<PAGE> 1
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 182356
Columbus, Ohio 43218-2356, 1-800-243-6295
TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
prospectus are flexible Purchase Payment contracts (collectively referred to as
the "Contracts"). Reference throughout the prospectus to such Contracts shall
also mean Certificates issued under Group Flexible Fund Retirement Contracts.
For such Group Contracts, references to "Owner" shall mean the "Participant"
unless the Plan otherwise permits or requires the Owner to exercise contractual
rights under the authority of the Plan terms. The Contracts are sold to
individuals for use in retirement plans which may qualify for special federal
tax treatment under the Internal Revenue Code (the "Code"). Annuity payments
under the Contracts are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II
("Variable Account"), a separate account of Nationwide Life Insurance Company
(the "Company"). The Variable Account is divided into Sub-Accounts, each of
which invests in shares of one of the underlying Mutual Funds described below:
AVAILABLE FOR ALL CONTRACTS
DREYFUS
<TABLE>
<S> <C>
Dreyfus Stock Index Fund Dreyfus Variable Investment Fund-Growth & Income Portfolio*
The Dreyfus Socially Responsible Growth Fund
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<S> <C> <C> <C>
Equity-Income Portfolio Growth Portfolio High Income Portfolio* Overseas Portfolio
</TABLE>
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
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (FORMERLY "ADVISERS MANAGEMENT TRUST")
<S> <C> <C>
Growth Portfolio Limited Maturity Bond Portfolio Partners Portfolio
</TABLE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG SPECIAL FUND II, INC.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. International Stock Fund II
TCI PORTFOLIOS, INC., AN AFFILIATE OF AMERICAN CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International TCI Value
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
Worldwide Bond Fund (Formerly Global Bond Fund) Gold and Natural Resources Fund
Worldwide Emerging Markets Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
WARBURG PINCUS TRUST
<TABLE>
<S> <C> <C>
International Equity Portfolio Post-Venture Capital Portfolio Small Company Growth Portfolio
</TABLE>
* These Portfolios may invest in lower quality debt securities commonly referred
to as junk bonds.
1
<PAGE> 2
AVAILABLE FOR ALL CONTRACTS
ISSUED ON OR AFTER MAY 1, 1987 AND BEFORE SEPTEMBER 1, 1989
AMERICAN VARIABLE INSURANCE SERIES
Growth Fund High-Yield Bond Fund U.S. Government/AAA-Rated Securities Fund
This prospectus provides you with the basic information you should know
about the Individual 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 May 1, 1996,
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 43218-2356.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 44 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS JANUARY 31, 1997
2
<PAGE> 3
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of Contract issuance. 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 actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Contract Owner as
set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named on the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of the
last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. A Contingent Designated Annuitant may not be named for Contracts
issued as Qualified Contracts, Individual Retirement Annuities, or Tax Sheltered
Annuities.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. For Contracts issued
in the State of New York, references throughout this prospectus to "Contingent
Owner" shall mean "Owner's Beneficiary." A Contingent Owner may not be named for
Contracts issued as Qualified Contracts, Individual Retirement Annuities, or Tax
Sheltered Annuities.
CONTRACT- The Individual Deferred Variable Annuity Contract described in this
prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date. The Contract Owner is the person
named as Owner in the application, unless changed.
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant
(or the Contingent Designated Annuitant, if applicable). This benefit does not
apply upon the death of the Contract Owner when the Owner and Designated
Annuitant are not the same person. If the Annuitant dies after the Annuitization
Date, any benefit that may be payable shall be as specified in the Annuity
Payment Option elected.
3
<PAGE> 4
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or any other segregated asset account of the
Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
under the Contract is guaranteed to remain the same. For new Purchase Payments
allocated to the Fixed Account or transfers from the Variable Account, this
period begins upon the date of deposit or transfer and ends at the end of the
calendar quarter at least one year (but not more than 15 months) from deposit or
transfer. At the end of an Interest Rate Guarantee Period, a new interest rate
is declared with an Interest Rate Guarantee Period starting at the end of the
prior period and ending at the end of the calendar quarter one year later.
MUTUAL FUND (FUND)- A registered management investment company in which the
assets of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under Sections 401 and 403(a) (Qualified Plans), 408 (IRAs) or 403(b)
(Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Contract or Tax Sheltered Annuity either through
employer contributions or employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED CONTRACT- A Contract which receives favorable tax treatment under the
provisions of the Code, including those described in Section 401 and 403(a).
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading of underlying Mutual Fund shares held by the Variable Account,
such that the current value of Variable Account Accumulation Units might be
materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide Variable Account-II, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in shares of a separate underlying Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
4
<PAGE> 5
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF SPECIAL TERMS.......................................................................................3
SUMMARY OF CONTRACT EXPENSES....................................................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..........................................................................7
SYNOPSIS.......................................................................................................11
CONDENSED FINANCIAL INFORMATION................................................................................12
NATIONWIDE LIFE INSURANCE COMPANY..............................................................................21
THE VARIABLE ACCOUNT...........................................................................................21
Underlying Mutual Fund Options........................................................................21
Voting Rights.........................................................................................21
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS..............................................22
Mortality Risk Charge.................................................................................22
Expense Risk Charge...................................................................................22
Contingent Deferred Sales Charge......................................................................22
Elimination of Contingent Deferred Sales Charge.......................................................23
Contract Maintenance Charge and Administration Charge.................................................24
Premium Taxes.........................................................................................25
Expenses of Variable Account..........................................................................25
Investments of the Variable Account...................................................................25
Right to Revoke.......................................................................................25
Transfers.............................................................................................25
Assignment............................................................................................26
Loan Privilege........................................................................................27
Ownership Provisions..................................................................................28
Contingent Owner and Beneficiary Provisions...........................................................28
Substitution of Securities............................................................................29
Contract Owner Inquiries..............................................................................29
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT........................................................................29
Value of an Annuity Unit..............................................................................29
Assumed Investment Rate...............................................................................29
Frequency and Amount of Annuity Payments..............................................................29
Annuity Commencement Date.............................................................................29
Change in Annuity Commencement Date...................................................................30
Change in Form of Annuity.............................................................................30
Annuity Payment Options...............................................................................30
Death of Contract Owner...............................................................................30
Death of Designated Annuitant Prior to the Annuitization Date.........................................31
Death Benefit After the Annuitization Date............................................................31
Required Distribution for Qualified Plans or Tax Sheltered Annuities..................................31
Required Distributions for Individual Retirement Annuities............................................32
Generation-Skipping Transfers.........................................................................33
GENERAL INFORMATION............................................................................................33
Contract Owner Services...............................................................................33
Statements and Reports................................................................................34
Allocation of Purchase Payments and Contract Value....................................................34
Value of a Variable Account Accumulation Unit.........................................................35
Net Investment Factor.................................................................................35
Valuation of Assets...................................................................................35
Determining the Contract Value........................................................................35
Surrender (Redemption)................................................................................36
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract...................................36
Taxes.................................................................................................37
Non-Qualified Contracts...............................................................................37
Diversification.......................................................................................39
Charge for Tax Provisions.............................................................................39
Qualified Plans, Individual Retirement Annuities, Individual Retirement
Accounts and Tax Sheltered Annuities................................................................39
Advertising...........................................................................................39
LEGAL PROCEEDINGS..............................................................................................44
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................................44
APPENDIX A.....................................................................................................45
APPENDIX B.....................................................................................................47
</TABLE>
5
<PAGE> 6
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
Maximum Contingent Deferred Sales Charge(1)................................................... 7%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
Number of Completed Years from Contingent Deferred Sales Load
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE(2)........................................................ $30
-------
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges............................................................ 1.25%
---------
Administration Charge......................................................................... 0.05%
---------
Total Variable Account Annual Expenses...................................................... 1.30%
---------
<FN>
1 Starting with the second year after a Purchase Payment has been made, 10%
of that Purchase Payment may be withdrawn without imposition of a
Contingent Deferred Sales Charge. This free withdrawal privilege is
non-cumulative and must be used in the year available. Under current
Company administrative practice the Contingent Deferred Sales Charge is
waived for: (1) first year withdrawals of up to 10% of each Purchase
Payment under Individual Retirement Annuity Contracts (IRAs as defined
under Section 408 of the Code) issued on or after March 1, 1993, or (2)
for Distributions required for the Contract to meet minimum Distribution
rules under the Code. Withdrawals may be restricted for Contracts issued
pursuant to the terms of a Tax Sheltered Annuity Plan or other Qualified
Plan. The Contingent Deferred Sales Charge is imposed only against
Purchase Payments (see "Contingent Deferred Sales Charge").
2 The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and on the date of surrender in any year in which the entire
Contract Value is surrendered (see "Contract Maintenance Charge and
Administration Charge").
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
--------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AVIS-Growth Fund 0.44% 0.03% 0.47%
--------------------------------------------------------------------------------------------------------------
AVIS- High-Yield Bond Fund 0.51% 0.03% 0.54%
--------------------------------------------------------------------------------------------------------------
AVIS- U.S. Government/AAA Rated Securities 0.51% 0.03% 0.54%
--------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund* 0.27% 0.12% 0.39%
--------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Growth & Income 0.75% 0.20% 0.95%
Portfolio
--------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund* 0.69% 0.58% 1.27%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -High Income Portfolio 0.60% 0.11% 0.71%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -Overseas Portfolio 0.76% 0.15% 0.91%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio* 0.71% 0.08% 0.79%
--------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
--------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
--------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
--------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
--------------------------------------------------------------------------------------------------------------
NSAT -Small Company Fund 1.00% 0.25% 1.25%
--------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
--------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.84% 0.10% 0.94%
Management Trust-Growth Portfolio
--------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.65% 0.10% 0.75%
Management Trust-Limited Maturity Bond Portfolio
--------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.85% 0.30% 1.15%
Management Trust-Partners Portfolio
--------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80%
--------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Global Securities 0.74% 0.15% 0.89%
Fund
--------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Multiple 0.74% 0.03% 0.77%
Strategies Fund
--------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
--------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Discovery Fund 1.00% 0.31% 1.31%
II, Inc.
--------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-International 1.00% 0.97% 1.97%
Stock Fund II
--------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Balanced 1.00% 0.00% 1.00%
--------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 1.00% 0.00% 1.00%
--------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI International 1.50% 0.00% 1.50%
--------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Value 1.00% 0.00% 1.00%
--------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
CONTINUED
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Van Eck Worldwide Insurance Trust-Gold and Natural 0.79% 0.15% 0.94%
Resources Fund*
--------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Bond 0.80% 0.16% 0.96%
Fund*
--------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Emerging 1.00% 0.00% 1.00%
Markets Fund
--------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.50% 2.50%
Trust-Real Estate Securities Fund*
--------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity Portfolio* 1.00% 0.44% 1.44%
--------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Post-Venture Capital Portfolio* 0.65% 0.75% 1.40%
--------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth Portfolio* 0.90% 0.35% 1.25%
--------------------------------------------------------------------------------------------------------------
<FN>
3 The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's net
asset value, which is the share price used to calculate the unit values of
the Variable Account. The information relating to the underlying Mutual
Fund expenses was provided by the underlying Mutual Fund and was not
independently verified by the Company.
* The investment advisers for the indicated underlying mutual funds have
voluntarily agreed to reimburse a portion of the management fees and/or
operating expenses resulting in a reduction of the total expenses. Absent
any such partial reimbursement, "Management Fees" and "Other Expenses"
would have been 0.27% and 0.15% for the Dreyfus Stock Index Fund; 0.69% and
0.64% for the Dreyfus Socially Responsible Growth Fund, Inc.; 0.71% and
0.10% for the Fidelity VIP Fund II-Asset Manager Portfolio; 1.00% and 0.16%
for the Van Eck Worldwide Insurance Trust-Gold and Natural Resources Fund;
1.00% and 0.15% for the Van Eck Worldwide Insurance Trust-Worldwide Bond
Fund; 1.00% and 1.90% for the Van Kampen American Capital Life Investment
Trust-Real Estate Securities Fund; 1.00% and 1.21% for the Warburg Pincus
Trust-International Equity Portfolio; 1.25% and 0.81% for the Warburg
Pincus Trust Post-Venture Capital Portfolio; and 0.90% and 0.60% for the
Warburg Pincus Trust-Small Company Growth Portfolio.
</TABLE>
8
<PAGE> 9
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below. The expense amounts presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing Contracts. Since
the average Contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your Contract
Contract your Contract at the end at the end of the applicable
at the end of the applicable of the applicable time time period
time period 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>
AVIS-Growth Fund 89 105 130 223 19 60 103 223 * 60 103 223
- ----------------------------------------------------------------------------------------------------------------------
AVIS-High-Yield Bond 90 107 134 231 20 62 107 231 * 62 107 231
Fund
- ----------------------------------------------------------------------------------------------------------------------
AVIS-U.S. Govt./AAA 90 107 134 231 20 62 107 231 * 62 107 231
Rated
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 89 103 126 214 19 58 99 214 * 58 99 214
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF-Growth & 94 120 156 275 24 75 129 275 * 75 129 275
Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 98 130 172 308 28 85 145 308 * 85 145 308
Responsible Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP 91 110 138 239 21 65 111 239 * 65 111 239
Fund-Equity-Income
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP 92 112 143 248 22 67 116 248 * 67 116 248
Fund-Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP 94 119 154 271 24 74 127 271 * 74 127 271
Fund-Overseas Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High 92 113 143 249 22 68 116 249 * 68 116 249
Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 93 115 147 258 23 70 120 258 * 70 120 258
II-Asset Manager
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 92 113 144 250 22 68 117 250 * 68 117 250
II-Contrafund Portfolio
- ----------------------------------------------------------------------------------------------------------------------
NSAT-Capital 90 107 134 231 20 62 107 231 * 62 107 231
Appreciation Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond 90 106 132 228 20 61 105 228 * 61 105 228
Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 90 107 133 229 20 62 106 229 * 62 106 229
- ----------------------------------------------------------------------------------------------------------------------
NSAT - Small Company 98 130 171 306 28 85 144 306 * 85 144 306
Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 90 106 132 228 20 61 105 228 * 61 105 228
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 94 120 155 274 24 75 128 274 * 75 128 274
Advisers Management
Trust-Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 92 114 145 254 22 69 118 254 * 69 118 254
Advisers Management
Trust-Limited Maturity
Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 97 127 166 295 27 82 139 295 * 82 139 295
Advisers Management
Trust- Partners
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 93 116 148 259 23 71 121 259 * 71 121 259
Account Funds-Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your
Contract your Contract at the end of Contract
at the end of the applicable the applicable time period at the end of the 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>
Oppenheimer Variable 94 118 153 268 24 73 126 268 * 73 126 268
Account Funds-Global
Securities Fund
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 93 115 146 256 23 70 119 256 * 70 119 256
Account Funds-Multiple
Strategies Fund
- ----------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, 97 128 169 301 27 83 142 301 * 83 142 301
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Strong Variable 98 132 175 312 28 87 148 312 * 87 148 312
Insurance Funds, Inc.-
Discovery Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Strong Variable 105 152 208 376 35 107 181 376 * 107 181 376
Insurance Funds, Inc.
- -International Stock
Fund II
- ----------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 95 122 158 280 25 77 131 280 * 77 131 280
TCI Balanced
- ----------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 95 122 158 280 25 77 131 280 * 77 131 280
TCI Growth
- ----------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 100 138 184 331 30 93 157 331 * 93 157 331
TCI International
- ----------------------------------------------------------------------------------------------------------------------
TCI Portfolios, 95 122 158 280 25 77 131 280 * 77 131 280
Inc.-TCI Value
- ----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 94 120 155 274 24 75 128 274 * 75 128 274
Insurance
Trust-Worldwide Bond
Fund
- ----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 95 122 158 280 25 77 131 280 * 77 131 280
Insurance
Trust-Worldwide
Emerging Markets Fund
- ----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 95 121 156 276 25 76 129 276 * 76 129 276
Insurance Trust-Gold
and Natural Resources
Fund
- ----------------------------------------------------------------------------------------------------------------------
Van Kampen American 115 181 254 460 45 136 227 460 * 136 227 460
Capital Life Investment
Trust-Real Estate
Securities Fund
- ----------------------------------------------------------------------------------------------------------------------
Warburg Pincus 100 136 181 325 30 91 154 325 * 91 154 325
Trust-International
Equity Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 99 134 179 321 29 89 152 321 * 89 152 321
Post-Venture Capital
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Warburg Pincus 98 130 171 306 28 85 144 306 * 85 144 306
Trust-Small Company
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------
<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
will be borne directly or indirectly when investing in the Contract. The
expenses of the Nationwide Variable Account-II as well as those of the
underlying Mutual Fund options are reflected in the Example. For more complete
descriptions of the expenses of the Variable Account, see "Variable Account
Charges, Purchase Payments, and Other Deductions." For more complete information
regarding expenses paid out of the assets of the underlying Mutual Fund options,
see the underlying Mutual Fund prospectuses. Deductions for premium taxes may
also apply but are not reflected in the Example shown above (see "Premium
Taxes").
10
<PAGE> 11
SYNOPSIS
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct from
the Contract Owner's Contract Value a Contingent Deferred Sales Charge not to
exceed 7% of the lesser of the total of all Purchase Payments made within 84
months prior to the date of the request to surrender, or the amount surrendered.
This charge, when applicable, is imposed to permit the Company to recover sales
expenses which have been advanced by the Company (see "Contingent Deferred Sales
Charge").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge from the Contract Value of the Contracts. The
Company will also assess an Administration Charge equal to an annual rate of
0.05% of the daily net asset value of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. The Company does not expect to recover from these
charges an amount in excess of accumulated administrative expenses (see
"Contract Maintenance Charge and Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the daily net asset value of the Variable Account for mortality risk
assumed by the Company (see "Mortality Risk Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.45% of the daily net asset value of the Variable Account as compensation for
the Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. The cumulative total of all Purchase Payments under
Contracts issued on the life of any one Designated Annuitant may not exceed
$1,000,000 without the prior consent of the Company (see "Allocation of Purchase
Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $500, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20. In no event, however, will annuity payments be made less
frequently than annually (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable by the Company at the time
Purchase Payments are made, an equal premium tax deduction may be made from the
Contract prior to the allocation of any Purchase Payment to any underlying
Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of Purchase Payments (see "Right to
Revoke").
11
<PAGE> 12
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS- 16.632869 21.880052 31.55% 533,382 1995
Growth Fund-Q ------------------------------------------------------------------------------------
16.767635 16.632869 -0.80% 568,831 1994
------------------------------------------------------------------------------------
14.603954 16.767635 14.82% 614,673 1993
------------------------------------------------------------------------------------
13.356752 14.603954 9.34% 630,618 1992
------------------------------------------------------------------------------------
10.154286 13.356752 31.54% 637,666 1991
------------------------------------------------------------------------------------
10.758820 10.154286 -5.62% 612,309 1990
------------------------------------------------------------------------------------
8.912471 10.758820 20.72% 578,318 1989***
------------------------------------------------------------------------------------
7.950563 8.912471 12.10% 335,760 1988
------------------------------------------------------------------------------------
10.000000 7.950563 -20.49% 245,664 1987
- -------------------------------------------------------------------------------------------------------------
AVIS- 16.632869 21.880052 31.55% 544,338 1995
Growth Fund-Q ------------------------------------------------------------------------------------
16.767635 16.632869 -0.80% 538,005 1994
------------------------------------------------------------------------------------
14.603954 16.767635 14.82% 573,448 1993
------------------------------------------------------------------------------------
13.356752 14.603954 9.34% 658,355 1992
------------------------------------------------------------------------------------
10.154286 13.356752 31.54% 675,796 1991
------------------------------------------------------------------------------------
10.758820 10.154286 -5.62% 709,255 1990
------------------------------------------------------------------------------------
8.912471 10.758820 20.72% 847,522 1989***
------------------------------------------------------------------------------------
7.950563 8.912471 12.10% 365,976 1988
------------------------------------------------------------------------------------
10.000000 7.950563 -20.49% 148,517 1987
- -------------------------------------------------------------------------------------------------------------
AVIS- 17.247186 20.792452 20.19% 74,984 1995
High-Yield Bond Fund-Q ------------------------------------------------------------------------------------
18.696382 17.247186 -7.75% 90,073 1994
------------------------------------------------------------------------------------
16.269615 18.696382 14.92% 97,302 1993
------------------------------------------------------------------------------------
14.656040 16.269615 11.01% 96,741 1992
------------------------------------------------------------------------------------
11.731211 14.656040 24.93% 104,317 1991
------------------------------------------------------------------------------------
11.446666 11.731211 2.49% 91,778 1990
------------------------------------------------------------------------------------
10.615988 11.446666 7.82% 107,592 1989***
------------------------------------------------------------------------------------
10.185386 10.615988 4.23% 80,266 1988
------------------------------------------------------------------------------------
10.000000 10.185386 1.85% 62,616 1987
- -------------------------------------------------------------------------------------------------------------
AVIS- 17.247186 20.792452 20.19% 65,007 1995
High-Yield Bond Fund-Q ------------------------------------------------------------------------------------
18.696382 17.247186 -7.75% 63,653 1994
------------------------------------------------------------------------------------
16.269615 18.696382 14.92% 90,260 1993
------------------------------------------------------------------------------------
14.656040 16.269615 11.01% 85,512 1992
------------------------------------------------------------------------------------
11.731211 14.656040 24.93% 93,543 1991
------------------------------------------------------------------------------------
11.446666 11.731211 2.49% 84,258 1990
------------------------------------------------------------------------------------
10.615988 11.446666 7.82% 120,140 1989***
------------------------------------------------------------------------------------
10.185386 10.615988 4.23% 67,570 1988
------------------------------------------------------------------------------------
10.000000 10.185386 1.85% 22,009 1987
- -------------------------------------------------------------------------------------------------------------
AVIS- 15.872495 18.077072 13.89% 315,331 1995
U.S. Gov't/AAA-Rated ------------------------------------------------------------------------------------
Securities Fund-Q 16.810323 15.872495 -5.58% 346,442 1994
------------------------------------------------------------------------------------
15.319654 16.810323 9.73% 414,364 1993
------------------------------------------------------------------------------------
14.425067 15.319654 6.20% 396,892 1992
------------------------------------------------------------------------------------
12.605067 14.425067 14.44% 436,968 1991
------------------------------------------------------------------------------------
11.780016 12.605067 7.00% 457,802 1990
------------------------------------------------------------------------------------
10.909251 11.780016 7.98% 493,935 1989***
------------------------------------------------------------------------------------
10.389044 10.909251 5.01% 303,920 1988
------------------------------------------------------------------------------------
10.000000 10.389044 3.89% 86,816 1987
- -------------------------------------------------------------------------------------------------------------
AVIS- 15.872495 18.077072 13.89% 238,614 1995
U.S. Gov't/AAA-Rated ------------------------------------------------------------------------------------
Securities Fund-NQ 16.810323 15.872495 -5.58% 272,776 1994
------------------------------------------------------------------------------------
15.319654 16.810323 9.73% 365,338 1993
------------------------------------------------------------------------------------
14.425067 15.319654 6.20% 447,387 1992
------------------------------------------------------------------------------------
12.605067 14.425067 14.44% 496,734 1991
------------------------------------------------------------------------------------
11.780016 12.605067 7.00% 528,128 1990
------------------------------------------------------------------------------------
10.909251 11.780016 7.98% 997,613 1989***
------------------------------------------------------------------------------------
10.389044 10.909251 5.01% 801,676 1988
------------------------------------------------------------------------------------
10.000000 10.389044 3.89% 167,148 1987
- -------------------------------------------------------------------------------------------------------------
<FN>
*** On October 20, 1989, the Company substituted shares of the American VI
Series for the then existing shares of the American Life/Annuity Series.
The unit values for the American VI Series started at the same unit values
as the corresponding units of the American Life/Annuity Series on the date
of the substitution.
</TABLE>
12
<PAGE> 13
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.087774 13.619180 35.01% 3,284,707 1995
Fund-Q ------------------------------------------------------------------------------------
10.130946 10.087774 -0.43% 539,188 1994
------------------------------------------------------------------------------------
10.000000 10.130946 1.31% 114,256 1993
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 10.087774 13.619180 35.01% 2,805,145 1995
Fund-Q ------------------------------------------------------------------------------------
10.130946 10.087774 -0.43% 418,990 1994
------------------------------------------------------------------------------------
10.000000 10.130946 1.31% 53,556 1993
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 10.721141 14.239508 32.82% 640,387 1995
Responsible Growth ------------------------------------------------------------------------------------
Fund-Q 10.702195 10.721141 0.18% 301,426 1994
------------------------------------------------------------------------------------
10.000000 10.702195 7.02% 32,265 1993
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 10.721141 14.239508 32.82% 421,093 1995
Responsible Growth ------------------------------------------------------------------------------------
Fund-NQ 10.702195 10.721141 0.18% 263,764 1994
------------------------------------------------------------------------------------
10.000000 10.702195 7.02% 48,396 1993
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 13.701507 14.832631 8.26% 14,272,080 1995
Overseas Portfolio-Q ------------------------------------------------------------------------------------
13.646118 13.701507 0.41% 15,065,853 1994
------------------------------------------------------------------------------------
10.074553 13.646118 35.45% 11,518,590 1993
------------------------------------------------------------------------------------
11.432117 10.074553 -11.88% 5,381,715 1992
------------------------------------------------------------------------------------
10.707951 11.432117 6.76% 3,095,641 1991
------------------------------------------------------------------------------------
11.042233 10.707951 -3.03% 1,715,341 1990
------------------------------------------------------------------------------------
8.858811 11.042233 24.65% 356,389 1989
------------------------------------------------------------------------------------
8.300609 8.858811 6.72% 53,275 1988
------------------------------------------------------------------------------------
10.000000 8.300609 -16.99% 434 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 13.701507 14.832631 8.26% 14,672,390 1995
Overseas Portfolio-NQ ------------------------------------------------------------------------------------
13.646118 13.701507 0.41% 17,550,925 1994
------------------------------------------------------------------------------------
10.074553 13.646118 35.45% 14,793,318 1993
------------------------------------------------------------------------------------
11.432117 10.074553 -11.88% 5,341,001 1992
------------------------------------------------------------------------------------
10.707951 11.432117 6.76% 3,211,265 1991
------------------------------------------------------------------------------------
11.042233 10.707951 -3.03% 1,989,713 1990
------------------------------------------------------------------------------------
8.858811 11.042233 24.65% 605,461 1989
------------------------------------------------------------------------------------
8.300609 8.858811 6.72% 167,313 1988
------------------------------------------------------------------------------------
10.000000 8.300609 -16.99% 101,502 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- High 18.327364 21.817076 19.04% 6,464,833 1995
Income Portfolio-Q ------------------------------------------------------------------------------------
18.859652 18.327364 -2.82% 4,924,388 1994
------------------------------------------------------------------------------------
15.855840 18.859652 18.94% 4,044,756 1993
------------------------------------------------------------------------------------
13.055215 15.855840 21.45% 1,837,635 1992
------------------------------------------------------------------------------------
9.778064 13.055215 33.52% 669,289 1991
------------------------------------------------------------------------------------
10.147625 9.778064 -3.64% 277,945 1990
------------------------------------------------------------------------------------
10.736745 10.147625 -5.49% 209,652 1989
------------------------------------------------------------------------------------
9.736528 10.736745 10.27% 67,813 1988
------------------------------------------------------------------------------------
10.000000 9.736528 -2.63% 5,430 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- High 18.327364 21.817076 19.04% 7,993,534 1995
Income Portfolio-NQ ------------------------------------------------------------------------------------
18.859652 18.327364 -2.82% 6,177,851 1994
------------------------------------------------------------------------------------
15.855840 18.859652 18.94% 5,307,509 1993
------------------------------------------------------------------------------------
13.055215 15.855840 21.45% 2,645,096 1992
------------------------------------------------------------------------------------
9.778064 13.055215 33.52% 1,098,412 1991
------------------------------------------------------------------------------------
10.147625 9.778064 -3.64% 425,270 1990
------------------------------------------------------------------------------------
10.736745 10.147625 -5.49% 353,195 1989
------------------------------------------------------------------------------------
9.736528 10.736745 10.27% 140,237 1988
------------------------------------------------------------------------------------
10.000000 9.736528 -2.63% 39,928 1987
- -------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Fund - 18.646331 24.863579 33.34% 21,482,777 1995
Equity- ------------------------------------------------------------------------------------
Income Portfolio-Q 17.644458 18.646331 5.68% 15,283,540 1994
------------------------------------------------------------------------------------
15.123262 17.644458 16.67% 10,828,747 1993
------------------------------------------------------------------------------------
13.099125 15.123262 15.45% 6,712,294 1992
------------------------------------------------------------------------------------
10.095775 13.099125 29.75% 4,458,956 1991
------------------------------------------------------------------------------------
12.075648 10.095775 -16.40% 3,063,355 1990
------------------------------------------------------------------------------------
10.425721 12.075648 15.83% 1,898,037 1989
------------------------------------------------------------------------------------
8.589543 10.425721 21.38% 319,889 1988
------------------------------------------------------------------------------------
10.000000 8.589543 -14.10% 8,805 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 18.646331 24.863579 33.34% 21,094,657 1995
Equity- ------------------------------------------------------------------------------------
Income Portfolio-NQ 17.644458 18.646331 5.68% 15,217,260 1994
------------------------------------------------------------------------------------
15.123262 17.644458 16.67% 11,195,669 1993
------------------------------------------------------------------------------------
13.099125 15.123262 15.45% 6,754,475 1992
------------------------------------------------------------------------------------
10.095775 13.099125 29.75% 4,614,322 1991
------------------------------------------------------------------------------------
12.075648 10.095775 -16.40% 3,627,225 1990
------------------------------------------------------------------------------------
10.425721 12.075648 15.83% 2,861,738 1989
------------------------------------------------------------------------------------
8.589543 10.425721 21.38% 678,815 1988
------------------------------------------------------------------------------------
10.000000 8.589543 -14.10% 420,904 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 25.451479 34.006052 33.61% 15,252,906 1995
Growth ------------------------------------------------------------------------------------
Portfolio-Q 25.790764 25.451479 -1.32% 11,689,858 1994
------------------------------------------------------------------------------------
21.890060 25.790764 17.82% 8,260,724 1993
------------------------------------------------------------------------------------
20.287900 21.890060 7.90% 5,747,021 1992
------------------------------------------------------------------------------------
14.125398 20.287900 43.63% 3,088,464 1991
------------------------------------------------------------------------------------
16.214983 14.125398 -12.89% 1,245,106 1990
------------------------------------------------------------------------------------
12.501824 16.214983 29.70% 398,400 1989
------------------------------------------------------------------------------------
10.938414 12.501824 14.29% 38,122 1988
------------------------------------------------------------------------------------
10.000000 10.938414 9.38% 2,784 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 25.451479 34.006052 33.61% 13,813,237 1995
Growth ------------------------------------------------------------------------------------
Portfolio-NQ 25.790764 25.451479 -1.32% 10,492,508 1994
------------------------------------------------------------------------------------
21.890060 25.790764 17.82% 8,788,434 1993
------------------------------------------------------------------------------------
20.287900 21.890060 7.90% 6,695,765 1992
------------------------------------------------------------------------------------
14.125398 20.287900 43.63% 4,003,764 1991
------------------------------------------------------------------------------------
16.214983 14.125398 -12.89% 2,190,071 1990
------------------------------------------------------------------------------------
12.501824 16.214983 29.70% 857,832 1989
------------------------------------------------------------------------------------
10.938414 12.501824 14.29% 105,051 1988
------------------------------------------------------------------------------------
10.000000 10.938414 9.38% 209 1987
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - 15.641016 18.056027 15.44% 22,704,319 1995
Asset ------------------------------------------------------------------------------------
Manager Portfolio-Q 16.874276 15.641016 -7.31% 24,788,850 1994
------------------------------------------------------------------------------------
14.123234 16.874276 19.48% 17,438,762 1993
------------------------------------------------------------------------------------
12.789976 14.123234 10.42% 6,977,842 1992
------------------------------------------------------------------------------------
10.572963 12.789976 20.97% 2,513,661 1991
------------------------------------------------------------------------------------
10.028081 10.572963 5.43% 729,271 1990
------------------------------------------------------------------------------------
10.000000 10.028081 0.28% 124,631 1989
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - 15.641016 18.056027 15.44% 16,037,811 1995
Asset ------------------------------------------------------------------------------------
Manager Portfolio-NQ 16.874276 15.641016 -7.31% 20,692,145 1994
------------------------------------------------------------------------------------
14.123234 16.874276 19.48% 16,652,403 1993
------------------------------------------------------------------------------------
12.789976 14.123234 10.42% 6,313,629 1992
------------------------------------------------------------------------------------
10.572963 12.789976 20.97% 1,991,456 1991
------------------------------------------------------------------------------------
10.028081 10.572963 5.43% 696,595 1990
------------------------------------------------------------------------------------
10.000000 10.028081 0.28% 161,084 1989
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - 10.000000 11.071500 10.72% 3,025,498 1995
Contrafund Portfolio - Q
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - 10.000000 11.071500 10.72% 3,490,716 1995
Contrafund Portfolio -
NQ
- -------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT Capital 11.311683 14.442619 27.68% 897,315 1995
Appreciation Fund-Q ------------------------------------------------------------------------------------
11.564256 11.311683 -2.18% 890,035 1994
------------------------------------------------------------------------------------
10.689287 11.564256 8.19% 545,013 1993
------------------------------------------------------------------------------------
10.000000 10.689287 6.89% 189,896 1992
- -------------------------------------------------------------------------------------------------------------
NSAT-Capital 11.311683 14.442619 27.68% 904,797 1995
Appreciation Fund-Q ------------------------------------------------------------------------------------
11.564256 11.311683 -2.18% 897,902 1994
------------------------------------------------------------------------------------
10.689287 11.564256 8.19% 549,294 1993
------------------------------------------------------------------------------------
10.000000 10.689287 6.89% 551,252 1992
- -------------------------------------------------------------------------------------------------------------
NSAT- 25.309101 29.663756 17.21% 4,150,795 1995
Government Bond ------------------------------------------------------------------------------------
Fund-Q 26.497619 25.309101 -4.49% 4,217,320 1994
------------------------------------------------------------------------------------
24.513489 26.497619 8.09% 4,093,697 1993
------------------------------------------------------------------------------------
23.025331 24.513489 6.46% 3,388,192 1992
------------------------------------------------------------------------------------
19.989831 23.025331 15.19% 2,396,577 1991
------------------------------------------------------------------------------------
18.497836 19.989831 8.07% 1,366,952 1990
------------------------------------------------------------------------------------
16.442690 18.497836 12.64% 769,336 1989
------------------------------------------------------------------------------------
15.416798 16.442690 6.65% 397,372 1988
------------------------------------------------------------------------------------
15.399065 15.416798 0.12% 345,246 1987
------------------------------------------------------------------------------------
13.540778 15.399065 13.72% 202,054 1986
- -------------------------------------------------------------------------------------------------------------
NSAT- 25.242252 29.585401 17.21% 3,385,486 1995
Government Bond ------------------------------------------------------------------------------------
Fund-NQ 26.427634 25.242252 -4.49% 3,855,380 1994
------------------------------------------------------------------------------------
24.448737 26.427634 8.09% 4,068,930 1993
------------------------------------------------------------------------------------
22.964507 24.448737 6.46% 3,746,706 1992
------------------------------------------------------------------------------------
19.937021 22.964507 15.19% 3,069,935 1991
------------------------------------------------------------------------------------
18.448970 19.937021 8.07% 2,213,029 1990
------------------------------------------------------------------------------------
16.399248 18.448970 12.50% 1,776,299 1989
------------------------------------------------------------------------------------
15.376062 16.399248 6.65% 1,568,736 1988
------------------------------------------------------------------------------------
15.358367 15.376062 0.12% 1,514,167 1987
------------------------------------------------------------------------------------
13.504987 15.358367 13.72% 1,661,130 1986
- -------------------------------------------------------------------------------------------------------------
NSAT-Money 20.457373 21.334141 4.29% 9,961,763 1995
Market Fund-Q* ------------------------------------------------------------------------------------
19.951530 20.457373 2.54% 11,466,217 1994
------------------------------------------------------------------------------------
19.672720 19.951530 1.42% 5,669,948 1993
------------------------------------------------------------------------------------
19.275668 19.672720 2.06% 5,743,893 1992
------------------------------------------------------------------------------------
18.453701 19.275668 4.45% 5,848,337 1991
------------------------------------------------------------------------------------
17.301093 18.453701 6.66% 4,869,455 1990
------------------------------------------------------------------------------------
16.070303 17.301093 7.66% 1,988,984 1989
------------------------------------------------------------------------------------
15.171173 16.070303 5.93% 1,232,073 1988
------------------------------------------------------------------------------------
14.441015 15.171173 5.06% 646,540 1987
------------------------------------------------------------------------------------
13.730155 14.441015 5.18% 352,785 1986
- -------------------------------------------------------------------------------------------------------------
<FN>
* The 7-day yield on the Money Market Fund as of December 29, 1995 was
3.78%.
</TABLE>
15
<PAGE> 16
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT-Money 20.457373 21.334141 4.29% 10,688,426 1995
Market Fund-NQ ------------------------------------------------------------------------------------
19.951530 20.457373 2.54% 16,632,423 1994
------------------------------------------------------------------------------------
19.672720 19.951530 1.42% 8,583,554 1993
------------------------------------------------------------------------------------
19.275668 19.672720 2.06% 7,286,887 1992
------------------------------------------------------------------------------------
18.453701 19.275668 4.45% 7,417,882 1991
------------------------------------------------------------------------------------
17.301093 18.453701 6.66% 7,729,382 1990
------------------------------------------------------------------------------------
16.070303 17.301093 7.66% 5,325,942 1989
------------------------------------------------------------------------------------
15.171173 16.070303 5.93% 5,407,347 1988
------------------------------------------------------------------------------------
14.441015 15.171173 5.06% 5,181,222 1987
------------------------------------------------------------------------------------
13.730155 14.441015 5.18% 3,345,080 1986
- -------------------------------------------------------------------------------------------------------------
NSAT-Small 10.000000 11.410135 14.10% 157,084 1995
Company Fund - Q ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NSAT-Small 10.000000 11.410135 14.10% 607,477 1995
Company Fund - NQ ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NSAT-Total 40.926247 52.147953 27.42% 2,843,673 1995
Return Fund-Q ------------------------------------------------------------------------------------
41.023082 40.926247 -0.24% 2,189,971 1994
------------------------------------------------------------------------------------
37.471598 41.023082 9.48% 1,747,873 1993
------------------------------------------------------------------------------------
35.094975 37.471598 6.77% 1,417,457 1992
------------------------------------------------------------------------------------
25.674744 35.094975 36.69% 905,547 1991
------------------------------------------------------------------------------------
28.286971 25.674744 -9.23% 720,473 1990
------------------------------------------------------------------------------------
25.311336 28.286971 11.76% 604,552 1989
------------------------------------------------------------------------------------
21.361366 25.311336 18.49% 467,922 1988
------------------------------------------------------------------------------------
21.799104 21.361366 -2.01% 542,976 1987
------------------------------------------------------------------------------------
18.369602 21.799104 18.67% 258,649 1986
- -------------------------------------------------------------------------------------------------------------
NSAT-Total 39.872391 50.805130 27.42% 2,833,128 1995
Return Fund-NQ ------------------------------------------------------------------------------------
39.966728 39.872391 -0.24% 2,396,609 1994
------------------------------------------------------------------------------------
36.506693 39.966728 9.48% 2,125,354 1993
------------------------------------------------------------------------------------
34.191261 36.506693 6.77% 2,066,486 1992
------------------------------------------------------------------------------------
25.013609 34.191261 36.69% 1,759,891 1991
------------------------------------------------------------------------------------
27.558577 25.013609 -9.23% 1,524,116 1990
------------------------------------------------------------------------------------
24.659571 27.558577 11.76% 1,576,425 1989
------------------------------------------------------------------------------------
20.811313 24.659571 18.49% 1,429,315 1988
------------------------------------------------------------------------------------
21.237770 20.811313 -2.01% 2,024,376 1987
------------------------------------------------------------------------------------
17.896579 21.237770 18.67% 2,057,031 1986
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 21.247525 27.626244 30.02% 5,919,670 1995
Advisers Management ------------------------------------------------------------------------------------
Trust-Growth Portfolio-Q 22.656907 21.247525 -6.22% 4,909,356 1994
------------------------------------------------------------------------------------
21.495392 22.656907 5.40% 4,959,418 1993
------------------------------------------------------------------------------------
19.882145 21.495392 8.11% 4,432,865 1992
------------------------------------------------------------------------------------
15.527030 19.882145 28.05% 3,336,332 1991
------------------------------------------------------------------------------------
17.135185 15.527030 -9.39% 1,761,170 1990
------------------------------------------------------------------------------------
13.408445 17.135185 27.79% 751,612 1989
------------------------------------------------------------------------------------
10.783816 13.408445 24.34% 109,355 1988
------------------------------------------------------------------------------------
10.000000 10.783816 7.84% 353 1987
- -------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger & Berman 21.247525 27.626244 30.02% 5,358,461 1995
Advisers Management ------------------------------------------------------------------------------------
Trust-Growth 22.656907 21.247525 -6.22% 4,342,056 1994
Portfolio-NQ ------------------------------------------------------------------------------------
21.495392 22.656907 5.40% 4,728,052 1993
------------------------------------------------------------------------------------
19.882145 21.495392 8.11% 4,843,969 1992
------------------------------------------------------------------------------------
15.527030 19.882145 28.05% 3,982,667 1991
------------------------------------------------------------------------------------
17.135185 15.527030 -9.39% 2,294,185 1990
------------------------------------------------------------------------------------
13.408445 17.135185 27.79% 1,363,755 1989
------------------------------------------------------------------------------------
10.783816 13.408445 24.34% 291,414 1988
------------------------------------------------------------------------------------
10.000000 10.783816 7.84% 701 1987
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 14.896724 16.311479 9.50% 4,061,293 1995
Advisers Management ------------------------------------------------------------------------------------
Trust- Limited Maturity 15.115753 14.896724 -1.45% 3,859,535 1994
Bond Portfolio-Q ------------------------------------------------------------------------------------
14.362908 15.115753 5.24% 5,013,322 1993
------------------------------------------------------------------------------------
13.836035 14.362908 3.81% 3,563,619 1992
------------------------------------------------------------------------------------
12.589849 13.836035 9.90% 1,462,609 1991
------------------------------------------------------------------------------------
11.776036 12.589849 6.91% 720,644 1990
------------------------------------------------------------------------------------
10.770188 11.776036 9.34% 303,493 1989
------------------------------------------------------------------------------------
10.182117 10.770188 5.78% 104,283 1988
------------------------------------------------------------------------------------
10.000000 10.182117 1.82% 645 1987
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 14.896724 16.311479 9.50% 3,866,535 1995
Advisers Management ------------------------------------------------------------------------------------
Trust- Limited Maturity 15.115753 14.896724 -1.45% 4,238,249 1994
Portfolio-NQ ------------------------------------------------------------------------------------
14.362908 15.115753 5.24% 5,023,386 1993
------------------------------------------------------------------------------------
13.836035 14.362908 3.81% 3,217,005 1992
------------------------------------------------------------------------------------
12.589849 13.836035 9.90% 1,326,257 1991
------------------------------------------------------------------------------------
11.776036 12.589849 6.91% 676,768 1990
------------------------------------------------------------------------------------
10.770188 11.776036 9.34% 299,695 1989
------------------------------------------------------------------------------------
10.182117 10.770188 5.78% 101,445 1988
------------------------------------------------------------------------------------
10.000000 10.182117 1.82% 99 1987
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.017795 13.494251 34.70% 2,151,917 1995
Advisers Management ------------------------------------------------------------------------------------
Trust-Partners 10.000000 10.017795 0.18% 223,285 1994
Portfolio-Q ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.017795 13.494251 34.70% 2,173,222 1995
Advisers Management ------------------------------------------------------------------------------------
Trust-Partners 10.000000 10.017795 0.18% 324,320 1994
Portfolio- ------------------------------------------------------------------------------------
NQ
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 13.216172 15.831164 19.79% 4,418,303 1995
Accounts Fund-Multiple ------------------------------------------------------------------------------------
Strategies Fund-Q 13.655607 13.216172 -3.22% 3,897,893 1994
------------------------------------------------------------------------------------
11.932236 13.655607 14.44% 2,951,734 1993
------------------------------------------------------------------------------------
11.091678 11.932236 7.58% 1,837,408 1992
------------------------------------------------------------------------------------
9.565675 11.091678 15.95% 1,118,029 1991
------------------------------------------------------------------------------------
9.880485 9.565675 -3.19% 643,641 1990
------------------------------------------------------------------------------------
10.000000 9.880485 -1.20% 139,332 1989
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 13.216172 15.831164 19.79% 3,837,204 1995
Accounts Fund-Multiple ------------------------------------------------------------------------------------
Strategies Fund-NQ 13.655607 13.216172 -3.22% 3,363,638 1994
------------------------------------------------------------------------------------
11.932236 13.655607 14.44% 2,677,668 1993
------------------------------------------------------------------------------------
11.091678 11.932236 7.58% 1,697,934 1992
------------------------------------------------------------------------------------
9.565675 11.091678 15.95% 1,012,431 1991
------------------------------------------------------------------------------------
9.880485 9.565675 -3.19% 603,205 1990
------------------------------------------------------------------------------------
10.000000 9.880485 -1.20% 184,606 1989
- -------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer Variable 14.531774 16.781326 15.48% 3,369,101 1995
Accounts Fund-Bond -------------------------------------------------------------------------------------
Fund-Q 15.013579 14.531774 -3.21% 2,694,486 1994
-------------------------------------------------------------------------------------
13.456350 15.013579 11.57% 2,304,838 1993
-------------------------------------------------------------------------------------
12.801628 13.456350 5.11% 1,429,504 1992
-------------------------------------------------------------------------------------
11.026344 12.801628 16.10% 609,779 1991
-------------------------------------------------------------------------------------
10.352435 11.026344 6.51% 193,600 1990
-------------------------------------------------------------------------------------
10.000000 10.352435 3.52% 64,637 1989
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 14.531774 16.781326 15.48% 3,073,942 1995
Accounts Fund-Bond -------------------------------------------------------------------------------------
Fund-NQ 15.013579 14.531774 -3.21% 2,666,115 1994
-------------------------------------------------------------------------------------
13.456350 15.013579 11.57% 2,249,484 1993
-------------------------------------------------------------------------------------
12.801628 13.456350 5.11% 1,407,269 1992
-------------------------------------------------------------------------------------
11.026344 12.801628 16.10% 627,014 1991
-------------------------------------------------------------------------------------
10.352435 11.026344 6.51% 243,677 1990
-------------------------------------------------------------------------------------
10.000000 10.352435 3.52% 56,538 1989
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 11.307851 11.411200 0.91% 6,518,772 1995
Accounts Fund-Global -------------------------------------------------------------------------------------
Securities Fund-Q 12.151882 11.307851 -6.95% 6,376,101 1994
-------------------------------------------------------------------------------------
10.000000 12.151882 21.52% 1,254,946 1993
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 11.307851 11.411200 0.91% 4,810,440 1995
Accounts Fund-Global -------------------------------------------------------------------------------------
Securities Fund-NQ 12.151882 11.307851 -6.95% 6,373,740 1994
-------------------------------------------------------------------------------------
10.000000 12.151882 21.52% 1,833,969 1993
- --------------------------------------------------------------------------------------------------------------
Strong Special 14.551898 18.071722 24.19% 9,874,627 1995
Fund II, Inc.-Q -------------------------------------------------------------------------------------
14.230988 14.551898 2.26% 8,576,003 1994
-------------------------------------------------------------------------------------
11.519061 14.230988 23.54% 4,733,084 1993
-------------------------------------------------------------------------------------
10.000000 11.519061 15.19% 1,132,322 1992
- --------------------------------------------------------------------------------------------------------------
Strong Special 14.551898 18.071722 24.19% 8,712,015 1995
Fund II, Inc.-NQ -------------------------------------------------------------------------------------
14.230988 14.551898 2.26% 8,937,552 1994
-------------------------------------------------------------------------------------
11.519061 14.230988 23.54% 5,766,194 1993
-------------------------------------------------------------------------------------
10.000000 11.519061 15.19% 1,281,636 1992
- --------------------------------------------------------------------------------------------------------------
Strong Variable 12.143604 16.212409 33.51% 5,223,195 1995
Insurance -------------------------------------------------------------------------------------
Funds, Inc.-Discovery 13.003747 12.143604 -6.61% 3,921,214 1994
Fund II, Inc.-Q -------------------------------------------------------------------------------------
10.796708 13.003747 20.44% 2,178,730 1993
-------------------------------------------------------------------------------------
10.000000 10.796708 7.97% 1,002,256 1992
- --------------------------------------------------------------------------------------------------------------
Strong Variable 12.143604 16.212409 33.51% 5,248,509 1995
Insurance -------------------------------------------------------------------------------------
Funds, Inc.-Discovery 13.003747 12.143604 -6.61% 4,385,371 1994
Fund II, Inc.-NQ -------------------------------------------------------------------------------------
10.796708 13.003747 20.44% 3,188,982 1993
-------------------------------------------------------------------------------------
10.000000 10.796708 7.97% 1,433,375 1992
- --------------------------------------------------------------------------------------------------------------
Strong Variable 10.000000 10.226470 2.26% 78,603 1995
Insurance -------------------------------------------------------------------------------------
Funds,
Inc.-International
Stock Fund II - Q
- --------------------------------------------------------------------------------------------------------------
Strong Variable 10.000000 10.226470 2.26% 86,735 1995
Insurance -------------------------------------------------------------------------------------
Funds,
Inc.-International
Stock Fund II - NQ
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 10.801286 12.912980 19.55% 2,978,792 1995
TCI Balanced-Q -------------------------------------------------------------------------------------
10.876699 10.801286 -0.69% 2,670,990 1994
-------------------------------------------------------------------------------------
10.232829 10.876699 6.29% 2,039,118 1993
-------------------------------------------------------------------------------------
10.000000 10.232829 2.33% 1,233,110 1992
- --------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 10.801286 12.912980 19.55% 2,471,621 1995
TCI Balanced-NQ -------------------------------------------------------------------------------------
10.876699 10.801286 -0.69% 2,324,933 1994
-------------------------------------------------------------------------------------
10.232829 10.876699 6.29% 2,073,593 1993
-------------------------------------------------------------------------------------
10.000000 10.232829 2.33% 1,301,248 1992
- --------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TCI Portfolios, Inc.- 19.378026 25.074858 29.40% 9,867,412 1995
TCI Growth-Q ------------------------------------------------------------------------------------
19.864882 19.378026 -2.45% 9,394,094 1994
------------------------------------------------------------------------------------
18.244594 19.864882 8.88% 8,366,010 1993
------------------------------------------------------------------------------------
18.736465 18.244594 -2.63% 7,578,213 1992
------------------------------------------------------------------------------------
13.379768 18.736465 40.04% 4,222,602 1991
------------------------------------------------------------------------------------
13.732668 13.379768 -2.57% 1,954,531 1990
------------------------------------------------------------------------------------
10.801278 13.732668 27.14% 548,848 1989
------------------------------------------------------------------------------------
11.201686 10.801278 -3.57% 224,112 1988
------------------------------------------------------------------------------------
10.000000 11.201686 12.02% 9,178 1987
- --------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 19.378026 25.074858 29.40% 7,570,906 1995
TCI Growth-NQ ------------------------------------------------------------------------------------
19.864882 19.378026 -2.45% 7,577,109 1994
------------------------------------------------------------------------------------
18.244594 19.864882 8.88% 7,513,748 1993
------------------------------------------------------------------------------------
18.736465 18.244594 -2.63% 8,116,485 1992
------------------------------------------------------------------------------------
13.379768 18.736465 40.04% 5,428,104 1991
------------------------------------------------------------------------------------
13.732668 13.379768 -2.57% 2,629,880 1990
------------------------------------------------------------------------------------
10.801278 13.732668 27.14% 974,118 1989
------------------------------------------------------------------------------------
11.201686 10.801278 -3.57% 348,954 1988
------------------------------------------------------------------------------------
10.000000 11.201686 12.02% 9,741 1987
- --------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 9.392316 10.402550 10.76% 1,565,354 1995
TCI International-Q ------------------------------------------------------------------------------------
10.000000 9.392316 -6.08% 688,372 1994
------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 9.392316 10.402550 10.76% 1,498,305 1995
TCI International-NQ ------------------------------------------------------------------------------------
10.000000 9.392316 -6.08% 845,551 1994
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12.465907 14.433345 15.78% 2,993,355 1995
Insurance Trust - ------------------------------------------------------------------------------------
Worldwide Bond Fund-Q 12.798654 12.465907 -2.60% 2,731,900 1994
------------------------------------------------------------------------------------
12.031194 12.798654 6.38% 2,906,303 1993
------------------------------------------------------------------------------------
12.872259 12.031194 -6.53% 2,263,731 1992
------------------------------------------------------------------------------------
11.012132 12.872259 16.89% 1,132,905 1991
------------------------------------------------------------------------------------
10.027192 11.012132 9.82% 453,396 1990
------------------------------------------------------------------------------------
10.000000 10.027192 0.27% 27,550 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12.465907 14.433345 15.78% 3,020,939 1995
Insurance Trust - ------------------------------------------------------------------------------------
Worldwide Bond Fund-NQ 12.798654 12.465907 -2.60% 3,204,016 1994
------------------------------------------------------------------------------------
12.031194 12.798654 6.38% 3,619,098 1993
------------------------------------------------------------------------------------
12.872259 12.031194 -6.53% 2,707,532 1992
------------------------------------------------------------------------------------
11.012132 12.872259 16.89% 1,168,830 1991
------------------------------------------------------------------------------------
10.027192 11.012132 9.82% 497,712 1990
------------------------------------------------------------------------------------
10.000000 10.027192 0.27% 51,091 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12.728311 13.944310 9.55% 3,166,034 1995
Insurance Trust-Gold and ------------------------------------------------------------------------------------
Natural Resources 13.544828 12.728311 -6.03% 3,213,104 1994
Fund-Q ------------------------------------------------------------------------------------
8.325308 13.544828 62.69% 2,189,942 1993
------------------------------------------------------------------------------------
8.795164 8.325308 -5.34% 800,912 1992
------------------------------------------------------------------------------------
9.175494 8.795164 -4.15% 449,387 1991
------------------------------------------------------------------------------------
10.823789 9.175494 -15.23% 337,698 1990
------------------------------------------------------------------------------------
10.000000 10.823789 8.24% 44,378 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12.728311 13.944310 9.55% 3,714,045 1995
Insurance Trust-Gold and ------------------------------------------------------------------------------------
Natural Resources 13.544828 12.728311 -6.03% 4,473,812 1994
Fund-NQ ------------------------------------------------------------------------------------
8.325308 13.544828 62.69% 3,344,681 1993
------------------------------------------------------------------------------------
8.795164 8.325308 -5.34% 960,152 1992
------------------------------------------------------------------------------------
9.175494 8.795164 -4.15% 565,314 1991
------------------------------------------------------------------------------------
10.823789 9.175494 -15.23% 475,693 1990
------------------------------------------------------------------------------------
10.000000 10.823789 8.24% 83,552 1989
- --------------------------------------------------------------------------------------------------------------
Van Kampen American 10.000000 10.765351 7.65% 161,110 1995
Capital Life Investment ------------------------------------------------------------------------------------
Trust-Real Estate
Securities Fund - Q
- --------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen American 10.000000 10.765351 7.65% 310,010 1995
Capital Life Investment ------------------------------------------------------------------------------------
Trust-Real Estate
Securities Fund - NQ
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.000000 10.661059 6.61% 1,798,470 1995
International Equity ------------------------------------------------------------------------------------
Portfolio - Q
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.000000 10.661059 6.61% 2,012,385 1995
International Equity ------------------------------------------------------------------------------------
Portfolio - NQ
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.000000 12.430073 24.30% 2,450,661 1995
Small Company Growth ------------------------------------------------------------------------------------
Portfolio - Q
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.000000 12.430073 24.30% 2,574,975 1995
Small Company Growth ------------------------------------------------------------------------------------
Portfolio - NQ
- --------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March 1929. The Company is a member of the "Nationwide
Insurance Enterprise," with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43216-6609. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
the District of Columbia, Puerto Rico and in all states.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on October 7, 1981,
pursuant to the provisions of Ohio law. The Company has caused the Variable
Account to be registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and
as such, is not chargeable with liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains, or losses of the Company.
Purchase Payments are allocated within the Variable Account among one or
more Sub-Accounts made up of shares in the underlying Mutual Fund option(s)
designated by the Contract Owner. There are two Sub-Accounts within the Variable
Account for each of the underlying Mutual Fund options which may be designated
by the Contract Owner. One such Sub-Account contains the underlying Mutual Funds
shares attributable to Accumulation Units under Qualified Contracts, Individual
Retirement Annuities, and Tax Sheltered Annuities and one such Sub-Account
contains the underlying Mutual Funds shares attributable to Accumulation Units
under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different underlying
Mutual Fund options. (See Appendix B which contains a summary of investment
objectives for each underlying Mutual Fund option.) More detailed information
may be found in the current prospectus for each underlying Mutual Fund offered.
Such a prospectus for the Mutual Fund option(s) being considered must accompany
this prospectus and should be read in conjunction herewith. A copy of each
prospectus may be obtained without charge from Nationwide Life Insurance Company
by calling 1-800-243-6295, TDD 1-800-238-3035, or writing P.O. Box 182356,
Columbus, Ohio 43218-2356.
The underlying Mutual Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect Contract
Owners and variable annuity payees, including withdrawal of the Variable Account
from participation in the underlying Mutual Fund or Mutual Funds which are
involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds.
These shares will be voted in accordance with instructions received from
Contract Owners who have an interest in the Variable Account. If the Investment
Company Act of 1940 or any Regulation thereunder should be amended or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the underlying Mutual
Funds in its own right, it may elect to do so.
21
<PAGE> 22
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares attributable to each Contract Owner is
determined by dividing the Contract Owner's interest in each respective
Sub-Account of the Variable Account by the net asset value of the applicable
share of the underlying Mutual Fund corresponding to the Sub-Account.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest will receive periodic reports
relating to the underlying Mutual Fund, proxy material, and a form with which to
give such voting instructions.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated in the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis, and
is equal to an annual rate of 0.80% of the daily net asset value of the Variable
Account. The Company expects to generate a profit through assessing this charge.
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
deducts an Expense Risk Charge from the Variable Account. This amount is
computed on a daily basis, and is equal to an annual rate of 0.45% of the daily
net asset value of the Variable Account. The Company expects to generate a
profit through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions (see "Elimination of
Contingent Deferred Sales Charge" section), deduct a Contingent Deferred Sales
Charge not to exceed 7% of the lesser of the total of all Purchase Payments made
within 84 months prior to the date of the request to surrender, or the amount
surrendered. The Contingent Deferred Sales Charge, when it is applicable, will
be used to cover expenses relating to the sale of the Contracts, including
commissions paid to sales personnel, the costs of preparation of sales
literature and other promotional activity. The Company attempts to recover its
distribution costs relating to the sale of the Contracts from the Contingent
Deferred Sales Charge. Any shortfall will be made up from the General Account of
the Company, which may indirectly include portions of the Mortality and Expense
Risk Charges, since the Company expects to generate a profit from these charges.
The maximum amount that may be paid to a selling agent on the sale of these
Contracts is 5.25% of Purchase Payments.
For purposes of the Contingent Deferred Sales Charge, surrenders under a
Contract come first from the Purchase Payments which have been on deposit under
the Contract for the longest time period. For tax purposes, a surrender is
usually treated as a withdrawal of earnings first. This charge will apply in the
amounts set forth below to Purchase Payments within the time periods set forth.
In no event will any Contingent Deferred Sales Charge be deducted against any
values which have been held under the Contract for at least 84 months, or to
commencement of an annuity payout under Contracts which have been in effect for
at least two years or upon the death of the Designated Annuitant.
The Contingent Deferred Sales Charge applies to Purchase Payments as
follows for Contracts issued on or after December 15, 1988:
22
<PAGE> 23
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
Starting with the second year after a Purchase Payment has been made
under the Contract, 10% of that Purchase Payment may be withdrawn each year
without imposition of the Contingent Deferred Sales Charge. This free withdrawal
privilege is non-cumulative and will not exceed 10% of the Purchase Payment in
any year. The Contingent Deferred Sales Charge is waived for either: (1) first
year withdrawals of up to 10% of each Purchase Payment under Individual
Retirement Annuity Contracts issued on or after March 1, 1993, or (2) for
Distributions required for the Contract to meet minimum Distribution rules under
the Code. Withdrawals may be restricted for Contracts issued pursuant to the
terms of a Tax Sheltered Annuity Plan or other Qualified Plan. No sales charges
are deducted on redemption proceeds that are transferred to the Fixed Account
option of this annuity. The Contract Owner may be subject to a tax penalty if
withdrawals are taken prior to age 59 1/2.
For Contracts issued prior to December 15, 1988, a Contingent Deferred
Sales charge will be made by the Company equal to 5% of the lesser of the total
of all Purchase Payments made within 96 months prior to the date of the request
for surrender, or the amount surrendered. For Contracts issued prior to December
15, 1988 the Contract Owner may, after the first year from the date of each
Purchase Payment, withdraw without a Contingent Deferred Sales Charge, up to 5%
of that Purchase Payment for each year that the Purchase Payment has remained on
deposit (less the amount of such Purchase Payment previously surrendered free of
charge).
When a Contract is held by a Charitable Remainder Trust, the amount which
may be withdrawn from this Contract without application of a Contingent Deferred
Sales Charge, shall be the larger of (a) or (b), where (a) is:
The amount which would otherwise be available for withdrawal without
application of a Contingent Deferred Sales Charge;
and where (b) is:
The difference between the total Purchase Payments made to the Contract
as of the date of the withdrawal (reduced by previous withdrawals of such
Purchase Payments), and the Contract Value at the close of the day prior
to the date of the withdrawal.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For Tax Sheltered Annuity Contracts issued on or after December 17, 1990,
Qualified Contracts sold in conjunction with 401 cases sold on or after January
14, 1991, and SEP-IRA Contracts sold on or after January 14, 1991, the Company
will waive the Contingent Deferred Sales Charge when:
A. the Plan Participant experiences a case of hardship (as provided
in Code Section 403(b) and as defined for purposes of Code
Section 401(k));
B. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Plan Participant attains age 59 1/2 and has participated in
the Contract for at least 5 years, as determined from the
Contract Anniversary date;
D. the Plan Participant has participated in the Contract for at
least 15 years as determined from the Contract Anniversary date;
E. the Plan Participant dies; or
F. the Contract is annuitized after 2 years from the inception of
the Contract.
23
<PAGE> 24
For Non-Qualified Contracts and IRA Contracts, the Company will waive the
Contingent Deferred Sales Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this prospectus is exchanged for another
Contract issued by the Company, or any of its affiliated insurance companies, of
the type and class which the Company determined is eligible for such exchange,
the Company will waive the Contingent Deferred Sales Charge on the first
Contract. Contingent Deferred Sales Charges may apply to the Contract received
in the exchange.
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by state law.
CONTRACT MAINTENANCE CHARGE AND ADMINISTRATION CHARGE
Each year on the Contract Anniversary, (and on the date of surrender in
any year in which the entire Contract Value is surrendered) the Company deducts
a Contract Maintenance Charge from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract.
The Contract Maintenance Charges are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------ ---------------------------------------------
AMOUNT TYPE OF CONTRACT ISSUED
------------------------------------------------------ ---------------------------------------------
------------------------------------------------------ ---------------------------------------------
<S> <C>
- Non-Qualified Contracts
- Individual Retirement Annuities
- Tax Sheltered Annuities (sold prior to
$30.00 December 17, 1990)
- Qualified Contracts (issued pursuant to a
401 plan prior to January 14, 1991).(1)
------------------------------------------------------ ---------------------------------------------
------------------------------------------------------ ---------------------------------------------
- Tax Sheltered Annuity Contracts issued on
$12.00 or after December 17, 1990 and before
August 1, 1994.(2)
------------------------------------------------------ ---------------------------------------------
------------------------------------------------------ ---------------------------------------------
- Qualified Contracts issued on or after
$30.00 to $0.00 January 14, 1991 and before August 1,
1994.(3)
------------------------------------------------------ ---------------------------------------------
------------------------------------------------------ ---------------------------------------------
- Qualified Contracts (sold on or after
$12.00 to $0.00(4) August 1, 1994).
- Tax Sheltered Annuity Contracts (sold on
or after August 1, 1994).
------------------------------------------------------ ---------------------------------------------
<FN>
1 If additional Contracts are or were issued (on or after January 14, 1991)
pursuant to a plan which was funded by Contracts described in this prospectus
prior to January 14, 1991, such additional Qualified Contracts shall have a
Contract Maintenance Charge of $30.00.
2 This charge may be lowered to reflect savings in administration of the
Contracts.
3 Variances are based on internal underwriting guidelines which can result in
reductions of charges in incremental amounts of $5.00. Underwriting
considerations include the size of the group, the average participant account
balance transferred to the Company, if any, and administrative savings.
4 The charge is determined based on Company underwriting guidelines.
</TABLE>
All Contract Maintenance Charge reductions shall be based on objective
underwriting guidelines which shall be applied in a non-discriminatory manner.
The Contract Maintenance Charge will be allocated between the Fixed
Account and Variable Account in the same percentages as the Purchase Payment
investment allocations are to the Fixed Account and Variable Account. The
Company also assesses an Administration Charge equal on an annual basis to 0.05%
of the daily net asset value of the Variable Account. The deduction of the
Administration Charge is made from each Sub-Account in the same proportion that
the Contract Value in each Sub-Account bears to the total Contract Value in the
Variable Account. These charges are designed only to reimburse the Company for
administrative expenses and the Company will monitor these charges to ensure
that they do not exceed annual administration expenses. In any Contract Year
when a Contract is surrendered for its full value on any date other than the
Contract Anniversary, the Contract Maintenance Charge will be deducted at the
time of such surrender. The amount of the Contract Maintenance Charge may not be
increased by the Company. In no event will reduction or elimination of the
Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
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<PAGE> 25
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The method
used to recoup premium tax expense will be determined by the Company at its sole
discretion and in compliance with applicable state law. The Company currently
deducts such charges from a Contract Owner's Contract Value either: (1) at the
time the Contract is surrendered, (2) at Annuitization, or (3) at such earlier
date as the Company may become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses:
(1) administrative expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk, Expense Risk,
Contract Maintenance and Administration Charges described in this prospectus
will not change regardless of actual expenses. If these charges are insufficient
to cover these expenses, the loss will be borne by the Company.
For 1995, the Variable Account incurred total expenses equal to 1.47% of
its average net assets, relating to the administrative, sales, mortality and
expense risk charges described above for all Contracts outstanding during that
year. Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each underlying Mutual Fund prospectus.
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
application, the Contract Owner designates the underlying Mutual Funds to which
he or she desires to have Purchase Payments allocated. The Contract Owner may
change the election as to allocation of Purchase Payments or may elect to
exchange amounts among the Sub-Account options pursuant to such terms and
conditions applicable to such transactions as may be imposed by each of the
underlying Mutual Funds, in addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the date
of application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of Purchase
Payments. In order to revoke the Contract, it must be mailed or delivered to the
Home Office of the Company at the mailing address shown on page 1 of this
prospectus. Mailing or delivery must occur on or before 10 days after receipt of
the Contract for revocation to be effective. In order to revoke the Contract, if
it has not been received, written notice must be mailed or delivered to the Home
Office of the Company at the mailing address shown on page 1 of this prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Owner may request a transfer of up to 100% of the Contract Value from
the Variable Account to the Fixed Account, without penalty or adjustment. All
amounts transferred to the Fixed Account must remain on deposit in the Fixed
Account until the expiration of the current Interest Rate Guarantee Period. In
addition, transfers from the Fixed Account may not be made prior to the end of
the then current Interest Rate Guarantee Period. The Interest Rate Guarantee
Period expires on the final day of a calendar quarter during which the one year
anniversary of the allocation to the Fixed Account occurs. Transfers must also
be made prior to the Annuitization Date. The Owner's value in each Sub-Account
will be determined as of the date the transfer request is received in the Home
Office in good order. The Company reserves the right to restrict transfers from
the Variable Account to the Fixed Account to 25% of the Contract Value for any
12 month period.
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<PAGE> 26
The Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The amount that may be transferred from the Fixed Account to the Variable
Account will be determined by the Company, at its sole discretion, but will not
be less than 10% of the total value of the portion of the Fixed Account that is
maturing. The amount that may be transferred will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. Transfers
from the Fixed Account must be made within 30 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 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 Owners having to elect this privilege. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include any or all of
the following, or such other procedures as the Company may, from time to time,
deem reasonable: requesting identifying information, such as name, contract
number, Social Security Number, and/or personal identification number; tape
recording all telephone transactions; or providing written confirmation thereof
to both the Contract Owner and any agent of record, at the last address of
record. The Company will not be liable for following instructions communicated
by telephone which it reasonably believes to be genuine. Any losses incurred
pursuant to actions taken by the Company in reliance on telephone instructions
reasonably believed to be genuine shall be borne by the Contract Owner. The
Company may withdraw the telephone exchange privilege upon 30 days' written
notice to the Contract Owners.
Contracts described in this prospectus may in some cases be sold to
individuals who independently utilize the services of a firm or individual
engaged in market timing. Generally, such firms or individuals obtain
authorization from multiple Contract Owners to make transfers and exchanges
among the Sub-Accounts (the underlying Mutual Funds) on the basis of perceived
market trends. Because of the unusually large transfers of funds associated with
some of these transactions, the ability of the Company or underlying Mutual
Funds to process such transactions may be compromised, and the execution of such
transactions may possibly disadvantage or work to the detriment of other
Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts
may be subject to modification if such rights are exercised by a market timing
firm or any other third party authorized to initiate transfer or exchange
transactions on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL
CONTRACT OWNERS TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED
DIRECTLY BY THE CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF
RECORD AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF
ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the
Company may, among other things, not accept (1) the transfer or exchange
instructions of any agent acting under a power of attorney on behalf or more
than one Contract Owner, or (2) the transfer or exchange instructions of
individual Contract Owners who have executed preauthorized transfer or exchange
forms which are submitted by market timing firms or other third parties on
behalf of more than one Contract Owner at the same time. The Company will not
impose any such restrictions or otherwise modify exchange rights unless such
action is reasonably intended to prevent the use of such rights in a manner that
will disadvantage or potentially impair the contract rights of other Contract
Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all rights under
the Contract at any time during the lifetime of the Designated Annuitant. Such
assignment will take effect upon receipt by the Company of a written notice
thereof executed by the Contract Owner. The Company assumes no responsibility
for the validity or sufficiency of any assignment. The Company shall not be
liable as to any payment or other settlement made by the Company before receipt
of the assignment. Where necessary for the proper administration of the terms of
the Contract, an assignment will not be recorded until the Company has received
sufficient direction from the Contract Owner and assignee as to the proper
allocation of Contract rights under the assignment. Individual Retirement
Annuities, Tax Sheltered Annuities, and Qualified Contracts may not be assigned,
pledged or otherwise transferred except under such conditions as may be allowed
by applicable law.
If this Contract is a Non-Qualified Contract, any portion of Contract
Value attributable to Purchase Payments made after August 13, 1982, which is
pledged or assigned after August 13, 1982, shall be treated as a Distribution
and shall be included in gross income to the extent that the cash value exceeds
the investment in the Contract for the taxable year in which assigned or
pledged. In addition, any Contract Values assigned may, under certain
conditions, be subject to a tax penalty equal to 10% of the amount which is
included in gross
26
<PAGE> 27
income. Assignments of the entire Contract Value may cause the portion of the
Contract Value which exceeds the total investment in the Contract to be included
in gross income each year that the assignment is in effect.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity Contract may receive a loan from the Contract Value subject to
the terms of the Contract, the Plan, and the Code, which impose restrictions on
loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period. Additional loans are subject to the
Contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated in this provision.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other named
collateral where the loan from a Contract exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal to
the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in each
option until the required balance is reached or all such variable units are
exhausted. The remaining required collateral will next be transferred from the
Fixed Account. No withdrawal charges are deducted at the time of the loan, or on
the transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the collateral
fixed account will never be less than 3.0%. Specific loan terms are disclosed at
the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently
than quarterly, within five years. Loans used to purchase the principal
residence of the Contract Owner must be repaid within 15 years. During the loan
term, the outstanding balance of the loan will continue to earn interest at an
annual rate as specified in the loan agreement. Loan repayments will consist of
principal and interest in amounts set forth in the loan agreement. Loan
repayments will be allocated between the Fixed and Variable Accounts in the same
proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue.
A grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, then
that payment, which may be a single periodic payment or payment of the entire
loan, will be treated as a deemed Distribution, as permitted by law, may be
taxable to the borrower, and may be subject to the early withdrawal tax penalty.
Interest which subsequently accrues on defaulted amounts may also be treated as
additional deemed Distributions each year. Any defaulted amounts, plus accrued
interest, will be deducted from the Contract when the participant becomes
eligible for a Distribution of at least that amount, and this amount may again
be treated as a Distribution where required by law. Additional loans may not be
available while a previous loan remains in default.
27
<PAGE> 28
Loans may also be subject to additional limitations or restrictions under
the terms of the employer's plan. Loans permitted under this Contract may still
be taxable in whole or part if the participant has additional loans from other
plans or contracts. The Company will calculate the maximum nontaxable loan based
on the information provided by the participant or the employer.
Loan repayments must be identified as such or else they will be treated
as Purchase Payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment of loans. The Company also reserves the right to
assess a loan processing fee. Individual Retirement Annuities, SEP-IRA accounts
and Non-Qualified Contracts are not eligible for loans.
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 the Owner dies prior to
the Annuitization Date, Contract ownership will be determined in accordance with
the "Death of Contract Owner" provision. If the Designated Annuitant does not
survive the Contract Owner or if the Designated Annuitant and the Owner are the
same person, Contract ownership will be determined in accordance with the "Death
Of Designated Annuitant Prior To The Annuitization Date" provision. After the
Annuitization Date ownership will be based on the Annuity Payment Option
selected. Ownership rights under this Contract may be restricted under the
provisions of the retirement or deferred compensation plan under which this
Contract may be issued.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner at any time, but such change may be subject to state and federal
gift taxes and may be treated as an assignment of the Contract for income tax
purposes. Such an assignment would result in a deemed Distribution of the value
of the Contract. Any new choice of Contract Owner will automatically revoke any
prior choice of Contract Owner. Any request for change must be: (1) made in
writing; and (2) received by the Company at its Home Office. A request for
change of Contract Owner must be a "proper written application" and may include
a signature guarantee as specified in the "Surrender" section. The change will
become effective as of the date the written request is signed. A new choice of
Contract Owner will not apply to any payment made or action taken by the Company
prior to the time it was received.
A change in the Designated Annuitant will have the following conditions:
(1) request for such change must be made by the Contract Owner; (2) request must
be made in writing on a form acceptable to the Company; (3) request must be
signed by the Contract Owner; and (4) such change is subject to underwriting and
approval by the Company.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person (or persons) who may receive certain
benefits under the Contract if the Contract Owner dies before the Annuitization
Date. If more than one Contingent Owner survives the Contract Owner, each will
share equally unless otherwise specified in the Contingent Owner designation. If
a Contingent Owner is not named or predeceases the Contract Owner, all rights
and interest of the Contingent Owner will vest in the Contract Owner's estate.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner from time to time prior to the Annuitization Date by
written notice to the Company. The change, upon receipt and recording by the
Company at its Home Office, will take effect as of the time the written notice
was signed, whether or not the Contract Owner is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change. Unless the Contingent Owner is also
the named Beneficiary (or Contingent Beneficiary, if applicable), the Contingent
Owner shall have no rights in the Contract if the Contract Owner/Annuitant dies.
If a Contract Owner/Annuitant dies, disposition of the Contract shall be
determined based on the "Death of Designated Annuitant Prior to the
Annuitization Date" provisions.
The Beneficiary is the person or persons who may receive certain benefits
under the Contract in the event the Designated Annuitant dies prior to the
Annuitization Date. If more than one Beneficiary survives the Designated
Annuitant, each will share equally unless otherwise specified in the Beneficiary
designation. If no Beneficiary survives the Designated Annuitant, all rights and
interest of the Beneficiary shall vest in the Contingent Beneficiary, and if
more than one Contingent Beneficiary survives, each will share equally unless
otherwise specified in the Contingent Beneficiary designation. If a Contingent
Beneficiary is not named or predeceases the Designated Annuitant, all rights and
interest of the Contingent Beneficiary will vest with the Contract Owner or the
Contract Owner's estate. Subject to the terms of any existing assignment, the
Contract Owner may change the Beneficiary or Contingent Beneficiary from time to
time during the lifetime of the
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<PAGE> 29
Designated Annuitant, by written notice to the Company. The change, upon receipt
by the Company at its Home Office, will take effect as of the time the written
notice was signed, whether or not the Designated Annuitant is living at the time
of recording, but without further liability as to any payment or settlement made
by the Company before receipt of such change.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options described in this
prospectus should no longer be available for investment by the Variable Account
or if, in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate in view of the
purposes of the Contract, the Company may eliminate Sub-Accounts, combine two or
more Sub-Accounts, or substitute shares of another underlying Mutual Fund for
underlying Mutual Fund shares already purchased or to be purchased in the future
with Purchase Payments under the Contract. No substitution of securities in the
Variable Account may take place without prior approval of the Securities and
Exchange Commission, 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 43218-2356, or calling
1-800-243-6295, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected and the amount of the first such payment
shall be determined in accordance with the Annuity Table in the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an Annuity
Unit for a Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (see "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$500, the Company shall have the right to pay such amount in one lump sum in
lieu of the payments otherwise provided for. In addition, if the payments
provided for would be or become less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20. In no event will the Company make payments under an annuity
option less frequently than annually.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
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<PAGE> 30
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing, and the Company approves the
request, the Annuity Commencement Date may be deferred. No further changes in
the Designated Annuitant will be permitted under the Contract. The amount of the
Death Benefit will be limited to the Contract Value if the Annuity Commencement
Date is postponed beyond the first day of the calendar month after the
Designated Annuitant's 75th birthday or such other Annuity Commencement Date
provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE THE
THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second person
and continuing thereafter during the lifetime of the survivor. AS IS THE
CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period to
the Beneficiary or the Beneficiary may, at any time, elect to have
the present value of the guaranteed number of annuity payments
remaining paid in a lump sum as specified in section (2) below.
(2) If a Beneficiary is the payee, the present value, computed as of
the date on which notice of death is received by the Company at
its Home Office, of the guaranteed number of annuity payments
remaining after receipt of such notice and to which the deceased
would have been entitled had he or she not died, computed at the
Assumed Investment Rate effective in determining the Annuity
Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states.
The Owner may request an alternative non-guaranteed option by giving notice in
writing prior to Annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity
Payment Option, the Contract Value will continue to accumulate. Qualified Plan
Contracts, Individual Retirement Annuities or Tax Sheltered Annuities are
subject to the minimum Distribution requirements set forth in the Plan,
Contract, or Code.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts issued on or after January 19, 1985, in
the event the Contract Owner dies, the following rules will apply:
(1) If the Contract Owner dies prior to the Annuitization Date, the entire
interest in the Contract, less any applicable deductions (which may
include a Contingent Deferred Sales Charge), must be distributed within 5
years unless the recipient of the Distribution is the Contract Owner's
spouse. Such Distribution will be paid to the Designated Annuitant unless
the Owner has named a Contingent Owner or his or her estate to receive
the Distribution. In the alternative, the Designated Annuitant or
Contingent Owner (where one is named) may elect to receive Distribution
in the form of a life annuity or an annuity for a period certain not
exceeding the Designated Annuitant's (Contingent Owner's) life
expectancy and such annuity must begin within one year following the
date of the Contract Owner's death. In the event the Designated
Annuitant or
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<PAGE> 31
Contingent Owner is the Contract Owner's spouse, the Contract may be
continued by such Designated Annuitant or Contingent Owner, treating the
spouse as the Contract Owner. In the event the Designated Annuitant does
not survive the Contract Owner, or if the Designated Annuitant and the
Contract Owner are the same person, a Distribution will be made in
accordance with the "Death of Designated Annuitant Prior To The
Annuitization Date" provision below; provided, however, that all
Distributions made as a result of the death of the Contract Owner shall be
made within the time limits set forth in this paragraph. If the Contract
Owner and the Designated Annuitant are not the same, no Death Benefit is
payable upon the death of the Contract Owner, but Distribution must be
made as discussed above.
(2) In the event the Contract Owner/Annuitant dies on or after the
Annuitization Date, Distribution, if any, must be made to the Beneficiary
at least as rapidly as under the method of Distribution being used as of
the date of the Contract Owner/Annuitant's death.
B. If the Contract Owner is not a natural person, the death of the Designated
Annuitant (or a change of the Designated Annuitant) will be treated like a death
of the Contract Owner and will result in a Distribution pursuant to Section (1),
regardless of whether a Contingent Designated Annuitant has also been named. The
Distribution will take the form of either:
(a) the Death Benefit described below (if the Designated Annuitant has
died and there is no Contingent Designated Annuitant), or, in all
other cases,
(b) the benefit described in Section (1), of this provision, except that
in the event of a change of Designated Annuitant, the benefit will be
paid to the Contract Owner if the Designated Annuitant is living, or
as a Death Benefit to the Beneficiary upon the death of the Designated
Annuitant (and the Contingent Designated Annuitant, if any) prior to
the expiration of the period described in Section (1)of this
provision.
DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
A Death Benefit is payable to the Beneficiary unless the Owner has named a
Contingent Designated Annuitant. In such case, the Death Benefit is payable to
the Beneficiary upon the death of the last survivor of the Designated Annuitant
and Contingent Designated Annuitant. The value of the Death Benefit will be
determined as of the Valuation Date coincident with or next following the date
the Company receives both (1) due proof of death and (2) an election for (a) a
single sum payment or (b) Annuity Payment Option.
Contracts issued in connection with Qualified Plans, Individual Retirement
Annuities, or Tax Sheltered Annuities will be subject to specific rules, set
forth in the Plan, Contract, or Code concerning distributions upon the death of
the Owner or Designated Annuitant (see the "Required Distribution For Qualified
Plans or Tax Sheltered Annuities" provision).
If a single sum settlement is requested, payment will be made in accordance
with any applicable laws and regulations governing the payment of Death
Benefits. If an Annuity Payment Option is desired, election may be made by the
Beneficiary during the 90-day period commencing with the date written notice is
received by the Company. If no election has been made by the end of such 90-day
period, the Death Benefit will be paid to the Beneficiary in a single sum. The
amount of the Death Benefit will be the greater of (i) the sum of all Purchase
Payments, less any amounts surrendered, or (ii) the Contract Value.
If the Contract Owner has (1) requested an Annuity Commencement Date later
than the first day of the calendar month after the Designated Annuitant's 75th
birthday, (2) the Company has approved the request, and (3) the Designated
Annuitant dies after his or her 75th birthday, the dollar amount of the Death
Benefit will be equal to the Contract Value.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Code and regulations thereunder, as applicable, and will be
paid, notwithstanding anything else contained herein, to the Owner/Annuitant
under the Annuity Payments Option selected, over a period not exceeding:
A. the life of the Owner/Annuitant or the lives of the Owner/Annuitant
and the Owner/Annuitant's Designated Beneficiary; or
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B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary provided that, for
Tax Sheltered Annuity Contracts, no Distributions will be required
from this Contract if Distributions otherwise required from this
Contract are being withdrawn from another Tax Sheltered Annuity
Contract of the Annuitant.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70 1/2 (the Required Beginning Date).
In the case of a governmental plan (as defined in Code Section 414(d), or church
plan (as defined in Code Section 401(a)(9)(C)), the Required Beginning Date will
be the later of the dates determined under the preceding sentence or April 1 of
the calendar year following the calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the year in which the fifth anniversary of his or
her death occurs unless:
(a) In the case of a Tax Sheltered Annuity, the Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his
or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70 1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
Beneficiary elects to receive a Distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner/Annuitant dies after Distribution has commenced,
Distribution must continue at least as rapidly as under the schedule being used
prior to his or her death, except that a surviving spouse may treat a Tax
Sheltered Annuity as his or her own to the extent permitted by law.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70 1/2, provided that, for Individual Retirement Annuity Contracts,
no Distributions will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another Individual
Retirement Annuity Contract or Individual Retirement Account of the Annuitant.
Distribution may be accepted in a lump sum or in nearly equal payments over: (a)
the Owner's life or the lives of the Owner and his or her spouse or designated
Beneficiary, or (b) a period not extending beyond the life expectancy of the
Owner or the joint life expectancy of the Owner and the Owner's designated
Beneficiary.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and such
spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70 1/2; or
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(b) The Owner names a Beneficiary other than his or her surviving spouse and
such Beneficiary elects to receive a Distribution of the account in
nearly equal payments over his or her life (or a period not exceeding his
or her life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse may treat the Individual Retirement
Annuity as his or her own, in the same manner as is described in section (a)(i)
of this provision.
If the amounts distributed do not satisfy the Distribution rules
mentioned above, a penalty tax of 50% is levied on 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 Owner of an Individual Retirement Annuity must annually report
the amount of non-deductible contributions, the amount of any Distribution, the
amount by which non-deductible contributions for all years exceed non-taxable
Distributions for all years, and the total balance of all Individual Retirement
Accounts and Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum Distribution from a Qualified Plan. If the
Owner dies prior to the time Distribution of his or her interest in the annuity
is completed, the balance will also be included in his or her gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the Code,
and the amount of the tax on the generation-skipping transfer resulting from
such direct skip. If applicable, such payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday or any other day
when the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the last business day before that day. An Asset Rebalancing request
must be in writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Code may have superseding plan restrictions with regard to the
frequency of fund exchanges and underlying Mutual Fund options. The Contract
Owner may want to contact a financial adviser in order to discuss the use of
Asset Rebalancing in his or her Contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice; such discontinuation will not affect Asset
Rebalancing programs which have already commenced. The Company also reserves the
right to assess a processing fee for this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer from the Money Market Sub-Account, Limited Maturity Bond
Portfolio Sub-Account or the Fixed Account to any other Sub-Account within the
Variable Account on a monthly basis. This service is intended to allow the
Contract Owner to utilize Dollar Cost Averaging, a long-term investment program
which provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect against
loss in a declining market. To qualify for Dollar Cost Averaging, there must be
a minimum total Contract Value of $15,000. Transfers for purposes of Dollar Cost
Averaging can only be made from the Money Market Sub-Account, Limited Maturity
Bond Portfolio Sub-Account or the Fixed Account. The minimum monthly Dollar Cost
Averaging transfer is $100. In addition, Dollar Cost Averaging monthly transfers
from the Fixed Account must be equal to or less than 1/30th of the Fixed Account
value when the Dollar Cost Averaging program is requested. Transfers out of the
Fixed Account, other than for Dollar Cost Averaging, may be subject to certain
additional restrictions (see "Transfers"). A written election of this service,
on a form provided by the Company, must be
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completed by the Contract Owner in order to begin transfers. Once elected,
transfers from the Money Market Sub-Account, Limited Maturity Bond Portfolio
Sub-Account or the Fixed Account will be processed monthly until either the
value in the Money Market Sub-Account, Limited Maturity Bond Portfolio
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; such discontinuation will not affect
Dollar Cost Averaging programs which have already commenced. The Company also
reserves the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all Sub-Accounts in
which the Contract Owner has an interest, and the Fixed Account. A Contingent
Deferred Sales Charge may also apply to Systematic Withdrawals in accordance
with the considerations set forth in the "Contingent Deferred Sales Charge"
section. Each Systematic Withdrawal is subject to federal income taxes on the
taxable portion. In addition, a 10% federal penalty tax may be assessed on
Systematic Withdrawals if the Contract Owner is under age 59 1/2. If directed by
the Contract Owner, the Company will withhold federal income taxes from each
Systematic Withdrawal. The Contract Owner may discontinue Systematic Withdrawals
at any time by notifying the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice; such discontinuation will not affect
any Systematic Withdrawal programs already commenced. The Company also reserves
the right to assess a processing fee for this service.
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 accurately reported on quarterly statements or
confirmation statements unless the Contract Owner notifies the Company otherwise
within 30 days after receipt of the statement. The Company will also send to
Contract Owners each year an annual report and a semi-annual report containing
financial statements for the Variable Account, as of December 31 and June 30,
respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. Purchase Payments, if any, after the first Contract
Year must be at least $10 each. The Company, however, reserves the right to
lower this $10 Purchase Payment minimum for certain employer sponsored programs.
The Contract Owner may increase or decrease Purchase Payments or change the
frequency of payment. The Contract Owner is not obligated to continue Purchase
Payments in the amount or at the frequency elected. There are no penalties for
failure to continue Purchase Payments.
The cumulative total of all Purchase Payments under Contracts issued on
the life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
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The initial Purchase Payment allocated to designated Sub-Accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase if the application and all information necessary for
processing the purchase order are complete upon receipt by the Company. The
Company may, however, retain the Purchase Payment for up to 5 business days
while attempting to complete an incomplete application. If the application
cannot be made complete within 5 days, the prospective purchaser will be
informed of the reasons for the delay and the Purchase Payment will be returned
immediately unless the prospective purchaser specifically consents to the
Company retaining the Purchase Payment until the application is made complete.
Thereafter, subsequent Purchase Payments will be priced on the basis of the
Accumulation Value next computed for the appropriate Sub-Account after the
additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF 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 available for purchase. The value for any subsequent Valuation
Period is determined by multiplying the Accumulation Unit value for each
Sub-Account for the immediately preceding Valuation Period by the Net Investment
Factor for the Sub-Account during the subsequent Valuation Period. The value of
an Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain Distributions
made by the underlying Mutual Fund held in the Sub-Account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period (see "Charge For
Tax Provisions").
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account. Such
factor is equal to an annual rate of 1.30% of the daily net asset value
of the Variable Account.
For underlying Mutual Fund options that credit dividends on a daily basis
and pay such dividends once a month (the 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 Mortality Risk Charge, Expense Risk Charge and Administration
Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each Sub-Account
are determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit Value for the Sub-Account for the Valuation Period during
which the Purchase Payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate
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amount from the Fixed Account will be deducted in the same proportion that the
Contract Owner's interest in the Variable Account and the Fixed Account bears to
the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper written application" means that the surrender must be
requested in writing by the Contract Owner, satisfy all good order requirements,
and the Company may require that the signature(s) be guaranteed by a member firm
of the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a commercial bank or a savings and loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases (for example, requests
by a corporation, partnership, agent, fiduciary, or surviving spouse), the
Company will require additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all Sub-Accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each Sub-Account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the Sub-Accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
Purchase Payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
Certain redemption restrictions also apply to Contracts issued under the
Texas Optional Retirement Program or the Louisiana Optional Retirement Plan.
With respect to Contracts issued under the Texas Optional Retirement Program,
the Texas Attorney General has ruled that withdrawal benefits are available only
in the event of a participant's death, retirement, termination of employment due
to total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a Distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable Contingent Deferred Sales Charge. The
Company issues this Contract to participants in the Texas Optional Retirement
Program in reliance upon, and in compliance with, Rule 6c-7 of the Investment
Company Act of 1940 and to participants in the Louisiana Optional Retirement
Plan in reliance upon, and in compliance with, an exemptive order the Company
obtained from the Securities and Exchange Commission on August 22, 1990.
SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code, may be executed only:
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1. when the Contract Owner attains age 59 1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
B. The surrender limitations described in Section A. above also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts, may be withdrawn in the case of
hardship).
C. Any Distribution other than the above, including exercise of a contractual
ten-day free look provision (when available) may result in the immediate
application of taxes and penalties and/or retroactive disqualification of a
Qualified Contract or Tax Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event of
a ten-day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling 90-24. Such
restrictions are subject to legislative change and/or reinterpretation from time
to time.
The Contract surrender provisions may also be modified pursuant to the plan
terms and Code tax provisions when the Contract is issued to fund a Qualified
Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A
PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for: (1) Qualified Contracts; (2) Individual
Retirement Annuities and Individual Retirement Accounts; (3) Tax Sheltered
Annuities; or (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to Participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned by
Individual Retirement Accounts are also generally taxed when received. The
portion of each such payment which is excludable is based on the ratio between
the amount by which nondeductible Purchase Payments to all such Contracts
exceeds prior non-taxable Distributions from such Contracts, and the total
account balances in such Contracts, at the time of the Distribution. The Owner
of such Individual Retirement Annuities or the Annuitant under Contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service the amount of nondeductible Purchase Payments, the amount of any
Distribution, the amount by which nondeductible Purchase Payments for all years
exceed non-taxable Distributions for all years, and the total balance in all
Individual Retirement Annuities and Accounts. Owners should consult a financial
consultant, legal counsel or tax advisor to discuss in detail the taxation and
use of the Contracts.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Designated Annuitant dies prior to excluding
from income the entire investment in the Contract, the Designated Annuitant's
final tax return may reflect a deduction for the balance of the investment in
the Contract.
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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 Designated Annuitant are not the same individual. In
determining the taxable amount of a Distribution, all annuity contracts issued
after October 21, 1988, by the same company to the same Contract Owner during
any 12 month period, will be treated as one annuity contract. Additional
limitations on the use of multiple contracts may be imposed by Treasury
Regulations. Distributions prior to the Annuitization Date with respect to that
portion of the Contract invested prior to August 14, 1982, are treated first as
a recovery of the investment in the Contract as of that date. A Distribution in
excess of the amount of the investment in the Contract as of August 14, 1982,
will be treated as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for Qualified Contracts, Individual Retirement Annuities and Tax Sheltered
Annuities; immediate annuities; and certain Contracts owned for the benefit of
an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase. If
this Contract is issued as a result of an exchange described in Section 1035 of
the Code, it will generally be considered to have been purchased on the purchase
date of the contract give up in the exchange.
Code Section 72 also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59 1/2, the death or disability of the Contract Owner.
The penalty does not apply if the Distribution is one of a series of
substantially equal periodic payments made over the life or life expectancy (or
joint lives or life expectancies) of the Designated Annuitant (and the
Designated Annuitant's Beneficiary), or is made from an immediate annuity, or is
allocable to an investment in the Contract before August 14, 1982. A Contract
Owner wishing to begin taking Distributions to which the 10% tax penalty does
not apply should forward a written request to the Company. Upon receipt of a
written request from the Contract Owner, the Company will inform the Contract
Owner of the procedures pursuant to Company Policy and subject to limitations of
the Contract including but not limited to first year withdrawals. If the
Designated Annuitant or Owner selects an annuity for life or life expectancy, or
begins a pre-defined series of withdrawals based on life expectancy, and changes
the method of payment before the expiration of 5 years and the attainment of age
59 1/2, the early withdrawal penalty will apply. The penalty will be equal to
that which would have been imposed had no exception applied from the outset, and
the Designated Annuitant will also pay interest on the amount of the penalty
from the date it would have originally applied until it is actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for Distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the Distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year from the death of
the Contract Owner. If the Contract Owner's Beneficiary is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. In the event the Contract
Owner dies on or after the Annuitization Date and before the entire interest has
been distributed, the remaining portion must be distributed at least as rapidly
as under the method of Distribution being used as of the date of the Contract
Owner's death. If the Contract Owner is not an individual, the death of the
Designated Annuitant (or a change in the Designated Annuitant) will result in a
Distribution pursuant to these rules, regardless of whether a Contingent
Designated Annuitant has been named (see "Required Distribution For Qualified
Plans or Tax Sheltered Annuities").
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such Distribution, but may be subject to penalties in the event insufficient
federal income tax is paid, through withholding estimated payments.
Generally, the taxable portion of any Distribution from a Contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
38
<PAGE> 39
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the Owner or the Company pays an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the Owner if the income, for the period the contract was
not diversified, had been received by the Owner. If the failure to diversify is
not corrected in this manner, the Owner of an annuity contract will be deemed
the Owner of the underlying securities and will be taxed on the earnings of his
or her account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in the area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of underlying
Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual Funds such
that the Contract would no longer qualify as an annuity under Section 72 of the
Code, the Company will take whatever steps are available to remain in
compliance.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of Purchase Payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans, Individual Retirement Accounts, or Individual
Retirement Annuities. Most Distributions from Tax Sheltered Annuities may be
rolled into another Tax Sheltered Annuity, an Individual Retirement Account, or
an Individual Retirement Annuity. Distributions which may not be rolled over are
those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the employee,
b) the joint lives (or joint life expectancies) of the employee and
the employee's designated beneficiary, or c) for a specified period of
ten years or more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred directly
to an appropriate plan as described in this provision.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater of
the cash value of the Contract or the sum of all Purchase Payments (less
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of ERISA. It is the responsibility of the plan and its
fiduciaries to determine and satisfy section 404(c) requirements.
ADVERTISING
A "yield" and "effective yield" may be advertised for the 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
39
<PAGE> 40
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-Accounts of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual fund options with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2 1/2 Year CD Rates;
and Dow Jones Industrial
Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar,
Donoghue's, magazines such as MONEY, FORBES, KIPLINGER'S PERSONAL FINANCE
MAGAZINE, FINANCIAL WORLD, CONSUMER REPORTS, BUSINESS WEEK, TIME, NEWSWEEK,
NATIONAL UNDERWRITER, U.S. NEWS AND WORLD REPORT; rating services such as LIMRA,
VALUE, BEST'S AGENT GUIDE, WESTERN ANNUITY GUIDE, COMPARATIVE ANNUITY REPORTS;
and other publications such as the WALL STREET JOURNAL, BARRON'S, INVESTOR'S
DAILY, and Standard & Poor's OUTLOOK. In addition, Variable Annuity Research &
Data Service (THE VARDS REPORT) is an independent rating service that ranks over
500 variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the underlying Mutual Fund
options against all underlying mutual funds over specified periods and against
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the Variable Account. The Company may
advertise for the Sub-Accounts standardized "average annual total return,"
calculated in a manner prescribed by the Securities and Exchange Commission, and
nonstandardized "total return." "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund option held in the Sub-Account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation reflects the deduction of all
applicable charges made to the Contracts except for premium taxes, which may be
imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner and
for the same time periods as the average annual total return except total return
will assume an initial investment of $10,000 and will not reflect the deduction
of any applicable Contingent Deferred Sales Charge, which, if reflected, would
decrease the level of performance shown. The Contingent Deferred Sales Charge is
not reflected because the Contracts are designed for long term investment. An
assumed initial investment of $10,000 will be used because that figure more
closely approximates the size of a typical Contract than does the $1,000 figure
used in calculating the standardized average annual total return quotations. The
amount of the hypothetical initial investment assumed affects performance
because the Contract Maintenance Charge is a fixed per Contract charge.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
40
<PAGE> 41
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.
Below are quotations of standardized average annual total return and
non-standardized total return calculated as described above, for each of the
Sub-Accounts available within the Variable Account for which there is
significant investment history. These figures are based upon historical earnings
and are not necessarily representative of future results.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/95 12/31/95 To 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS Growth Fund 31.25% 16.37% 15.11%* 2-08-84
- ------------------------------------------------------------------------------------------------------
AVIS High Yield Bond 19.89% 11.83% 10.75%* 2-08-84
Fund
- ------------------------------------------------------------------------------------------------------
AVIS US Govt./AAA-rated 13.59% 7.22% 6.78%* 11-19-85
- ------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 32.52% N/A 16.74% 10-06-93
Growth Fund
- ------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 34.71% 14.24% 10.57% 9-29-89
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 33.04% 19.54% 11.61% 10-09-86
Equity Income Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 33.31% 19.00% 13.11% 10-09-86
Growth Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 18.74% 17.21% 9.81%* 9-09-85
High Income Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 7.96% 6.46% 5.66% 1-28-87
Overseas Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II- 15.14% 11.07% 9.54% 9-06-89
Asset Manager.
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund N/A N/A 37.93% 7-01-95
Portfolio
- ------------------------------------------------------------------------------------------------------
NSAT- 27.38% N/A 9.52% 4-15-92
Capital Appreciation Fund
- ------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 16.91% 7.96% 7.94%* 11-08-82
- ------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 3.99% 2.66% 4.26%* 11-10-81
- ------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund N/A N/A 100.73%* 10-23-95
- ------------------------------------------------------------------------------------------------------
NSAT-Total Return 27.12% 15.01% 10.79%* 11-08-82
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management Trust- 29.72% 11.98% 10.35%* 9-10-84
Growth Portfolio
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management Trust- 9.20% 5.05% 5.99%* 9-10-84
Limited Maturity Bond
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management Trust- 34.40% N/A 15.70% 3-22-94
Partners Portfolio
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 15.18% 8.51% 7.71%* 4-30-85
Funds-
Bond Fund
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.61% 7.85% 7.62% 11-12-90
Funds-
Global Securities Fund
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 19.49% 10.35% 9.43% 2-09-87
Funds-
Multiple Strategies Fund
- ------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 23.89% N/A 17.34% 5-08-92
- ------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 33.21% N/A 13.87% 5-08-92
Inc.-
Discovery Fund II, Inc.
- ------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, N/A N/A 12.24% 10-23-95
Inc.-
International Stock II
- ------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/95 12/31/95 To 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TCI Portfolios, Inc.- 19.25% N/A 8.11% 5-01-91
TCI Balanced
- ------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 29.10% 13.16% 11.12% 11-20-87
TCI Growth
- ------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 10.46% N/A 2.19% 5-01-94
TCI International
- ------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 15.48% 5.29% 5.68% 9-01-89
Trust-Worldwide Bond Fund
- ------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 9.25% 8.46% 5.06% 9-01-89
Trust-Gold & Natural Resources
Fund
- ------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life N/A N/A 15.75% 7-01-95
Investment Trust-Real Estate
Securities Fund
- ------------------------------------------------------------------------------------------------------
Warburg Pincus N/A N/A 13.25% 7-01-95
Trust-International Equity
Portfolio
- ------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small N/A N/A 53.71% 7-01-95
Company Growth Portfolio
- ------------------------------------------------------------------------------------------------------
<FN>
* Represents 10 years to 12/31/95.
</TABLE>
42
<PAGE> 43
Standardized Average Annual Total Return
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/95 12/31/95 To 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS-Growth Fund 23.15% 14.10% 13.50%* 2-08-84
- ------------------------------------------------------------------------------------------------------
AVIS-High Yield Bond Fund 11.79% 9.43% 8.87%* 2-08-84
- ------------------------------------------------------------------------------------------------------
AVIS-US Govt./AAA-rated 5.49% 4.51% 4.50%* 11-19-85
- ------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 24.42% N/A 11.26% 10-06-93
Growth Fund
- ------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 26.61% 11.80% 7.61% 9-19-89
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 24.94% 17.36% 9.02% 10-09-86
Equity Income Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 25.21% 16.90% 10.75% 10-09-86
Growth Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 10.64% 15.11% 7.61%* 9-09-85
High Income Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas -0.14% 3.52% 3.04% 1-28-87
Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 7.04% 8.62% 6.79% 9-06-89
Manager Portfolio
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - N/A N/A 28.23% 7-01-95
Contrafund Portfolio
- ------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 19.28% N/A 5.82% 4-15-92
- ------------------------------------------------------------------------------------------------------
NSAT-Government 8.81% 5.26% 5.78%* 11-08-82
Bond Fund
- ------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund -4.11% -0.42% 1.81%* 11-10-81
- ------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund N/A N/A 91.03% 10-23-95
- ------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 19.02% 12.73% 8.79%* 11-08-82
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management Trust- 21.62% 9.52% 8.35%* 9-10-84
Growth Portfolio
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management 1.10% 2.16% 3.72%* 9-10-84
Trust- Limited Maturity Bond
Portfolio
- ------------------------------------------------------------------------------------------------------
N&B Advisers Management 26.30% N/A 9.68% 3-22-94
Trust- Partners Portfolio
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 7.08% 5.85% 5.47% 4-30-85
Funds-Bond Fund
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account -7.36% 5.06% 4.26% 11-12-90
Funds-Global Securities Fund
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 11.39% 7.77% 7.27% 2-09-87
Funds-Multiple Strategies Fund.
- ------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 15.79% N/A 14.12% 5-08-92
- ------------------------------------------------------------------------------------------------------
Strong Variable Insurance 25.11% N/A 10.36% 5-08-92
Funds, Inc.-Discovery Fund II,
Inc.
- ------------------------------------------------------------------------------------------------------
Strong Variable Insurance N/A N/A 2.54% 10-23-95
Funds, Inc.-
International Stock Fund II
- ------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/95 12/31/95 To 12/31/95 Effective
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TCI Portfolios, Inc.-TCI 11.15% N/A 4.98% 5-01-91
Balanced
- ------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 21.00% 10.77% 8.65% 11-20-87
- ------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 2.36% N/A -4.44% 5-01-94
International
- ------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 7.38% 2.37% 2.70% 9-01-89
Trust-Worldwide Bond
- ------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 1.15% 5.55% 1.66% 9-01-89
Trust-Gold & Natural Resources
Fund
- ------------------------------------------------------------------------------------------------------
Van Kampen American Capital N/A N/A 6.05% 7-01-95
Life Investment Trust-Real
Estate Securities Fund
- ------------------------------------------------------------------------------------------------------
Warburg Pincus N/A N/A 3.55% 7-01-95
Trust-International Equity
Portfolio
- ------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small N/A N/A 44.01% 7-01-95
Company Growth Portfolio
- ------------------------------------------------------------------------------------------------------
<FN>
* Represents 10 years to 12/31/95.
</TABLE>
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 Advisory 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
Underlying Mutual Fund Performance Summary..................................................................3
Annuity Payments............................................................................................6
Financial Statements........................................................................................7
</TABLE>
44
<PAGE> 45
APPENDIX A
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which support insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which related to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Nationwide Variable Account II and any other segregated
asset account. Fixed Account Purchase Payments will be allocated to the Fixed
Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum rate
as stated in the contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New Purchase Payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money transferred from the Variable Sub-Accounts to the Fixed Account and
amounts maturing in the Fixed Account at the expiration of an Interest Rate
Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the Purchase Payments allocated to the
Fixed Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred will be determined by the Company
at its sole discretion, but will not be less than 10% of the total value of the
portion of the Fixed Account that is maturing and will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. The Interest
Rate Guarantee Period expires on the final day of a calendar quarter. Transfers
under this provision must be made within 30 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. Any
Group Annuity Contract offered in conjunction with the prospectus, the assets of
which are invested in the general account of the Company, may be subject to
restrictions or surrender of a plan's or a participant's interest in the Annuity
Contract, and may require that such a surrender be completed over a period of 5
years.
45
<PAGE> 46
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES AND ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
46
<PAGE> 47
APPENDIX B
PARTICIPATING UNDERLYING MUTUAL FUNDS
AVAILABLE FOR ALL CONTRACTS
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund is an open-end, non-diversified, management
investment company. It was incorporated under Maryland law on January 24, 1989
and commenced operations on September 29, 1989. The Dreyfus Corporation
("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index manager.
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.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
August 31, 1990. Dreyfus serves as the Fund's manager. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon
Bank Corporation.
- - GROWTH AND INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests in equity securities, debt securities and money market
instruments of domestic and foreign issuers. The proportion of the
Portfolio's assets invested in each type of security will vary from time
to time in accordance with Dreyfus' assessment of economic conditions and
investment opportunities. In purchasing equity securities, Dreyfus will
invest in common stocks, preferred stocks and securities convertible into
common stocks, particularly those which offer opportunities for capital
appreciation and growth of earnings, while paying current dividends. The
Portfolio will generally invest in investment-grade debt obligations,
except that it may invest up to 35% of the value of its net assets in
convertible debt securities rated not lower than Caa by Moody's Investor
Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed
to be of comparable quality by Dreyfus. These securities are considered
to have predominantly speculative characteristics with respect to
capacity to pay interest and repay principal and are considered to be of
poor standing. See "Investment Considerations and Risks-Lower Rated
Securities" and "Risks-Lower Rated Securities" in the Portfolio's
prospectus.
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. Dreyfus
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 Fund's
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.
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- - 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.
- - 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:
o at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
o 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 objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide Advisory Services,
Inc. ("NAS") of One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned
subsidiary of Nationwide Life Insurance Company.
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- - 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.
- - 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. NAS, 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. The sub-advisers were chosen because they
utilize a number of different investment styles when investing in small
company stocks. By utilizing a number of investment styles, NAS 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 (FORMERLY "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. is a diversified, open-end management
company commonly called a mutual fund. The Special Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. is the
investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series and classes of series of common stock.
The International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds")
are offered by the Corporation to insurance company separate accounts for the
purpose of funding variable life insurance policies and variable annuity
contracts. Strong Capital Management, Inc. is the investment advisor to the
Funds.
- - DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt 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 AMERICAN CENTURY(SM) INVESTMENTS.
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. TCI Portfolios, Inc. is managed by American
Century Investment Management, Inc.
- - 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 securities
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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.)
- - TCI VALUE
Investment Objective: The investment objective of the Fund is
long-term capital growth; income is a secondary objective. Under
normal market conditions, the Fund expects to invest at least 80% of
the value of its total assets in equity securities, including common
and preferred stock, convertible preferred stock and convertible debt
obligations. The equity securities in which the Fund will invest will
be primarily securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase.
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.
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- - WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to
the world's major economies, exhibit relatively low gross national
product per capita, as well as the potential for rapid economic growth.
Peregrine Asset Management (Hong Kong) Limited serves as sub-investment
adviser to this Fund.
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 funds which are sold
only to insurance companies to provide funding for variable life insurance
policies and variable annuity contracts. Van Kampen American Capital Asset
Management, Inc. serves as the Fund's investment adviser.
- - 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.
- - POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: The Portfolio seeks long-term growth of capital by
investing primarily in equity securities of issuers in their post-venture
capital stage of development and pursues an aggressive investment
strategy. Under normal market conditions, the Portfolio will invest at
least 65% of its total assets in equity securities of "post-venture
capital companies." A post-venture capital company is one that has
received venture capital financing either (a) during the early stages of
the company's existence or the early stages of the development of a new
product or service or (b) as part of a restructuring or recapitalization
of the company. The Portfolio may invest up to 10% of its assets in
venture capital and other investment funds.
- - 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.
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AVAILABLE FOR ALL CONTRACTS ISSUED ON OR AFTER MAY 1, 1987 AND
BEFORE SEPTEMBER 1, 1989
AMERICAN VARIABLE INSURANCE SERIES
The American Variable Insurance Series was organized as a Massachusetts business
trust in 1983, and is a fully managed, diversified, open-end investment company.
Shares of the series are offered only to separate accounts of various insurance
companies which fund certain variable annuity and life insurance contracts.
- - GROWTH FUND
Investment Objective: To provide growth of capital. Whatever current
income is generated by the Fund is likely to be incidental to the
objective of capital growth. Ordinarily, accomplishment of the Fund's
objective of capital growth will be sought by investing primarily in
common stocks or securities with common stock characteristics.
- - HIGH-YIELD BOND FUND
Investment Objective: Seeks high current income and secondarily seeks
capital appreciation. The Fund invests substantially in intermediate and
long-term corporate obligations, with emphasis on higher yielding, higher
risk, lower rated or unrated securities. These investments are subject to
greater market fluctuations and risk of loss of income and principal than
are investments in lower yielding fixed income securities.
- - U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
Investment Objective: A high level of current income consistent with
prudent investment risk and preservation of capital. It seeks to achieve
its objective by investing primarily in a combination of (i) securities
guaranteed by the U.S. Government (backed by the full faith and credit of
the U.S.), and (ii) corporate debt securities rated AAA by Standard and
Poor's Corporation or Aaa by Moody's Investors Service, Inc. (or that
have not received a rating but are determined to be of comparable quality
by the Investment Adviser).
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