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NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 182356
Columbus, Ohio 43216-2356, 1-800-243-6295
Voice Response (available 24 hours) 1-800-848-8258, TDD 1-800-238-3035
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
This Prospectus describes individual modified single premium payment
contracts (collectively referred to as the "Contracts") issued by Nationwide
Life Insurance Company ("Nationwide" or the "Company"). The Contracts are sold
either as Non-Qualified Contracts or Individual Retirement Annuities. Annuity
payments under the Contracts are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II
("Variable Account"), a separate account of 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:
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio Growth Portfolio
High Income Portfolio* Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Small Company Fund Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Growth Portfolio Limited Maturity Bond Portfolio Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG SPECIAL FUND II, INC.
Special Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. International Stock Fund II
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund Gold and Natural Resources Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
* 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 Variable Account-II before investing. You
should read it and keep it for future reference. A Statement of Additional
Information dated October 27, 1995 containing further information about the
Contracts and the Nationwide Variable Account-II has been filed with the
Securities and Exchange Commission. You can obtain a copy without charge from
Nationwide Life Insurance Company by calling the number listed above, or
writing P.O. Box 182356, Columbus, Ohio 43216-2356.
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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 OCTOBER 27, 1995
IS INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR
THE STATEMENT OF ADDITIONAL INFORMATION APPEARS ON PAGE 29 OF THE
PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS OCTOBER 27, 1995.
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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 designated to receive annuity payments
during Annuitization and upon whose life any annuity payments
involving life contingencies depends. This person must be age 90
or younger at the time of Contract issuance, unless the Company
has approved a request for an Annuitant of greater age. The
Annuitant may be changed prior to the Annuitization Date with the
consent of the Company.
ANNUITIZATION- The period during which annuity payments are
actually received.
ANNUITIZATION DATE- The date on which annuity payments are
scheduled to begin.
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 who may receive
certain benefits under the Contract upon the death of the
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 is the person
designated to be the Annuitant if the Annuitant is not living at
the Annuitization Date. If a Contingent Annuitant is named, all
provisions of the Contract which are based on the death of the
Annuitant prior to the Annuitization Date will be based on the
death of the last survivor of the Annuitant and the Contingent
Annuitant, unless otherwise indicated.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person
designated to be the Beneficiary if the named Beneficiary is not
living at the time of the death of the Annuitant.
CONTINGENT OWNER- A Contingent Owner, if named, may succeed to
the rights of Contract Owner upon the Contract Owner's death
before Annuitization. For Contracts issued in the State of New
York, references throughout this prospectus to "Contingent Owner"
shall mean "Owner's Beneficiary."
CONTRACT- 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 (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, the
Contingent Owner, the Annuitant, the Contingent Annuitant, the
Beneficiary, the Contingent Beneficiary, the Annuity Payment
Option, or the Annuitization Date.
CONTRACT VALUE- The sum of the Variable Account Accumulation
Units attributable to the Contract plus any amount held under the
Contract in the Fixed Account.
CONTRACT YEAR- Each year commencing with the Date of Issue, and
each Contract Anniversary thereafter shall be a Contract Year.
DATE OF ISSUE- The Date of Issue is the date the first Purchase
Payment is applied to the Contract.
DEATH BENEFIT- The benefit payable upon the death of the
Annuitant prior to the Annuitization Date. This benefit does not
apply upon the death of the Contract Owner when the Owner and
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.
DISTRIBUTION- Any payment of part or all of the Contract Value.
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FIXED ACCOUNT- The Fixed Account is made up of all assets of the
Company other than those in any segregated asset account.
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 which qualifies for
treatment under Section 408(b) of the Internal Revenue Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period
is the interval of time in which an interest rate credited to the
Fixed Account under the Contract is guaranteed to remain the
same. For Purchase Payments into the Fixed Account or transfers
from the Variable Account, this period begins upon the date of
deposit or transfer and ends at the end of the calendar quarter
at least one year from deposit or transfer. At the end of an
Interest Rate Guarantee Period, a new interest rate is declared
with an Interest Rate Guarantee Period starting at the end of the
prior period and ending at the end of the calendar quarter one
year later.
IRA- Refers generally to both an Individual Retirement Account
and an Individual Retirement Annuity as defined in Sections
408(a) and (b), respectively, of the Code.
JOINT OWNER- The Joint Owner, if any, possesses an undivided
interest in the entire Contract in conjunction with the Owner.
IF A JOINT OWNER IS NAMED, REFERENCES TO "CONTRACT OWNER" OR
"OWNER" IN THIS PROSPECTUS WILL APPLY TO BOTH THE OWNER AND JOINT
OWNER. JOINT OWNERS MUST BE SPOUSES AT THE TIME JOINT OWNERSHIP
IS REQUESTED. IRAs may not be jointly owned.
MUTUAL FUNDS (FUNDS)- The registered management investment
companies in which the assets of the Sub-Accounts of the Variable
Account will be invested.
NON-QUALIFIED CONTRACTS- A Contract which does not qualify for
favorable tax treatment under the provisions of Section 401
(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 among the Sub-
Accounts.
QUALIFIED PLANS- Retirement plans which receive favorable tax
treatment under Section 401 and 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 treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the
Company's Home Office is open for business or any other day
during which there is a sufficient degree of trading of the
Variable Account's underlying Mutual Fund shares that the current
net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD- The period of time commencing at the close of
business of the New York Stock Exchange and ending at the close
of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT- The Variable Account is 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.
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Table of Contents
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS ................................. 3
SUMMARY OF CONTRACT EXPENSES .............................. 6
SYNOPSIS .................................................. 9
NATIONWIDE LIFE INSURANCE COMPANY ......................... 9
THE VARIABLE ACCOUNT ...................................... 9
Underlying Mutual Fund Options ....................... 10
Fund Descriptions .................................. 10
Voting Rights ........................................ 16
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS,
AND OTHER DEDUCTIONS .................................... 16
Mortality Risk Charge ................................ 16
Premium Taxes ........................................ 16
Expenses of Variable Account ......................... 16
Investments of the Variable Account .................. 17
Right to Revoke ...................................... 17
Transfers ............................................ 17
Assignment ........................................... 18
Contingent Owner and Beneficiary Provisions .......... 18
Ownership Provisions ................................. 19
Substitution of Securities ........................... 19
Contract Owner Inquiries ............................. 19
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT ................... 19
Value of an Annuity Unit ............................. 20
Assumed Investment Rate .............................. 20
Frequency and Amount of Annuity Payments ............. 20
Annuitization Date ................................... 20
Change in Annuitization Date ......................... 20
Change in Form of Annuity ............................ 20
Annuity Payment Options .............................. 20
Death of Contract Owner .............................. 21
Death of Annuitant Prior to the Annuitization Date ... 21
Death of Annuitant After the Annuitization Date ...... 22
Required Distributions for Individual
Retirement Annuities ............................... 22
GENERAL INFORMATION ....................................... 23
Contract Owner Services .............................. 23
Statements and Reports ............................... 24
Allocation of Purchase Payments and Contract Value ... 24
Value of a Variable Account Accumulation Unit ........ 24
Net Investment Factor ................................ 25
Valuation of Assets .................................. 25
Determining the Contract Value ....................... 25
Surrender (Redemption) ............................... 25
Taxes ................................................ 26
Non-Qualified Contracts .............................. 26
Individual Retirement Annuities ...................... 27
Diversification ...................................... 28
Charge for Tax Provisions ............................ 28
Advertising .......................................... 28
LEGAL PROCEEDINGS ......................................... 29
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION .. 29
APPENDIX .................................................. 30
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality Risk Charges ........................... 0.80 %
Administration Charge ............................ 0.00 %
Total Variable Account Annual Expenses ......... 0.80 %
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (1)
(as a percentage of mutual fund net assets)
Management Other Total Mutual
Fees Expenses Fund Expenses
<S> <C> <C> <C>
Dreyfus Stock Index Fund 0.14% 0.26% 0.40%
- -------------------------------------------------------------------------
The Dreyfus Socially Responsible 0.00% 0.25% 0.25%
Growth Fund
- -------------------------------------------------------------------------
Fidelity VIP-Equity-Income Portfolio 0.52% 0.06% 0.58%
- -------------------------------------------------------------------------
Fidelity VIP-Growth Portfolio 0.62% 0.07% 0.69%
- -------------------------------------------------------------------------
Fidelity VIP-High Income Portfolio 0.61% 0.10% 0.71%
- -------------------------------------------------------------------------
Fidelity VIP-Overseas Portfolio 0.77% 0.15% 0.92%
- -------------------------------------------------------------------------
Fidelity VIP II-Asset Manager 0.72% 0.07% 0.79%
Portfolio
- -------------------------------------------------------------------------
Fidelity VIP II-Contrafund 0.62% 0.27% 0.89%
Portfolio
- -------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.06% 0.56%
- -------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- -------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.04% 0.54%
- -------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.25% 1.25%
- -------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.02% 0.52%
- -------------------------------------------------------------------------
Neuberger & Berman Advisers 0.79% 0.12% 0.91%
Management Trust-Growth Portfolio
- -------------------------------------------------------------------------
Neuberger & Berman Advisers 0.60% 0.13% 0.73%
Management Trust-Limited
Maturity Bond Portfolio
- -------------------------------------------------------------------------
Neuberger & Berman Advisers 0.80% 0.50% 1.30%
Management Trust-Partners Portfolio
- -------------------------------------------------------------------------
Oppenheimer-Bond Fund 0.75% 0.06% 0.81%
- -------------------------------------------------------------------------
Oppenheimer-Global 0.75% 0.20% 0.95%
Securities Fund
- -------------------------------------------------------------------------
Oppenheimer-Multiple 0.74% 0.05% 0.79%
Strategies Fund
- -------------------------------------------------------------------------
Strong-Discovery Fund II, Inc. 1.00% 0.21% 1.21%
- -------------------------------------------------------------------------
Strong-International Stock Fund II 1.00% 1.05% 2.05%
- -------------------------------------------------------------------------
Strong-Special Fund II, Inc. 1.00% 0.10% 1.10%
- -------------------------------------------------------------------------
TCI Portfolios-TCI Balanced 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------
TCI Portfolios-TCI Growth 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------
TCI Portfolios-TCI International 1.50% 0.00% 1.50%
- -------------------------------------------------------------------------
Van Eck-Worldwide Bond Fund 0.75% 0.18% 0.93%
- -------------------------------------------------------------------------
Van Eck-Gold and Natural 0.75% 0.21% 0.96%
Resources Fund
- -------------------------------------------------------------------------
Van Kampen American Capital-Real 1.00% 0.00% 1.00%
Estate Securities Fund
- -------------------------------------------------------------------------
Warburg Pincus-International 1.00% 0.44% 1.44%
Equity Portfolio
- -------------------------------------------------------------------------
Warburg Pincus-Small Company 0.90% 0.35% 1.25%
Growth Portfolio
- -------------------------------------------------------------------------
<FN>
(1) 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 the unit values of the Variable Account.
</TABLE>
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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>
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- -----------------------------------------------------------------------------------------------------------------------------------
1 Yr 3 Yrs 5 Yrs 10 Yrs 1 Yr 3 Yrs 5 Yrs 10 Yrs 1 Yr 3 Yrs 5 Yrs 10 Yrs
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index Fund 13 39 68 149 13 39 68 149 * 39 68 149
- -----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially
Responsible Growth Fund 11 34 60 132 11 34 60 132 * 34 60 132
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Equity-Income
Portfolio 14 45 78 170 14 45 78 170 * 45 78 170
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Growth
Portfolio 16 49 84 183 16 49 84 183 * 49 84 183
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Overseas
Portfolio 18 56 96 209 18 56 96 209 * 56 96 209
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-High Income
Portfolio 16 49 85 185 16 49 85 185 * 49 85 185
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset
Manager Portfolio 17 52 89 194 17 52 89 194 * 52 89 194
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Contrafund
Portfolio 18 55 95 206 18 55 95 206 * 55 95 206
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation
Fund 14 44 77 168 14 44 77 168 * 44 77 168
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 14 43 74 162 14 43 74 162 * 43 74 162
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 14 44 76 166 14 44 76 166 * 44 76 166
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 22 66 114 245 22 66 114 245 * 66 114 245
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 14 43 74 163 14 43 74 163 * 43 74 163
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-Growth
Portfolio 18 56 96 208 18 56 96 208 * 56 96 208
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-Limited
Maturity Bond Portfolio 16 50 86 188 16 50 86 188 * 50 86 188
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust-Partners
Portfolio 22 68 117 250 22 68 117 250 * 68 117 250
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contact at the end of the at the end of the applicable
time period applicable time period time period
- -----------------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Bond Fund 17 52 90 197 17 52 90 197 * 52 90 197
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Global Securities Fund 18 57 98 212 18 57 98 212 * 57 98 212
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Multiple Strategies Fund 17 52 89 194 17 52 89 194 * 52 89 194
- -----------------------------------------------------------------------------------------------------------------------------------
Strong Discovery Fund II, Inc. 21 65 112 241 21 65 112 241 * 65 112 241
- -----------------------------------------------------------------------------------------------------------------------------------
Strong International Stock Fund II 30 92 156 328 30 92 156 328 * 92 156 328
- -----------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 20 62 106 229 20 62 106 229 * 62 106 229
- -----------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Balanced 19 58 101 218 19 58 101 218 * 58 101 218
- -----------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Growth 19 58 101 218 19 58 101 218 * 58 101 218
- -----------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI International 24 74 127 272 24 74 127 272 * 74 127 272
- -----------------------------------------------------------------------------------------------------------------------------------
Van Eck-Worldwide Bond Fund 18 56 97 210 18 56 97 210 * 56 97 210
- -----------------------------------------------------------------------------------------------------------------------------------
Van Eck-Gold and Natural
Resources Fund 18 57 98 213 18 57 98 213 * 57 98 213
- -----------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital-Real
Estate Securities Fund 19 58 101 218 19 58 101 218 * 58 101 218
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus-International
Equity Portfolio 24 72 124 265 24 72 124 265 * 72 124 265
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus-Small Company
Growth Portfolio 22 66 114 245 22 66 114 245 * 66 114 245
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
*The Contracts sold under this Prospectus do not permit annuitizations during the first two Contract years.
</TABLE>
The purpose of the Summary of Contract Expenses and Example is to assist
the Contract Owner in understanding the various costs and expenses that a
Contract Owner will bear directly or indirectly when investing in the Contract.
The expenses of the Variable Account as well as those of the underlying Mutual
Fund options are reflected in the Example. For more and complete descriptions
of the expenses of the Variable Account, see "Variable Account Charges, Purchase
Payments, and Other Deductions." For more and complete information regarding
expenses paid out of the assets of the underlying Mutual Fund options, see the
underlying Mutual Funds' prospectuses. Deductions for premium taxes may also
apply but are not reflected in the Example shown above (see "Premium Taxes").
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SYNOPSIS
There are two types of Contracts: Non-Qualified Contracts may
be purchased with money from any source or an Individual
Retirement Annuity may be purchased with annual IRA contributions
or contributions rolled-over from Qualified Plans, Tax-Sheltered
Annuities or other IRAs.
The Company does not deduct a sales charge from Purchase
Payments made for these Contracts. The Company deducts a
Mortality Risk Charge equal to an annual rate of 0.80% of the
daily net asset value of the Variable Account for mortality risk
assumed by the Company (see "Mortality Risk Charge").
There are no minimum initial Purchase Payment or minimum
subsequent Purchase Payment requirements. Subsequent Purchase
Payments are not permitted for Contracts purchased in the states
of New York, Oregon and Washington. The cumulative total of all
Purchase Payments under a Contract may not exceed $1,000,000
without the prior consent of the Company (see "Allocation of
Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than
$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 (see "Frequency and Amount of Annuity
Payments").
Premium taxes payable to any governmental entity will be
charged against the Contracts. If any such premium taxes are
payable at the time Purchase Payments are made, the premium tax
deduction will be made prior to allocation to any underlying
Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the
Contract, the Contract Owner has a ten day free look. Within ten
days of the day the Contract is received, it may be returned to
the Home Office of the Company, at the address shown on page 1 of
this Prospectus. When the Contract is received by the Company,
the Company will void the Contract and refund the Contract Value
in full unless otherwise required by state and/or federal law.
All Individual Retirement Annuity refunds will be return of
Purchase Payments (see "Right to Revoke").
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under
the laws of the State of Ohio in 1929. The Company is a member
of the Nationwide Insurance Enterprise, with its Home Offices at
One Nationwide Plaza, Columbus, Ohio 43216-6609. The Company
offers a complete line of life insurance, including annuities and
accident and health insurance. It is admitted to do business in
the District of Columbia, Puerto Rico, and in all states.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on October
7, 1981, pursuant to the provisions of Ohio law. The Company has
caused the Variable Account to be registered with the Securities
and Exchange Commission as a unit investment trust pursuant to
the provisions of the Investment Company Act of 1940. Such
registration does not involve supervision of the management of
the Variable Account or the Company by the Securities and
Exchange Commission.
The Variable Account is a separate investment account of the
Company and, as such, is not chargeable with liabilities arising
out of any other business the Company may conduct. The Company
does not guarantee the investment performance of the Variable
Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses, whether or
not realized, from the assets of the Variable Account are, in
accordance with the Contracts, credited to or charged against the
Variable Account without regard to other income, gains, or losses
of the Company.
Purchase Payments are allocated within the Variable Account
among one or more Sub-Accounts made up of shares in the
underlying Mutual Fund option(s) designated by the Contract
Owner. 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.
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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
option below. THERE CAN BE NO ASSURANCE THAT THE FUNDS'
INVESTMENT OBJECTIVES WILL BE ACHIEVED.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund, Inc. is an open-end, non-
diversified, management investment company. It was incorporated
under Maryland law on January 24, 1989 and commenced operations
on September 29, 1989. Wells Fargo Nikko Investment Advisors
serves as the Fund's index fund manager. As of May 1, 1994, the
Dreyfus Life and Annuity Index Fund began doing business as the
Dreyfus Stock Index Fund.
Investment Objective: To provide investment results that
correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard &
Poor's Composite Stock Price Index. The Fund is neither
sponsored by nor affiliated with Standard & Poor's Corporation.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-
end, diversified, management investment company. It was
incorporated under Maryland law on July 20, 1992, and commenced
operations on October 7, 1993. The Dreyfus Corporation serves as
the Fund's investment advisor. Tiffany Capital Advisors, Inc.
serves as the Fund's sub-investment adviser and provides day-to-
day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide
capital growth equity investment in companies that, in the
opinion of the Fund's management, not only meet traditional
investment standards, but which also show evidence that they
conduct their business in a manner that contributed to the
enhancement of the quality of life in America. Current income is
secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The fund is an open-end, diversified, management investment
company organized as a Massachusetts business trust on November
13, 1981. The funds shares are purchased by insurance companies
to fund benefits under variable insurance and annuity policies.
Fidelity Management & Research Company ("FMR") is the Fund's
manager.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing
primarily in income-producing equity securities. In choosing
these securities FMR also will consider the potential for
capital appreciation. The Portfolio's goal is to achieve a
yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price
Index.
- - GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation.
This Portfolio will invest in the securities of both well-
known and established companies, and smaller, less well-known
companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will
often involve greater risk than may be found in the ordinary
investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore,
the performance of the Portfolio. Many securities which FMR
believes would have the greatest potential may be regarded as
speculative, and investment in the Portfolio may involve
greater risk than is inherent in other 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> 11
- - HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current
income by investing primarily in high-risk, lower-rated, high-
yielding, fixed-income securities, while also considering
growth of capital. The Portfolio manager will seek high
current income normally by investing the Portfolio's assets
as follows:
- at least 65% in income-producing debt securities and
preferred stocks, including convertible securities
- up to 20% in common stocks and other equity securities
when consistent with the Portfolio's primary objective or
acquired as part of a unit combining fixed-income and
equity securities
Higher yields are usually available on securities that are
lower-rated or that are unrated. Lower-rated securities are
usually defined as Ba or lower by Moody's; BB or lower by
Standard & Poor's and may be deemed to be of a speculative
nature. The Portfolio may also purchase lower-quality bonds
such as those rated Ca3 by Moody's or C- by Standard & Poor's
which provide poor protection for payment of principal and
interest (commonly referred to as "junk bonds"). For a
further discussion of lower-rated securities, please see the
"Risks of Lower-Rated Debt Securities" section of the
Portfolio's prospectus.
- - OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital
primarily through investments in foreign securities. The
Overseas Portfolio provides a means for investors to
diversify their own portfolios by participating in companies
and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Variable Insurance Products Fund II is an open-end,
diversified, management investment company organized as a
Massachusetts business trust on March 21, 1988. The fund's
shares are purchased by insurance companies to fund benefits
under variable insurance and annuity policies. FMR is the fund's
manager.
- - ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced
risk over the long-term by allocating its assets among
domestic and foreign stocks, bonds and short-term fixed
income instruments.
- - CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by
investing primarily in companies that the fund manager
believes to be undervalued due to an overly pessimistic
appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and
large, many of which may not be well known. The fund
primarily invests in common stock and securities convertible
into common stock, but it has the flexibility to invest in
any type of security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a
diversified open-end management investment company created under
the laws of Massachusetts. The Trust offers shares in the five
separate Mutual Funds listed below, each with its own investment
objective. Currently, shares of the Trust will be sold only to
life insurance company separate accounts to fund the benefits
under variable life insurance policies or variable annuity
contracts issued by life insurance companies. The assets of the
Trust are managed by Nationwide Financial Services, Inc. of One
Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary
of Nationwide Life Insurance Company.
- - CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who
are interested in long-term growth. The Fund seeks to meet
its objective primarily through a diversified portfolio of
the common stock of companies which the investment manager
determines have a better-than-average potential for sustained
capital growth over the long term.
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- - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as
is consistent with the preservation of capital. It seeks to
achieve its objective by investing in a diversified portfolio
of securities issued or backed by the U.S. Government, its
agencies or instrumentalities.
- - MONEY MARKET FUND
Investment Objective: To seek as high a level of current
income as is considered consistent with the preservation of
capital and liquidity by investing primarily in money market
instruments.
- - SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of
capital by investing primarily in equity securities of
domestic and foreign companies with market capitalizations of
less than $1 billion at the time of purchase. Nationwide
Financial Services, Inc. ("NFS"), the Fund's adviser, has
employed a group of sub-advisers, each of which will manage a
portion of the Fund's portfolio. These sub-advisers are the
Dreyfus Corporation, Neuberger & Berman, L.P., Pictet
International Management Limited, Van Eck Associates
Corporation, Strong Capital Management, Inc. and Warburg,
Pincus Counsellors, Inc. These sub-advisers were chosen
because they utilize a number of different investment styles
when investing in small company stocks. By utilizing a
number of different investment styles, NFS hopes to increase
prospects for investment return and to reduce market risk and
volatility.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total
return (i.e., earnings growth plus potential dividend yield)
on invested capital from a flexible combination of current
return and capital gains through investments in common
stocks, convertible issues, money market instruments and
bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end
diversified management investment company established as a
Massachusetts business trust on December 14, 1983. Shares of the
Trust are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered
directly to qualified pension and retirement plans outside of the
separate account context. The investment adviser is Neuberger &
Berman Management Incorporated.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth
through investments in common stocks of companies that the
investment adviser believes will have above average earnings
or otherwise provide investors with above average potential
for capital appreciation. To maximize this potential, the
investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and
options to purchase such stocks.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current
income, consistent with low risk to principal and liquidity.
As a secondary objective, it also seeks to enhance its total
return through capital appreciation when market factors, such
as falling interest rates and rising bond prices, indicate
that capital appreciation may be available without
significant risk to principal. It seeks to achieve its
objectives through investments in a diversified portfolio of
limited maturity debt securities.
- - PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This
portfolio will seek to achieve its objective by investing
primarily in the common stock of established companies. Its
investment program seeks securities believed to be
undervalued based on fundamentals such as low price-to-
earnings ratios, consistent cash flows, and support from
asset values. The objective of the Partners Portfolio is not
fundamental and can be changed by the Trustees of the Trust
without shareholder approval. Shareholders will, however,
receive at least 30 days notice thereof. There is no
assurance the investment objective will be met.
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OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-end,
diversified management investment company organized as a
Massachusetts business trust in 1984. Shares of the Funds are
sold only to provide benefits under variable life insurance
policies and variable annuity contracts. Oppenheimer Management
Corporation is the Funds' investment adviser.
- - OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of
current income from investment in high yield fixed-income
securities rated "Baa" or better by Moody's or "BBB" or
better by Standard & Poor's. Secondarily, the fund seeks
capital growth when consistent with its primary objective.
- - OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation
by investing a substantial portion of assets in securities of
foreign issuers, "growth-type" companies, cyclical industries
and special situations which are considered to be
speculative.
- - OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return
(which includes current income and capital appreciation in
the value of its shares) from investments in common stocks
and other equity securities, bonds and other debt securities,
and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. ("Special Fund II") is a
diversified, an open-end management company commonly called a
Mutual Fund. The Special Fund II was incorporated in Wisconsin
and may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts
and variable life insurance policies. Strong Capital Management
Inc. (the "Advisor") is the investment advisor for the Fund.
- - SPECIAL FUND II
Investment Objective: To seek capital appreciation through
investments in a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE PRODUCTS FUNDS
The Strong Variable Insurance Funds, Inc. is a diversified,
open-end management investment company, commonly called a Mutual
Fund. The Strong Discovery Fund II, Inc. ("Discovery Fund II")
and the Strong International Stock Fund II (International Stock
Fund II") were incorporated in Wisconsin and may only be
purchased by the separate accounts of insurance companies for the
purpose of funding variable annuity contracts and variable life
insurance policies. Strong Capital Management, Inc. (the
"Adviser") is the investment advisor for each of the Funds.
- - DISCOVERY FUND II, INC.
Investment Objective: The Discovery Fund II's investment
objective is to seek maximum capital appreciation through
investments in a diversified portfolio of securities.
- - INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing
primarily in the equity securities of issuers located outside
the United States.
TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF
MUTUAL FUNDS.
TCI Portfolios, Inc. was organized as a Maryland corporation
in 1987. It is a diversified, open-end investment management
company, designed only to provide investment vehicles for
variable annuity and variable life insurance products of
insurance companies. A member of the Twentieth Century Family of
Mutual Funds, TCI Portfolios is managed by Investors Research
Corporation.
- - TCI BALANCED
Investment Objective: Capital growth and current income.
The fund will seek to achieve its objective by maintaining
approximately 60% of the assets of the fund in common stocks
(including
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<PAGE> 14
securities convertible into common stocks and
other equity equivalents) that are considered by management
to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. A minimum of
25% of the fixed income portion of the fund will be invested
in fixed income senior securities. There can be no assurance
that the Fund will achieve its investment objective.
- - TCI GROWTH
Investment Objective: Capital growth. The fund will seek to
achieve its objective by investing in common stocks
(including securities convertible into common stocks and
other equity equivalents) that meet certain fundamental and
technical standards of selection and have, in the opinion of
the fund's investment manager, better than average potential
for appreciation. The fund tries to stay fully invested in
such securities, regardless of the movement of stock prices
generally.
The fund may invest in cash and cash equivalents temporarily
or when it is unable to find common stocks meeting its
criteria of selection. It may purchase securities only of
companies that have a record of at least three years
continuous operation. There can be no assurance that the
Fund will achieve its investment objective.
- - TCI INTERNATIONAL
Investment Objective: To seek capital growth. The fund will
seek to achieve its investment objective by investing
primarily in securities of foreign companies that meet
certain fundamental and technical standards of selection and,
in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the fund will invest
at least 65% of its assets in common stocks or other equity
securities of issuers from at least three countries outside
the United States. Securities of United States issuers may
be included in the portfolio from time to time. Although the
primary investment of the fund will be common stocks (defined
to include depository receipts for common stocks), the fund
may also invest in other types of securities consistent with
the fund's objective. When the manager believes that the
total return potential of other securities equals or exceeds
the potential return of common stocks, the fund may invest up
to 35% of its assets in such other securities. There can be
no assurance that the fund will achieve its objectives.
(Although the Statement of Additional Information concerning
TCI Portfolios, Inc., refers to redemptions of securities in
kind under certain conditions, all surrendering or redeeming
Contract Owners will receive cash from the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
Van Eck Worldwide Insurance Trust is an open-end management
investment company organized as a "Business Trust" under the laws
of the Commonwealth of Massachusetts on January 7, 1987. Trust
shares are offered only to separate accounts of various insurance
companies to fund the benefits of variable insurance and annuity
policies. The investment adviser and manager is Van Eck
Associates Corporation.
- - WORLDWIDE BOND FUND (FORMERLY GLOBAL BOND FUND)
Investment Objective: To seek high total return through a
flexible policy of investing globally, primarily in debt
securities.
- - GOLD AND NATURAL RESOURCES FUND
Investment Objective: To seek long-term capital appreciation
by investing in equity and debt securities of companies
engaged in the exploration, development, production and
distribution of gold and other natural resources, such as
strategic and other metals, minerals, forest products, oil,
natural gas and coal. Current income is not an objective.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an
open-end diversified management investment company organized as a
Massachusetts business trust on June 3, 1985. The Trust offers
shares in separate portfolios which are sold only to insurance
companies to provide funding for variable
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<PAGE> 15
life insurance policies and variable annuity contracts.
Van Kampen American Capital Asset Management, Inc. serves as
the Portfolio's investment adviser.
- - AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
Investment Objective: To seek long-term capital growth by
investing in a portfolio of securities of companies operating
in the real estate industry ("Real Estate Securities").
Current income is a secondary consideration. Real Estate
Securities include equity securities, including common stocks
and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry
companies. A "real estate industry company" is a company
that derives at least 50% of its assets (marked to market),
gross income or net profits from the ownership, construction,
management or sale of residential, commercial or industrial
real estate. Under normal market conditions, at least 65% of
the Fund's total assets will be invested in Real Estate
Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its
total assets in securities issued by foreign issuers, some or
all of which may also be Real Estate Securities. There can
be no assurance that the Fund will achieve its investment
objective.
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management
investment company organized in March 1995 as a business trust
under the laws of The Commonwealth of Massachusetts. The Trust
offers its shares to insurance companies for allocation to
separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by
Warburg, Pincus Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation
by investing primarily in a broadly diversified portfolio of
equity securities of companies, wherever organized, that in
the judgment of "Counsellors" have their principal business
activities and interests outside the United States. The
Portfolio will ordinarily invest substantially all of its
assets, but no less than 65% of its total assets, in common
stocks, warrants and securities convertible into or
exchangeable for common stocks. The Portfolio intends to
invest principally in the securities of financially strong
companies with opportunities for growth within growing
international economies and markets through increased earning
power and improved utilization or recognition of assets.
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in
a portfolio of equity securities of small-sized domestic
companies. The Portfolio ordinarily will invest at least 65%
of its total assets in common stocks or warrants of small-
sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the
time of purchase) that represent attractive opportunities for
capital growth. The Portfolio intends to invest primarily in
companies whose securities are traded on domestic stock
exchanges or in the over-the-counter market. The Portfolio's
investments will be made on the basis of their equity
characteristics and securities ratings generally will not be
a factor in the selection process.
More detailed information may be found in the current
prospectus for each underlying Mutual Fund offered. Such a
prospectus for the underlying Mutual Fund options being
considered must accompany this Prospectus and should be read in
conjunction herewith. A copy of each prospectus may be obtained
without charge from Nationwide Life Insurance Company by calling
1-800-243-6295, Voice Response (available 24 hours) 1-800-848-
8258, TDD 1-800-238-3035 or writing P.O. Box 182356, Columbus,
Ohio 43216-2356.
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
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<PAGE> 16
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
involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to
Purchase Payments or accumulated amounts allocated to the
Variable Account.
In accordance with its view of present applicable law, the
Company will vote the shares of the underlying Mutual Funds held
in the Variable Account at regular and special meetings of the
shareholders of the underlying Mutual Funds in accordance with
instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the
Investment Company Act of 1940 or any Regulation thereunder
should be amended or if the present interpretation thereof should
change, and as a result the Company determines that it is
permitted to vote the shares of the underlying Mutual Funds in
its own right, it may elect to do so.
The person having the voting interest under a Contract shall
be the Contract Owner. The number of shares held in the Variable
Account which is attributable to each Contract Owner is
determined by dividing the Contract Owner's interest in the
Variable Account by the net asset value of the applicable share
of the underlying Mutual Funds.
The number of shares held in the Variable Account which is
attributable to each Contract is determined by dividing the
reserve for such Contract by the net asset value of one share.
The number of shares which a person has the right to vote will
be determined as of the date chosen by the Company not more than
90 days prior to the meeting of the underlying Mutual Fund and
voting instructions will be solicited by written communication at
least 15 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as
to which no timely instructions are received will be voted by the
Company in the same proportion as the voting instructions which
are received with respect to all Contracts participating in the
Variable Account.
Each person having the voting interest in the Variable Account
will receive periodic reports relating to the underlying Mutual
Fund, proxy material and a form with which to give such voting
instructions with respect to the proportion of the underlying
Mutual Fund shares held in the Variable Account corresponding to
his or her interest in the Variable Account.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity
payments will not be affected by the death rates of persons
receiving such payments or of the general population by virtue of
annuity rates incorporated in the Contract which cannot be
changed.
For assuming this mortality risk, the Company deducts a
Mortality Risk Charge from the Variable Account. This amount is
computed on a daily basis, and is equal to an annual basis to
0.80% of the daily net asset value of the Variable Account. The
Company expects to generate a profit through assessing this
charge.
PREMIUM TAXES
The Company will charge against the Contract Value the amount
of any premium taxes levied by a state or any other governmental
entity upon Purchase Payments received by the Company. To the
best of the Company's present knowledge, premium taxes currently
imposed by certain jurisdictions range from 0% to 3.5%. This
range is subject to change. The method used to recoup premium
tax expense will be determined by the Company at its sole
discretion and in compliance with applicable state law. The
Company currently deducts such charges from a Contract Owner's
Contract Value either: (1) at the time the Contract is
surrendered, (2) at Annuitization, or (3) in those states which
so require, at the time Purchase Payments are made to the Contract.
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EXPENSES OF VARIABLE ACCOUNT
Expenses of the Variable Account with respect to the Contracts
described herein include mortality expenses relating to the
guarantee of annuity purchase rates at issue for the life of the
Contract and the payment of minimum death benefits prior to the
Designated Annuitant's 86th birthday regardless of the investment
experience of the Variable Account.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have
Purchase Payments attributable to his or her participation in the
Variable Account allocated among one or more of the Sub-Accounts
which consist of shares in the underlying Mutual Fund options.
Shares of the respective underlying Mutual Fund options specified
by the Contract Owner are purchased at net asset value for the
respective Sub-Account(s) and converted into Accumulation Units.
At the time of purchase, the Contract Owner designates the
underlying Mutual Funds to which he or she desires to have
Purchase Payments allocated. Such election is subject to any
minimum Purchase Payment limitations which may be imposed by the
underlying Mutual Funds designated. The Contract Owner may
change the election as to allocation of Purchase Payments or may
elect to exchange amounts among the Sub-Account options pursuant
to such terms and conditions applicable to such transactions as
may be imposed by each of the underlying Mutual Fund options, in
addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between
the Date of Issue and the date 10 days after receipt of the
Contract and receive a refund of the Contract Value unless
otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be 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
The Company currently allows transfers up to 100% of the
Variable Account Contract Value from the Variable Account to the
Fixed Account. However, the Company reserves the right to
restrict transfers from the Variable Account to the Fixed Account
to 25% of 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 Interest Rate Guarantee
Period. The Interest Rate Guarantee Period expires on the final
day of a calendar quarter during which the one year anniversary
of the allocation to the Fixed Account occurs. The 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 if the Fixed Account is
greater than or equal to 30% of the 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 maximum percentage that may
be transferred from the Fixed Account to the Variable Account
will be determined by the Company, at its sole discretion, but
will not be less than 10% of the total value of the portion of
the Fixed Account that is maturing and will be declared upon the
expiration date of the then current Interest Rate Guarantee
Period. The specific percentage will be declared upon the
expiration date of the guaranteed period. 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.
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Transfers from the Fixed Account may not be made prior to the
first Contract Anniversary. Transfers must also be made prior to
the Annuitization Date.
Transfers among the sub-accounts may be made either in writing
or, in states allowing such transfers, by telephone. This
telephone exchange privilege is made available to Contract Owners
automatically without their having to elect the privilege. The
Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such
procedures may include any or all of the following, or such other
procedures as the Company may, from time to time, deem
reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal
identification number; tape recording all telephone transactions;
and providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record.
Although failure to follow reasonable procedures may result in
the Company's liability for any losses due to unauthorized or
fraudulent telephone transfers, the Company will not be liable
for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant
to actions taken by the Company in reliance on telephone
instructions reasonably determined to be genuine shall be borne
by the Contract Owner. The Company may withdraw the telephone
exchange privilege upon 30 days' written notice to Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at
any time during the lifetime of the Annuitant prior to the
Annuitization Date. Such assignment will take effect upon
receipt and recording by the Company at its Home Office of a
written notice thereof 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 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 assigned or
pledged. In addition, any Contract Values assigned may, under
certain conditions, be subject to a tax penalty equal to 10% of
the amount which is included in gross income. All rights in this
Contract are personal to the Contract Owner and may not be
assigned without written consent of the Company. Individual
Retirement Accounts and Individual Retirement Annuities are not
eligible for assignment.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person or persons who may receive
certain benefits under the Contract in the event the Contract
Owner dies before the Annuitization Date. If more than one
Contingent Owner survives the Contract Owner, each will share
equally unless otherwise specified in the Contingent Owner
designation. If a Contingent Owner is not named or predeceases
the Contract Owner, all rights and interest of the Contingent
Owner will vest in the Contract Owner's estate. Subject to the
terms of any existing assignment, the Contract Owner may change
the Contingent Owner from time to time prior to the Annuitization
Date, by written notice to the Company. The change, upon receipt
and recording by the Company at its Home Office, will take effect
as of the time the written notice was signed, whether or not the
Contract Owner is living at the time of recording, but without
further liability as to any payment or settlement made by the
Company before receipt of such change.
The Beneficiary is the person or persons who may receive
certain benefits under the Contract in the event the Annuitant
dies prior to the Annuitization Date. If more than one
Beneficiary survives the Annuitant, each will share equally
unless otherwise specified in the Beneficiary designation. If no
Beneficiary survives the Annuitant, all rights and interest of
the Beneficiary shall vest in the Contingent Beneficiary, and if
more than one Contingent Beneficiary survives, each will share
equally unless otherwise specified in the Contingent Beneficiary
designation. If a Contingent Beneficiary is not named or
predeceases the Annuitant, all rights and interest of the
Contingent Beneficiary will vest with the Contract Owner or the
Contract Owner's estate. Subject to the terms of any existing
assignment, the Contract Owner may change the Beneficiary or
Contingent Beneficiary from time to time during the lifetime of
the Annuitant, by written notice to the Company. The change,
upon receipt by the Company at its Home Office, will take effect
as of the time the written notice was signed, whether or not the
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.
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OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights
under the Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN
HIMSELF OR HERSELF AS OWNER, THE PURCHASER WILL HAVE NO RIGHTS
UNDER THE CONTRACT. If a Joint Owner is named, the Joint Owner
will possess an undivided interest in the Contract. The Contract
Owner(s) retains sole rights in the Contract upon the other's
death prior to the Annuitization Date. Unless otherwise
provided, when Joint Owner(s) are named, the exercise of any
ownership right in the Contract (including the right to surrender
or partially surrender the Contract, to change the Owner, the
Contingent Owner, the Annuitant, the Contingent Annuitant, the
Beneficiary, the Contingent Beneficiary, the Annuity Payment
Option or the Annuitization Date) shall require a written
indication of an intent to exercise that right, which must be
signed by both the Owners. Joint Owners must be spouses at the
time joint ownership is requested.
If a Contract Owner dies prior to the Annuitization Date and
the Contract Owner and the Annuitant are not the same person,
Contract ownership will be determined in accordance with the
"Death of Contract Owner" provision. If the Annuitant
(regardless of whether the Annuitant is also the Contract Owner)
dies prior to the Annuitization Date, ownership will be
determined in accordance with the "Death of Annuitant Prior to
the Annuitization Date" provision. On and after the
Annuitization Date, the Contract Owner is the Annuitant.
Prior to the Annuitization Date, the Contract Owner may name a
new Contract Owner. Such change may be subject to state and
federal gift taxes, and may also result in current federal income
taxation (see the "Taxes" provision). Any change of Contract
Owner will automatically revoke any prior Contract Owner
designation. Any request for change of Contract Owner must be
(1) made by proper written application, (2) received and recorded
by the Company at its Home Office, and (3) may include a
signature guarantee as specified in the "Surrender" provision.
The change will become effective as of the date the written
request is signed. A new choice of Contract Owner will not apply
to any payment made or action taken by the Company prior to the
time it was received and recorded.
The Contract Owner may request a change in the Annuitant or
Contingent Annuitant before the Annuitization Date. Such a
request must be made in writing on a form acceptable to the
Company and must be signed by the Contract Owner and the person
to be named as Annuitant or Contingent Annuitant. Any such
change is subject to underwriting and approval by the Company.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds described in this
Prospectus should no longer be available for investment by the
Variable Account or if, in the judgment of the Company's
management, further investment in such underlying Mutual Fund
shares should become inappropriate in view of the purposes of the
Contract, the Company may substitute shares of another underlying
Mutual Fund for underlying Mutual Fund shares already purchased
or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities in the Variable Account
may take place without prior approval of the Securities and
Exchange Commission, and under such requirements as it may
impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life
Insurance Company by writing P.O. Box 182356, Columbus, Ohio
43216-2356 , or calling 1-800-243-6295, Voice Response (available
24 hours) 1-800-848-8258, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value
is applied to the Annuity Payment Option elected in accordance
with the Annuity Table in the Contract.
Subsequent Variable Annuity payments vary in amount in
accordance with the investment performance of the Variable
Account. The dollar amount of the first annuity payment
determined as above is divided by the value of an Annuity Unit as
of the Annuitization Date to establish the number of Annuity
Units representing each monthly annuity payment. This number of
Annuity Units remains fixed during the annuity payment period.
The dollar amount of the second and subsequent payments is not
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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 for. 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.
ANNUITIZATION DATE
The Contract Owner selects an Annuitization Date at the time
of Application. Such date may be the first day of a calendar
month or any other agreed upon date.
CHANGE IN ANNUITIZATION DATE
The Contract Owner may, upon prior written notice to the
Company, change the Annuitization Date. The date to which such a
change may be made shall be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership
Provisions"), and the Company approves the request, the
Annuitization Date may be deferred. The amount of the Death
Benefit will be limited to the Contract Value if the
Annuitization Date is postponed beyond the Annuitant's 86th
birthday.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the
Company, at any time prior to the Annuitization Date, elect one
of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due
prior to the death of the Annuitant. IT WOULD BE POSSIBLE
UNDER THIS OPTION FOR THE ANNUITANT TO RECEIVE ONLY ONE
ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND ANNUITY
PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE
THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable
monthly during the joint lifetimes of the Annuitant and
designated second person and continuing thereafter during the
lifetime of the survivor. AS IS THE CASE UNDER OPTION 1
ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED
UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS
RECEIVED.
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Option 3-Life Annuity With 120 or 240 Monthly Payments
Guaranteed-An annuity payable monthly during the lifetime of
the Annuitant with the guarantee that if at the death of the
Annuitant payments have been made for fewer than 120 or 240
months, as selected, payments will be made as follows:
(1) If the Annuitant is the payee, any guaranteed annuity
payments will be continued during the remainder of the
selected period to 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 Owner may request an alternative non-guaranteed
option by giving notice in writing prior to annuitization. If
such a request is approved by the Company, it will be permitted
under the Contract.
If the Owner fails to elect an Annuity Payment Option, the
Contract Value will continue to accumulate. Individual
Retirement Annuities are subject to the minimum distribution
requirements set forth in the Internal Revenue Code.
DEATH OF CONTRACT OWNER
If the Contract Owner and the Annuitant are not the same
person and the Contract Owner dies prior to the Annuitization
Date, then the Joint Owner, if any, becomes the new Contract
Owner. If no Joint Owner is named (or if the Joint Owner
predeceases the Contract Owner), then the Contingent Owner
becomes the new Contract Owner. If no Contingent Owner is named
(or if the Contingent Owner predeceases the Contract Owner), then
the Contract Owner's estate becomes the Contract Owner. Unless
the new Contract Owner is the prior Contract Owner's spouse, the
entire interest in the Contract, less applicable deductions must
be distributed within five years of the prior Contract Owner's
death. The new Contract Owner may elect to receive distribution
in the form of a life annuity or an annuity for a period not
exceeding his or her life expectancy. Such annuity must begin
within one year following the date of the prior Contract Owner's
death. If the new Contract Owner is the spouse of the prior
Contract Owner, then the Contract may be continued without any
required Distribution.
If the Annuitant (regardless of whether the Annuitant is also
the Contract Owner) dies prior to the Annuitization Date, a Death
Benefit will be payable in accordance with the "Death of
Annuitant Prior to the Annuitization Date" provision below,
provided, that all distributions made as a result of the death of
the Contract Owner shall be made within the time limits set forth
above.
Individual Retirement Annuities will be subject to other
specific rules set forth in the Internal Revenue Code concerning
distributions upon the death of the Contract Owner (see "Required
Distributions for Individual Retirement Annuities").
DEATH OF ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Annuitant dies prior to the Annuitization Date, a Death
Benefit is payable unless the Contract Owner has also named a
Contingent Annuitant, in which case the Death Benefit is payable
upon the death of the last survivor of the Annuitant and
Contingent Annuitant. The Death Benefit is payable to the
Beneficiary. If no Beneficiary is named (or if the Beneficiary
predeceases the Annuitant), then the Death Benefit is payable to
the Contingent Beneficiary. If no Contingent Beneficiary is
named (or if the Contingent Beneficiary predeceases the
Annuitant), then the Death Benefit will be paid to Contract Owner
or the Contract Owner's estate.
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 both (1) due proof of the Annuitant's
death and (2) an election for either (a) a single sum payment or
(b) an Annuity Payment Option: (3) and any form
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required by state insurance laws. If a single sum payment is requested,
payment will be made in accordance with any applicable laws and
regulations governing the payment of Death Benefits. If an
Annuity Payment Option is requested, election must be made by the
Contract Owner during the 90-day period commencing with the date
written notice is received by the Company. If no election has
been made by the end of such 90-day period commencing with the
date written notice is received by the Company. If no election
has been made by the end of such 90-day period, the Death Benefit
will be paid in a single sum payment. If the Annuitant dies
prior to his or her 86th birthday, the value of the Death Benefit
will be the greatest of (1) the sum of all Purchase Payments,
made to the Contract less any amounts surrendered, (2) the
Contract Value, or (3) the Contract Value as of the most recent
five-year Contract Anniversary, less any amounts surrendered
since the most recent five-year Contract Anniversary. If the
Annuitant dies on or after his or her 86th birthday, then the
Death Benefit will be equal to the Contract Value.
If the Contract Owner is not a natural person, the death of
the Annuitant (or a change in the Annuitant), regardless of
whether a Contingent Annuitant has been named, will be treated
like a death of the Contract Owner for purposes of the "Death of
Contract Owner" provision and will result in a distribution of
either:
(a) the Death Benefit described above (if there is no
Contingent Annuitant and the Annuitant has died),
or in all other cases
(b) a distribution to the Contract Owner if the
Annuitant has been changed.
provided that any such distribution must be made within the time
period specified in the "Death of Contract Owner" provision.
DEATH OF ANNUITANT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any
benefit that may be payable shall be as specified in the Annuity
Payment Option selected.
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 Contract Owner attains age 70 1/2.
Distribution may be accepted in a lump sum or in nearly equal
payments over: (a) the Contract Owner's life or the lives of the
Contract Owner and the Contract Owner's spouse or designated
beneficiary, or (b) a period not extending beyond the life
expectancy of the Contract Owner and the life expectancy of the
Contract Owner's spouse or designated beneficiary.
If the Contract Owner dies prior to the commencement of the
distribution, the interest in the Individual Retirement Annuity
must be distributed by December 31 of the fifth anniversary of
the Contract Owner's death unless:
(a) The Contract Owner has named his or her surviving spouse as
the designated 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 Contract Owner would
have attained age 70 1/2; or
(b) The Contract Owner has named 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.
If the Contract Owner dies after distribution has commenced,
the distribution must continue at least as rapidly as under the
schedule being used prior to the Contract Owner's death, except
to the extent that a surviving spouse beneficiary may elect to
treat the Contract as his or her own, in the same manner as is
described in section (a)(i) of this provision.
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If the amounts distributed to the Contract Owner are less than
those mentioned above, penalty tax of 50% is levied on the amount
that should have been distributed for that year.
A pro-rata portion of all distributions will be included in
the gross income of the person receiving the distribution and
taxed at ordinary income tax rates. The portion of the
distribution which is taxable is based on the ratio between the
amount by which non-deductible contributions exceed prior non-
taxable distributions and total account balances at the time of
the distribution. The Contract Owner must annually report the
amount of non-deductible contributions, the amount of any
distribution, the amount by which non-deductible contributions
for all years exceed non-taxable distributions for all years, and
the total balance of all Individual Retirement 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 the Contract Owner's interest in the annuity is
completed, the balance will also be included in the Contract
Owner's gross estate.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the
automatic reallocation of contract values to the underlying
Mutual Fund options on a predetermined percentage basis every
three months. If the last day of the three month period falls on
a Saturday, Sunday, recognized holiday or any other day when the
New York Stock Exchange is closed, the Asset Rebalancing exchange
will occur on the last business day before that day. Asset
Rebalancing will not affect future allocations of purchase
payments. An Asset Rebalancing request must be in writing on a
form provided by the Company.
The Company reserves the right to discontinue offering Asset
Rebalancing upon 30 days' written notice to the Contract Owners;
however, any such discontinuation would not affect Asset
Rebalancing programs which have already commenced. The Company
also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING- The Contract Owner may direct the
Company to automatically transfer a specified amount from the
Money Market Fund Sub-Account or the Fixed Account to any other
Sub-Account within the Variable Account on a monthly basis. This
service is intended to allow the Contract Owner to utilize Dollar
Cost Averaging, a long-term investment program which provides for
regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or
protect against loss in a declining market. Transfers for
purposes of Dollar Cost Averaging can only be made from the Money
Market Fund Sub-Account or the Fixed Account. The minimum
monthly Dollar Cost Averaging transfer is $100. In addition,
Dollar Cost Averaging monthly transfers from the Fixed Account
must be equal to or less than 1/30th of the Fixed Account value
when the Dollar Cost Averaging program is requested. Transfers
out of the Fixed Account, other than Dollar Cost Averaging, may
be subject to certain additional restrictions (see "Transfers").
A written election of this service, on a form provided by the
Company, must be completed by the Contract Owner in order to
begin transfers. Once elected, transfers from the Money Market
Fund Sub-Account or the Fixed Account will be processed monthly
until the value in the Money Market Fund Sub-Account or the Fixed
Account is completely depleted or the Contract Owner instructs
the Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar
Cost Averaging upon 30 days' written notice to Contract Owners;
however, any such discontinuation would not affect Dollar Cost
Averaging programs already commenced. The Company also reserves
the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS - The 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 of the Sub-Accounts in
which the Contract Owner has an interest. Each Systematic
Withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed
on Systematic Withdrawals if the Contract Owner is under age 59 1/2.
If directed by the Contract Owner, the Company will withhold
federal
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income taxes from each Systematic Withdrawal. A Systematic
Withdrawal program will terminate automatically at the end of
each Contract Year and may be reinstated only pursuant to a
new request. The Contract Owner may discontinue Systematic
Withdrawals at any time by notifying the Company in writing.
Systematic Withdrawals are not available prior to the
expiration of the ten day free look provision of the Contract.
The Company also reserves the right to assess a processing fee
for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known
address of record, any statements and reports required by
applicable law or regulation. Contract Owners should therefore
give the Company prompt notice of any address change. The
Company will send a confirmation statement to Contract Owners
each time a transaction is made affecting the Owners' Variable
Account Contract Value, such as making additional purchase
payments, transfers, exchanges or withdrawals. Quarterly
statements are also mailed detailing the Contract activity during
the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of
periodic payment plan (such as a dollar cost averaging program)
or salary reduction arrangement, the Contract Owner may receive
confirmation of such transactions in their quarterly statements.
The Contract Owner should review the information in these
statements carefully. All errors or corrections must be reported
to the Company immediately to assure proper crediting to the
Owner's Contract. The Company will assume all transactions are
accurate unless the Contract Owner notifies the Company otherwise
within 30 days after receipt of the statement. The Company will
also send to Contract Owners each year an annual report and a
semi-annual report containing financial statements for the
Variable Account, as of December 31 and June 30, respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts
within the Variable Account in accordance with the designation of
the underlying Mutual Funds by the Contract Owner, and converted
into Accumulation Units.
There are no minimum initial Purchase Payment or minimum
subsequent Purchase Payment requirements. Subsequent Purchase
Payments are not permitted in the states of New York, Oregon, and
Washington. The cumulative total of all Purchase Payments under
a Contract may not exceed $1,000,000 without prior consent of the
Company. The cumulative total of all Purchase Payments under
Contracts issued on the life of any one 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 not later than 2
business days after receipt of an order to purchase, if the
Application and all information necessary for processing the
purchase order are complete upon receipt by the Company, and the
Company may retain the Purchase Payment for up to 5 business days
while attempting to complete an incomplete Application. If the
Application cannot be made complete within 5 days, the
prospective purchaser will be informed of the reasons for the
delay and the Purchase Payment will be returned immediately
unless the prospective purchaser specifically consents to the
Company retaining the Purchase Payment until the Application is
made complete. Thereafter, the Purchase Payment will be priced
within 2 business days.
Purchase Payments will not be priced on the following
nationally recognized holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-
Account was arbitrarily set initially at $10 when underlying
Mutual Fund shares in that Sub-Account were made available for
purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each
Sub-Account for the immediately preceding Valuation Period by the
Net Investment Factor for the Sub-Account during the subsequent
Valuation Period. The value of an Accumulation Unit
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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) the net asset value per share of the underlying Mutual Fund
held in the Sub-Account determined at the end of the
immediately preceding Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge
deducted from the Variable Account. Such factor is equal to
an annual rate of 0.80% of the daily net asset value of the
Variable Account.
For underlying Mutual Funds that credit dividends on a daily
basis and pay such dividends once a month (the Nationwide
Separate Account Trust - Money Market Fund), the Net Investment
Factor allows for the monthly reinvestment of these daily
dividends.
The Net Investment Factor may be greater or less than one;
therefore, the value of an Accumulation Unit may increase or
decrease. It should be noted that changes in the Net Investment
Factor may not be directly proportional to changes in the net
asset value of underlying Mutual Fund shares, because of the
deduction for the Mortality Risk Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be
valued at their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation
Units attributable to the Contract and amounts credited to the
Fixed Account is the Contract Value. The number of Accumulation
Units credited each Sub-Account are determined by dividing the
net amount allocated to the Sub-Account by the Accumulation Unit
Value for the Sub-Account during the Valuation Period in which
the Purchase Payment is received by the Company. In the event
part or all of the Contract Value is surrendered or charges or
deductions are made against the Contract Value, an appropriate
number of Accumulation Units from the Variable Account and an
appropriate amount from the Fixed Account will be deducted in the
same proportion that the Contract Owner's interest in the
Variable Account bears to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the 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. 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. 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 the Fixed Account bears to the total Contract Value.
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The Company will pay any funds applied for from the Variable
Account within 7 days of receipt of such application in the
Company's Home Office. However, the Company reserves the right
to suspend or postpone the date of any payment of any benefit or
values for any Valuation Period (1) when the New York Stock
Exchange ("Exchange") is closed, (2) when trading on the Exchange
is restricted, (3) when an emergency exists as a result of which
disposal of securities held in the Variable Account is not
reasonably practicable or it is not reasonably practicable to
determine the value of the Variable Account's net assets, or (4)
during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security
holders; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the
conditions prescribed in (2) and (3) exist. The Contract Value
on surrender may be more or less than the total of Purchase
Payments made by a Contract Owner, depending on the market value
of the underlying Mutual Fund shares.
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 their financial or tax
advisers to discuss in detail their particular tax situation and
the use of the Contracts.
Section 72 of the Code governs taxation of annuities in
general. That section sets forth different rules for annuities
purchased as Non-Qualified Contracts and annuities which are
purchased as Individual Retirement Annuities. Non-Qualified
Contracts and Individual Retirement Annuities are discussed
separately below.
Generally, the amount of any payment of items of interest to a
nonresident alien of the United States shall be subject to
withholding of a tax equal to thirty percent (30%) of such amount
or, if applicable, a lower treaty rate. A payment may not be
subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States
and such payment is includable in the recipient's gross income.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a
portion of each annuity payment received is excludable from
taxable income based on the ratio between the Contract Owner's
investment in the Contract and the expected return on the
Contract. The maximum amount excludable from income is the
investment in the Contract. If the 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 purchase payments 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.
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Code Section 72 also provides for a penalty, equal to 10% of
any Distribution which is includable in gross income, if such
Distribution is made prior to attaining age 59 1/2 or disability of
the Contract Owner. The penalty does not apply if the
Distribution is one of a series of substantially equal periodic
payments made over the life or life expectancy (or joint lives or
life expectancies) of the Annuitant (and the Annuitant's
Beneficiary), 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. If the Annuitant selects an annuity for life
or life expectancy and changes the method of payment before the
expiration of 5 years and the attainment of age 59 1/2, the early
withdrawal penalty will apply. The penalty will be equal to that
which would have been imposed had no exception applied from the
outset, and the Annuitant will also pay interest on the amount of
the penalty from the date it would have originally applied until
it is actually paid.
In order to qualify as an annuity Contract under Section 72 of
the Code, the Contract must provide for Distribution to be made
upon the death of the Contract Owner. In such case, the
Contingent Owner or other named recipient must receive the
Distribution within 5 years of the Owner's death. However, the
recipient may elect for payments to be made over their life or
life expectancy if such payments begin within one year from the
death of the Contract Owner. If the 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. If the Contract Owner is not an individual, the death of
the Annuitant (or a change in the Annuitant) will result in a
distribution pursuant to these rules, regardless of whether a
Contingent Annuitant has been named.
The Company is required to withhold tax from certain
Distributions to the extent that such Distribution would
constitute income to the Contract Owner. The Contract Owner is
entitled to elect not to have federal income tax withheld from
any such Distribution, but may be subject to penalties in the
event insufficient federal income tax is withheld during a
calendar year.
The Company may be required to determine whether the Death
Benefit or any other payment constitutes a direct skip as defined
in Section 2612 of the Internal Revenue Code, and the amount of
the tax on the generation-skipping transfer resulting from such
direct skip. If applicable, such payment will be reduced by any
tax the Company is required to pay under Section 2603 of the
Internal Revenue Code. A direct skip may occur when property is
transferred to or a Death Benefit is paid to an individual two or
more generations younger than the Contract Owner.
INDIVIDUAL RETIREMENT ANNUITIES
The Contract may be purchased as an Individual Retirement
Annuity under Section 408(b) of the Code. Because the Contract's
initial and subsequent Purchase Payments are greater than the
maximum contribution permitted an Individual Retirement Annuity,
or an Individual Retirement Annuity Contract may be purchased
only in connection with a "rollover" (including a direct trustee-
to-trustee transfer, where permitted). Specifically, an
Individual Retirement Annuity Contract may be purchased only in
connection with a rollover of amounts from a Qualified Plan, Tax-
Sheltered Annuity or IRA. The Contract Owner should seek
competent advice as to the tax consequences associated with the
use of a Contract as an Individual Retirement Annuity.
Recent changes to the Code permit the rollover of most
distributions from Qualified Plans to other Qualified Plans or
IRAs. Most distributions from Tax-Sheltered Annuities may be
rolled into another Tax-Sheltered Annuity or IRA. Distributions
which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more
frequent) payments made: a) over the life (or life
expectancy) of the employee, b) the joint lives (or joint
life expectancies) of the employee and the employee's
designated beneficiary, or c) for a specified period of ten
years or more, or
2. a required minimum distribution.
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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.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under
Section 817(h) of the Internal Revenue Code ("Code") relating to
diversification standards for the investments underlying a
variable annuity contract. The regulations provide that a
variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity
contract, unless the failure to satisfy the regulations was
inadvertent, the failure is corrected, and the Owner or the
Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the
Owner if the income, for the period the contract was not
diversified, had been received by the Owner. If the failure to
diversify is not corrected in this manner, the Owner of an
annuity Contract will be deemed the Owner of the underlying
securities and will be taxed on the earnings of his or her
account. The Company believes, under its interpretation of
the Code and regulations thereunder, that the investments
underlying this Contract will meet these diversification
standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain
reserve liability on Non-Qualified Contracts since capital gains
attributable to assets held in the Company's Variable Account for
such Contracts are not taxable to the Company. However, the
Company reserves the right to implement and adjust the tax charge
in the future, if the tax laws change.
ADVERTISING
A "yield" and "effective yield" may be advertised for
Nationwide Separate Account Trust Money Market Fund sub-account.
"Yield" is a measure of the net dividend and interest income
earned over a specific seven-day period (which period will be
stated in the advertisement) expressed as a percentage of the
offering price of the sub-account's units. Yield is an
annualized figure, which means that it is assumed that the sub-
account generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but
includes the effect of assumed compounding, calculated under
rules prescribed by the Securities and Exchange Commission. The
effective yield will be slightly higher than yield due to this
compounding effect.
The Company may also from time to time advertise the
performance of the sub-account of the Variable Account relative
to the performance of other variable annuity sub-accounts or
underlying mutual 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.
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
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the performance of the underlying Mutual Funds against all
underlying Mutual Funds over specified periods and against
underlying Mutual Funds in specified categories. The rankings
may or may not include the effects of sales or other charges.
The Company is also ranked and rated by independent financial
rating services, among which are Moody's, Standard & Poor's and
A.M. Best Company. The purpose of these ratings is to reflect
the financial strength or claims-paying ability of the Company.
The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the
Company may include in certain advertisements, endorsements in
the form of a list of organizations, individuals or other parties
which recommend the Company or the Contracts. Furthermore, the
Company may occasionally include in advertisements comparisons of
currently taxable and tax deferred investment programs, based on
selected tax brackets, or discussions of alternative investment
vehicles and general economic conditions.
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
non standardized "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.
Non standardized "total return" will be calculated in a
similar manner and for the same time periods as the average
annual total return. 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
non-standardized 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.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary
routine litigation incidental to the business to which the
Company and the Variable Account are parties or to which any of
their property is the subject.
The General Distributor, Nationwide Financial Services, Inc.,
is not engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History ............................... 1
Services ...................................................... 1
Purchase of Securities Being Offered .......................... 1
Underwriters .................................................. 2
Calculations of Performance ................................... 2
Fund Performance Summary .................................... N/A
Annuity Payments .............................................. 3
Financial Statements .......................................... 4
</TABLE>
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APPENDIX
FIXED ACCOUNT
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 supports 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 relate 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 investments chosen by the Company and allowed by applicable
law. Investment income from such Fixed Account investments will
be allocated by the Company between itself and the Contracts
participating in the Fixed Account.
The level of annuity payments made to Annuitants under the
Contracts will not be affected by the mortality experience (death
rate) of persons receiving such payments or of the general
population. The Company assumes this "mortality risk" by virtue
of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not
increase charges for maintenance of the Contracts regardless of
its actual expenses.
Investment income from the Fixed Account allocated to the
Company includes compensation for mortality and expense risks
borne by the Company in connection with Fixed Account Contracts.
The amount of such investment income allocated to the Contracts
will vary from year to year in the sole discretion of the Company
at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain
effective for a period of not less than twelve months, and remain
at such rate unless changed. However, the Company guarantees that
it will credit interest at not less than 3.0% per year (or as
otherwise required under state law, or at such minimum rate as
stated in the contract when sold). ANY INTEREST CREDITED TO
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR
WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE
CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED
ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3.0%
FOR ANY GIVEN YEAR. New Purchase Payments deposited to the
Contract which are allocated to the Fixed Account may receive a
different rate of interest than money transferred from the
Variable sub-accounts to the Fixed Account and amounts maturing
in the Fixed Account at the expiration of an Interest Rate
Guarantee Period.
The Company guarantees that, at any time, the Fixed Account
Contract Value will not be less than the amount of the Purchase
Payments allocated to the Fixed Account, plus interest credited
as described above, less the sum of all administrative charges,
any applicable premium taxes, and less any amounts surrendered.
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
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total value of the portion of the Fixed Account that is maturing
and will be declared upon the expiration date of the then current
Interest Rate Guarantee Period. The Interest Rate Guarantee Period
expires on the final day of a calendar quarter. Transfers under
this provision must be made within 45 days after the expiration
date of the guarantee period.
Owners who have entered into a Dollar Cost Averaging agreement
with the Company (see "Dollar Cost Averaging") may transfer from
the Fixed Account to the Variable Account under the terms of that
agreement.
Transfers among the sub-accounts may be made either in writing
or, in states allowing such transfers, by telephone. This
telephone exchange privilege is made available to Contract Owners
automatically without their having to elect the privilege. The
Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such
procedures may include any or all of the following, or such other
procedures as the Company may, from time to time, deem
reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal
identification number; tape recording all telephone transactions;
and providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record.
Although failure to follow reasonable procedures may result in
the Company's liability for any losses due to unauthorized or
fraudulent telephone transfers, the Company will not be liable
for following instructions communicated by telephone which it
reasonably believes to be genuine. The Company may withdraw the
telephone exchange privilege upon 30 days' written notice to
Contract Owners.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are
guaranteed by the Company as to dollar amount during the annuity
payment period. The first Fixed Annuity payment will be
determined by applying the Fixed Account Contract Value to the
applicable Annuity Table in accordance with the Annuity Payment
Option elected. This will be done at the Annuitization Date on an
age last birthday basis. Fixed Annuity payments after the first
will not be less than the first Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed
Annuity payments during the annuity payment period for annuity
options based on life contingencies. The Annuitant must rely on
the Annuity Tables applicable to the Contracts to determine the
amount of such Fixed Annuity payments.
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