develops and operates
Systems, Inc. Managed Care Delivery System
Nationwide Mutual Fire Ohio Insurance Company
Insurance Company
Nationwide Mutual Ohio Insurance Company
Insurance Company
Nationwide Properties, Ohio Develops, owns and operates
Ltd. real estate and real estate
investments
Nationwide Property Ohio Insurance Company
and Casualty Insurance
Company
Nationwide Realty Ohio Develops, owns and operates
Investors, Ltd. real estate and real estate
investments
* Nationwide Separate Massachusetts Investment Company
Account Trust
NEA Valuebuilder Delaware Life Insurance Agency
Investor Services,
Inc.
NEA Valuebuilder Alabama Life Insurance Agency
Investor Services of
Alabama, Inc.
NEA Valuebuilder Arizona Life Insurance Agency
Investor Services of
Arizona, Inc.
NEA Valuebuilder Massachusetts Life Insurance Agency
Investor Services of
Massachusetts, Inc.
NEA Valuebuilder Montana Life Insurance Agency
Investor Services of
Montana, Inc.
NEA Valuebuilder Nevada Life Insurance Agency
Investor Services of
Nevada, Inc.
NEA Valuebuilder Ohio Life Insurance Agency
Investor Services of
Ohio, Inc.
NEA Valuebuilder Oklahoma Life Insurance Agency
Investor Services of
Oklahoma, Inc.
NEA Valuebuilder Texas Life Insurance Agency
Investor Services of
Texas, Inc.
NEA Valuebuilder Wyoming Life Insurance Agency
Investor Services of
Wyoming
NEA Valuebuilder Massachusetts Life Insurance Agency
Services Insurance
Agency, Inc.
Neckura General Germany Insurance Company
Insurance Company
Neckura Holding Germany Administrative Service for
Company Neckura Insurance Group
Neckura Insurance Germany Insurance Company
Company
Neckura Life Insurance Germany Life Insurance Company
Company
NWE, Inc. Ohio Special Investments
95 of 109
<PAGE>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
PEBSCO of Massachusetts Markets and Administers
Massachusetts Deferred Compensation
Insurance Agency, Plans for Public Employees
Inc.
PEBSCO of Texas, Texas Markets and Administers
Inc. Deferred Compensation
Plans for Public Employees
Pension Associates Wisconsin Pension plan
of Wausau, Inc. administration, record
keeping and consulting and
compensation consulting
Physicians Plus Wisconsin Health Maintenance
Insurance Organization
Corporation
Public Employees Delaware Marketing and
Benefit Services Administration of Deferred
Corporation Employee Compensation
Plans for Public Employees
Public Employees Alabama Markets and Administers
Benefit Services Deferred Compensation
Corporation of Plans for Public Employees
Alabama
Public Employees Arkansas Markets and Administers
Benefit Services Deferred Compensation
Corporation of Plans for Public Employees
Arkansas
Public Employees Montana Markets and Administers
Benefit Services Deferred Compensation
Corporation of Plans for Public Employees
Montana
Public Employees New Mexico Markets and Administers
Benefit Services Deferred Compensation
Corporation of New Plans for Public Employees
Mexico
Scottsdale Indemnity Ohio Insurance Company
Company
Scottsdale Insurance Ohio Insurance Company
Company
Scottsdale Surplus Arizona Excess and Surplus Lines
Lines Insurance Insurance Company
Company
SVM Sales GmbH, Germany Sales support for Neckura
Neckura Insurance Insurance Group
Group
Wausau Business Illinois Insurance Company
Insurance Company
Wausau General Illinois Insurance Company
Insurance Company
Wausau Insurance United Insurance and Reinsurance
Company (U.K.) Kingdom Company
Limited
Wausau International California Special Risks, Excess and
Underwriters Surplus Lines Insurance
Underwriting Manager
** Wausau Preferred Wisconsin Insurance and Reinsurance
Health Insurance Company
Wausau Service Wisconsin Holding Company
Corporation
Wausau Underwriters Wisconsin Insurance Company
Insurance Company
96 of 109
<PAGE>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART)
OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* NACo Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide DC Ohio Nationwide Life Issuer of Annuity
Variable Account Separate Account Contracts
* Nationwide DCVA-II Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Multi- Ohio Nationwide Life Issuer of Annuity
Flex Variable Separate Account Contracts
Account
* Nationwide VA Ohio Nationwide Life Issuer of Annuity
Separate Account-A and Annuity Contracts
Separate Account
* Nationwide VA Ohio Nationwide Life Issuer of Annuity
Separate Account-B and Annuity Contracts
Separate Account
Nationwide VA Ohio Nationwide Life Issuer of Annuity
Separate Account-C and Annuity Contracts
Separate Account
* Nationwide VA Ohio Nationwide Life Issuer of Annuity
Separate Account-Q and Annuity Contracts
Separate Account
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-II Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-3 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-4 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-5 Separate Account Contracts
* Nationwide Fidelity Ohio Nationwide Life Issuer of Annuity
Advisor Variable Separate Account Contracts
Account
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-6 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-8 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-9 Separate Account Contracts
* Nationwide VL Ohio Nationwide Life Issuer of Life
Separate and Annuity Insurance Policies
Account-A Separate Account
* Nationwide VL Ohio Nationwide Life Issuer of Life
Separate and Annuity Insurance Policies
Account-B Separate Account
* Nationwide VL Ohio Nationwide Life Issuer of Life
Separate and Annuity Insurance Policies
Account-C Separate Account
97 of 109
<PAGE>
* Nationwide VLI Ohio Nationwide Life Issuer of Life
Separate Account Separate Account Insurance Policies
* Nationwide VLI Ohio Nationwide Life Issuer of Life
Separate Account-2 Separate Account Insurance Policies
* Nationwide VLI Ohio Nationwide Life Issuer of Life
Separate Account-3 Separate Account Insurance Policies
* Nationwide VLI Ohio Nationwide Life Issuer of Life
Separate Account-4 Separate Account Insurance Policies
98 of 109
<PAGE>
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
| --------------------------- | ---------------------------- | || --------------------------
- -------------------------- | | | | | || | |
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || --------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate | | |------------ Shares | | |------------ Shares |
|----------- Cost | | | Cost | | | Cost |
| ---- | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | -------------------------------- | --------------------------------
| | |
- -------------------------------- | -------------------------------- | --------------------------------
| F & B, INC. | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | COMPANY OF CALIFORNIA | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | (COLONIAL) | | | |
|------------ | |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | |------------ Shares | | |------------ Shares |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $10 | | |Casualty-100% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
|------------ Shares | | | Cost |
| Cost | | | ---- |
| ---- | | |Casualty-90% $9,000 |
|Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
-------------------------------- | --------------------------------
|| |
-------------------------------- | --------------------------------
| COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| INSURANCE COMPANY | | | MANAGEMENT |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $58,070,003 | | | NW Life--100% $5,996,261 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life--100% $529,728 | | | COMMON LAW TRUST | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Center)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|
----------------------------------------------------------------------------------------------------------------------
| | | |
--------------------------- -------------------------- ----------------------------- ----------------------------
| NATIONWIDE FINANCIAL | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $500 | || | NEA--100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP.--100% $25,683,532 | | | NW CORP.--100% $126,509,480 | | | NW CORP.--100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
Page 2
</TABLE>
100 of 109
<PAGE>
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified Contracts
as of July 31, 1997 was 4,596 and 9,958, respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation Law of
the State of Ohio, for indemnification by the Company of any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact
that such person is or was a director, officer or employee of the
Company, against expenses, including attorneys fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, to the
extent and under the circumstances permitted by the General
Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) 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)
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
William F. Devin Director
Edward C. Johnson 3d Director
Richard G. Malconian President
Charles Delle Donne Sevior 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. Bieniek 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, Clinet Services
Robert MacDonald Senior Vice President, Insurance Market
Reed Tupper Senior Vice President, Insurance Market
Arthur S. Loring Senior Vice President, Clerf and General Counsel
Susan Pfau Vice President, Fianance
Joseph Collins Vice President, Human Resources
Robert Sauvageau Vice President, Systems
101 of 109
<PAGE>
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
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than 16
months old for so long as payments under the variable annuity
contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly
upon written or oral request.
The Registrant represents that any of the Contracts which are issued
pursuant to Section 403(b) of the Code are issued by the the Company
through the Registrant in reliance upon, and in compliance with a no-
action letter issued by the staff of the Securities and Exchange
Commision to the American Council of Life Insurance (publicly
available November 28, 1988) permitting withdrawal restrictions to the
extent necessary to comply with Section 403(b)(11) of the Code.
The Company represents that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
102 of 109
<PAGE>
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Fidelity Advisor Variable Account
Individual Modified Single Premium Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1997
103 of 109
<PAGE>
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT
SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the Nationwide Fidelity Advisor Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 31, 1997 included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 28, 1997
104 of 109
<PAGE>
105 of 109
<PAGE>
106 of 109
<PAGE>
107 of 109
<PAGE>
108 of 109
<PAGE>
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 2nd day of September, 1997.
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
----------------------------------------------
Joseph P. Rath
Vice President
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 2nd day
of September, 1997.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer
- ------------------------------ and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- ------------------------------
Henry S. Holloway
DIMON RICHARD MCFERSON Chairman and Chief Executive
- ------------------------------ Officer - Nationwide Insurance
Dimon Richard McFerson Enterprise and Director
DAVID O. MILLER Director
- ------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-Chief Financial
- ------------------------------ Officer
Robert A. Oakley
JAMES F. PATTERSON Director By /s/ JOSEPH P. RATH
- ------------------------------ ---------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- ------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------
Harold W. Weihl
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