<PAGE> 1
As filed with the Securities and Exchange Commission. '33 Act File No. 33-85164
'40 Act File No. 811-5606
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES /X/
ACT OF 1933
Post Effective Amendment No. 4
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 /X/
NATIONWIDE VA SEPARATE ACCOUNT-A
(Exact Name of Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. McCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in
respect of the Prospectus, Statement of Additional Information and Financial
Statements.
It is proposed that this filing will become effective (check appropriate
space).
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on December 4, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to paragraph (a)(3) thereof, a nonrefundable
fee in the amount of $500 has been paid to the Commission. Registrant filed
its Rule 24f-2 Notice for the fiscal year ended December 31, 1994, on February
22, 1995.
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NATIONWIDE VA SEPARATE ACCOUNT-A
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Synopsis or Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies
(Disclosure regarding use of multiple prospectuses under Registration Statement) . . 11
Item 6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . . . . 16
Item 8. Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 9. Death Benefit and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 10. Purchases and Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Item 14. Table of Contents of the Statement of Additional Information . . . . . . . . . . . . 32
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 17. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 21. Calculation of Performance Information . . . . . . . . . . . . . . . . . . . . . . . 36
Item 22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 58
Item 25. Directors and Officers of the Depositor . . . . . . . . . . . . . . . . . . . . . . 60
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant . . . 62
Item 27. Number of Contract Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Item 28. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Item 29. Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Item 30. Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Item 31. Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Item 32. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008, 1-800-533-5622, TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VA SEPARATE ACCOUNT-A
OF NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
Prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). The Contracts are sold to individuals for use in retirement
plans which may qualify for special federal tax treatment under the Internal
Revenue Code. Annuity payments under the Contracts are deferred until a
selected later date.
Purchase payments allocated to the Nationwide VA Separate Account-A
("Variable Account"), a separate account of Nationwide Life and Annuity
Insurance Company (the "Company") are used to purchase shares at net asset
value in one or more of the following Mutual Fund options:
Federated Insurance Management Series MFS(R) Variable Insurance Trust(SM)
-Corporate Bond Fund* -MFS(R) Emerging Growth Series
-Equity Growth and Income Fund -MFS(R) Total Return Series
Fidelity Variable Insurance Products Fund Nationwide Separate Account Trust
-Equity-Income Portfolio -Government Bond Fund
-Overseas Portfolio -Money Market Fund
-Small Company Fund
This Prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide VA Separate Account-A before investing. You should read it and keep
it for future reference. A Statement of Additional Information dated December
4, 1995 has been filed with the Securities and Exchange Commission. You can
obtain a copy without charge from Nationwide Life and Annuity Insurance Company
by calling the number listed above, or writing P. O. Box 182008, Columbus,
Ohio 43218-2008.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY THE ADVISER, THE U.S. GOVERNMENT, THE BANK, OR ANY OF
THEIR AFFILIATES. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY, AND AN INVESTMENT IN THE VARIABLE ACCOUNT FUND OPTIONS 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 VARIABLE ANNUITY CONTRACTS OFFERED UNDER THIS CONTRACT ARE MADE
AVAILABLE TO THE CUSTOMERS OF VARIOUS FINANCIAL INSTITUTIONS. ALTHOUGH THESE
FINANCIAL INSTITUTIONS MAY COOPERATE WITH THE COMPANY IN THE MARKETING OF THE
CONTRACTS TO THE EXTENT PERMITTED UNDER FEDERAL AND STATE LAW, SUCH COOPERATION
IN NO WAY IMPLIES RESPONSIBILITY FOR THE GUARANTEES UNDER THE CONTRACTS, WHICH
ARE THE SOLE RESPONSIBILITY OF THE COMPANY; NOR DOES SUCH COOPERATION IN ANY
WAY IMPLY THAT THE ANNUITY CONTRACTS ARE OBLIGATIONS OF THE FINANCIAL
INSTITUTION OR ARE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION. IN
THE FUTURE, THE COMPANY MAY ADD TO THE VARIABLE ACCOUNT ONE OR MORE UNDERLYING
MUTUAL FUND OPTIONS WHICH ARE MANAGED BY THE FINANCIAL INSTITUTION THROUGH
WHICH THIS PROSPECTUS WAS OBTAINED. THESE ADDITIONAL UNDERLYING MUTUAL FUND
OPTIONS WILL BE EXCLUSIVELY AVAILABLE TO THE CUSTOMERS OF THAT FINANCIAL
INSTITUTION. SIMILAR ARRANGEMENTS WITH OTHER FINANCIAL INSTITUTIONS MAY BE
PURSUED BY THE COMPANY.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 4, 1995, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 30 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS DECEMBER 4, 1995.
*The Federated Corporate Bond Fund may invest in lower quality debt securities
commonly referred to as junk bonds.
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<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT-An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT-The person on whose life this Contract is issued and who will receive
annuity payments. The Annuitant is named on the Data Page of the Contract,
unless changed. No change of Annuitant may be made without the prior consent of
the Company. This person must be age 85 or younger at the time of contract
issuance.
ANNUITIZATION DATE-The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE-The date on which the annuity payments are scheduled
to commence. The Annuity Commencement Date is originally shown on the Data
Page of the Contract, and is subject to change by the Owner.
ANNUITY PAYMENT OPTION-The method for making annuity payments. Several options
are available under this Contract. The Annuity Payment Option is named in the
application, unless changed.
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 Annuitant. The Beneficiary
can be changed by the Contract Owner as set forth in the Contract.
CODE-The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY-The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Annuitant.
CONTRACT ANNIVERSARY-An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)-The person who possesses all rights under the Contract,
including the right to designate and change the Annuitant, Beneficiary,
Contingent Beneficiary, Annuity Payment Option, and Annuity Commencement Date.
If a Joint Owner is named in the application, references to "Contract Owner" or
"Owner" in this prospectus, unless otherwise indicated, will apply to both the
Owner and Joint Owner.
CONTRACT VALUE-The sum of the Variable Account Contract Value and the Fixed
Account Contract Value.
CONTRACT YEAR-Each year starting with either the Date of Issue or a Contract
Anniversary.
DATE OF ISSUE-The date shown as the Date of Issue on the Contract Data Page of
the Contract.
DEATH BENEFIT-The benefit payable upon the death of the Annuitant. This
benefit does not apply upon the death of the Contract Owner when the Owner and
Annuitant are not the same person. If the Annuitant dies after the
Annuitization Date, any benefit that may be payable shall be as specified in
the Annuity Payment Option elected.
FIXED ACCOUNT-The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ACCOUNT CONTRACT VALUE-The sum of the value credited, including interest
to the Fixed Account attributable to this Contract.
FIXED ANNUITY-An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
INDIVIDUAL RETIREMENT ANNUITY-An annuity which qualifies for treatment under
Section 408 of the Internal Revenue Code.
INTEREST RATE GUARANTEE PERIOD-An Interest Rate Guarantee Period is the
interval of time in which an interest rate credited to the Fixed Account under
the Contract is guaranteed to remain the same. For Purchase Payments into the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter at
least one year from deposit or transfer. At the end of an Interest Rate
Guarantee Period, a new interest rate is declared with an Interest Rate
Guarantee Period starting at the end of the prior period and ending at the end
of the calendar quarter one year later.
JOINT OWNER-The Joint Owner, if any is named, possesses an undivided interest
in the entire Contract, along with the Owner. When a Joint Owner is named, the
exercise of any ownership right under the Contract shall require written
authorization, signed by both the Owner and Joint Owner, of an intent to
exercise such right, unless the Owner and Joint Owner provide in the
application that the exercise of any such ownership right may be made by either
the Owner or Joint Owner independently of one another. Unless otherwise
indicated, references to "Contract Owner" or "Owner" in this prospectus will
apply to both the Owner and Joint Owner.
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<PAGE> 5
MUTUAL FUND-The registered management investment companies in which the assets
of the sub-accounts of the variable account will be invested.
NON-QUALIFIED CONTRACTS-Contracts not issued to or as Qualified Plans,
Individual Retirement Annuities or Tax Sheltered Annuities.
NON-QUALIFIED PLANS-Retirement Plans which do not receive favorable tax
treatment under the provisions of the Internal Revenue Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom purchase payments
are being made to a Qualified Plan or Tax Sheltered Annuity either through
employer contributions or employee salary reduction contributions.
QUALIFIED CONTRACTS-Contracts issued under Qualified Plans.
QUALIFIED PLANS-Retirement Plans which receive favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
TAX SHELTERED ANNUITY-An annuity which qualifies for treatment under Section
403(b) of the Internal Revenue Code of 1986, as amended.
VALUATION DATE-Each day the New York Stock Exchange and the Company's home
office are open for business or any other day during which there is a
sufficient degree of trading of the Variable Account's underlying Mutual Fund
shares 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-A separate investment account of the Company into which
Variable Account purchase payments are allocated.
VARIABLE ACCOUNT CONTRACT VALUE-The sum of the value of all Variable Account
Accumulation Units attributable to the Contract.
VARIABLE ANNUITY-An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF CONTRACT EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Underlying Mutual Fund Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Federated Insurance Management Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fidelity Variable Insurance Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 10
MFS(R) Variable Insurance Trust(SM). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Nationwide Separate Account Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS . . . . . . . . . . . . . . . . . . . 12
Mortality Risk Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Expense Risk Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Elimination of Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . . . 13
Contract Maintenance Charge and Administration Charge . . . . . . . . . . . . . . . . . . . . 13
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Expenses of the Variable Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Investments of the Variable Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Right to Revoke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Loan Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Beneficiary Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Ownership Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Substitution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Contract Owner Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Value of an Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Frequency and Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Annuity Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Change in Annuity Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Annuity Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Death of Contract Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Death Benefit at Death of Annuitant Prior to the Annuitization Date . . . . . . . . . . . . . 20
Death Benefit After the Annuitization Date . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Required Distribution for Qualified Plans or Tax Sheltered Annuities . . . . . . . . . . . . . 21
Required Distributions for Individual Retirement Annuities . . . . . . . . . . . . . . . . . . 22
Generation-Skipping Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Contract Owner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of Purchase Payments and Contract Value . . . . . . . . . . . . . . . . . . . . . . 24
Value of a Variable Account Accumulation Unit . . . . . . . . . . . . . . . . . . . . . . . . 25
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Determining the Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Surrender (Redemption) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract . . . . . . . . . . . . . 26
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Non-Qualified Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Charge for Tax Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and Tax
</TABLE>
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<TABLE>
<S> <C>
Sheltered Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 30
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Deferred Sales Charge(1) . . . . . . . . . . . . . . . . . . . 7%
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
Number of Completed Years from Contingent Deferred Sales Charge
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
MAXIMUM CONTRACT MAINTENANCE CHARGE(2) . . . . . . . . . . . . . . . $50
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges . . . . . . . . . . . . . . 1.25%
Administration Charge . . . . . . . . . . . . . . . . . . . . 0.15%
Total Variable Account Annual Expenses . . . . . . . . . . . . 1.40%
</TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Management Other Expenses Total Portfolio
Fees Company Expenses
<S> <C> <C> <C>
Federated - Corporate Bond Fund 0.60% 0.20% 0.80%
Federated - Equity Growth and 0.00% 0.85% 0.85%
Income Fund
Fidelity VIP-Equity-Income Portfolio 0.52% 0.06% 0.58%
Fidelity VIP - Overseas Portfolio 0.77% 0.15% 0.92%
MFS(R) - Emerging Growth Series 0.75% 0.51% 1.26%
MFS(R) - Total Return Series 0.71% 0.05% 0.76%
NSAT - Government Bond Fund 0.50% 0.01% 0.51%
NSAT - Money Market Fund 0.50% 0.04% 0.54%
NSAT - Small Company Fund 1.00% 0.25% 1.25%
- -------------------------------------------------------------------------------
</TABLE>
1 Once each year after a purchase payment has been made, 10% of that
purchase payment may be withdrawn without imposition of a Contingent
Deferred Sales Charge. The free withdrawal privilege is non-cumulative and
must be used in the year available. Withdrawals may be restricted for
Contracts issued pursuant to the terms of a Tax Sheltered Annuity or other
Qualified Plan. The Contingent Deferred Sales Charge is imposed only
against purchase payments (see "Contingent Deferred Sales Charge").
2 The one-time Contract Maintenance Charge is deducted when the Contract is
established. The Contract Maintenance Charge varies from $50 to $0 based
upon the amount of the initial purchase payment and plan type (see
"Contract Maintenance Charge and Administration Charge").
3 The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against separate account assets or
reductions from Contract Values. These underlying Mutual Fund expenses
are taken into consideration in computing each Mutual Fund's net asset
value, which is the share price used to calculate the Variable Account's
unit value.
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<PAGE> 9
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 initial purchase payment 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 maximum $50 one-time Contract
Maintenance Charge to be expressed as a percentage of the average Contract
account size for existing Contracts. Since the average Contract account size
for Contracts issued under this prospectus is greater than $1000, the expense
effect of the Contract Maintenance Charge is reduced accordingly.
<TABLE>
<CAPTION>
If you surrender your Contract at If you do not surrender your If you annuitize your Contract at
the end of the applicable time Contract at the end of the the end of the applicable time
period applicable 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>
Federated - Corporate 92 122 154 267 29 77 127 267 * 77 127 267
Bond Fund
Federated - Equity
Growth and Income 92 123 157 272 29 78 130 272 * 78 130 272
Fund
Fidelity VIP-Equity- 89 115 143 243 26 70 116 243 * 70 116 243
Income Portfolio
Fidelity VIP - 93 126 161 279 30 81 134 279 * 81 134 279
Overseas Portfolio
MFS(R) - Emerging 96 136 179 314 33 91 152 314 * 91 152 314
Growth Series
MFS(R) - Total Return 96 120 152 262 28 75 125 262 * 75 125 262
Series
NSAT - Government 89 113 139 235 26 68 112 235 * 68 112 235
Bond Fund
NSAT - Money Market 89 113 141 239 26 68 114 239 * 68 114 239
Fund
NSAT - Small 96 136 178 313 33 91 151 313 * 91 151 313
Company Fund
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that a Contract
Owner will bear directly or indirectly. The expenses of the Nationwide VA
Separate Account-A as well as those of the underlying Mutual Fund are reflected
in the table. For more and complete descriptions of the expenses of the Variable
Account, see "Variable Account Charges, Purchase Payments, and Other
Deductions." For more and complete information regarding expenses paid out of
the assets of a particular underlying Mutual Fund option, see the underlying
Mutual Fund's prospectus. Deductions for premium taxes may also apply but are
not reflected in the Example shown above (see "Premium Taxes").
7
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<PAGE> 10
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, when the Contract is established, the Company will deduct a
one-time Contract Maintenance Charge. The one-time Contract Maintenance Charge
varies from $50 to $0 based upon the amount of the initial purchase payment.
The Company will also assess an Administration Charge equal to an annual rate
of 0.15% 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 $5,000 for
Non-Qualified Contracts or $2,000 for Individual Retirement Annuities.
However, if periodic purchase payments are expected by the Company, this
initial first year minimum may be satisfied by purchase payments made on an
annualized basis. The cumulative total of all purchase payments under a
Contract may not exceed $1,000,000 without the prior consent of the Company
(see "Allocation of Purchase Payments and Contract Value").
If the Contract Value at the Annuity Commencement Date is less than
$5,000, the Contract Value may be distributed in one lump sum in lieu of
annuity payments. If any annuity payment would be less than $50, the Company
shall have the right to change the frequency of payments to such intervals as
will result in payments of at least that amount (see "Frequency and Amount of
Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable at the time purchase
payments are made, the premium tax deduction will be made from the Contract
prior to allocation to any underlying Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the day the Contract
is received, it may be returned to the home office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by
the Company, the Company will void the Contract and refund the Contract Value
in full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of purchase payments (see "Right to
Revoke").
8
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<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Financial Horizons Life Insurance Company, a stock life insurance
company organized under the laws of the State of Ohio, was established in
February, 1981. Pursuant to a resolution by the Board of Directors, the name
of Financial Horizons Life Insurance Company was changed to Nationwide Life and
Annuity Insurance Company. The name change will be operationally effective
pursuant to and as permitted by the laws of each state. The Company is a
member of the "Nationwide Insurance Enterprise," with its home office at One
Nationwide Plaza, Columbus, Ohio 43216. The Company offers certain life
insurance products and annuities.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on May 6, 1987,
pursuant to the provisions of Ohio law. On April 6, 1988, the name of the
Variable Account was established as the "Financial Horizons VA Separate
Account-1." The name of the Variable Account was changed to "Nationwide VA
Separate Account-A" pursuant to a resolution by the Board of Directors. 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 option(s) which may be
designated by the Contract Owner. One such sub-account contains the underlying
Mutual Fund shares attributable to Accumulation Units under Qualified Contracts
and one such sub-account contains the underlying Mutual Fund shares
attributable to Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
A summary of investment objectives is contained in the description of
each underlying Mutual Fund below. More detailed information may be found in
the current prospectus for each underlying Mutual Fund option offered. Such a
prospectus for the underlying 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 and Annuity
Insurance Company by calling (800) 533-5622, TDD (800) 238-3035 or writing P.O.
Box 182008, Columbus, Ohio 43218-2008.
The underlying Mutual Funds 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 a 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.
Contract Owners may choose from among the following underlying Mutual
Fund options under the Contracts. There can be no assurance that any of the
underlying Mutual Fund options will achieve its objective.
FEDERATED INSURANCE MANAGEMENT SERIES
The Insurance Management Series (the "Trust") is an open-end, management
investment company organized as a Massachusetts business trust under a
Declaration of Trust on September 15, 1993. Shares of the Fund are sold to
insurance companies as funding vehicles for variable annuity contracts and
variable life insurance policies issued by the insurance companies. Federated
Advisers, a Delaware business trust organized on April 11, 1989, serves as the
Series' adviser.
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<PAGE> 12
-CORPORATE BOND FUND
Investment Objective: To seek high current income by investing
primarily (at least 65% of fund assets) in lower-rated corporate bonds.
Other fixed income securities in which the Fund invests include, but are
not limited to, preferred stocks, debentures, notes, equipment lease
certificates, and equipment trust certificates. The potential for
capital growth may be considered in the purchase of various fund assets,
but only when consistent with the investment objective of high current
income.
THE FUND'S PORTFOLIO CONSISTS PRIMARILY OF LOWER-RATED CORPORATE DEBT
OBLIGATIONS, WHICH ARE COMMONLY REFERRED TO AS "JUNK BONDS." PURCHASERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS
FUND.
-EQUITY GROWTH & INCOME FUND
Investment Objective: Primarily to achieve long-term growth of capital
and secondarily, to provide income. The Fund pursues its investment
objectives by investing under normal circumstances at least 65% of its
total assets in common stock of "blue- chip" companies. "Blue-chip"
companies are generally top-quality, established growth companies which,
in the opinion of the investment adviser, meet specified criteria which
is enumerated in the underlying mutual fund prospectus. There is no
assurance that the Fund will achieve its investment objectives.
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
of the securities comprising the Standard & Poor's 500 Composite Stock
Price Index.
-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 the United States.
MFS(R) VARIABLE INSURANCE TRUST(SM)
The Trust is an open-end, registered management investment company
organized as a business trust under the laws of The Commonwealth of
Massachusetts by a Declaration of Trust dated February 1, 1994. The Trust
currently offers shares of each Series to insurance company separate accounts
that fund Contracts. Massachusetts Financial Services Company, a Delaware
Corporation ("MFS" or the "Adviser"), is the investment adviser to each Series.
MFS(R) EMERGING GROWTH SERIES
Investment Objective: To seek growth of capital. The selection of
securities is made solely on the basis of potential for growth of
capital. Dividend and interest income from portfolio securities, if any,
is incidental to the investment objective of long-term growth of capital.
-MFS(R) TOTAL RETURN SERIES
Investment Objective: To obtain above-average income consistent with
what management believes to be prudent employment of capital. While
current income is the primary objective, the Series believes that there
also should be a reasonable opportunity for growth of capital and income,
since many securities offering a better-than-average yield may possess
growth potential.
THE MFS EMERGING GROWTH SERIES AND THE MFS TOTAL RETURN SERIES MAY INVEST
TO A LIMITED EXTENT IN LOWER RATED FIXED INCOME SECURITIES OR COMPARABLE
UNRATED SECURITIES COMMONLY KNOWN AS "JUNK BONDS."
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<PAGE> 13
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 separate underlying Mutual Funds listed below, each
with its own investment objectives. Currently, shares of the Trust will be sold
to life insurance company separate accounts to fund the benefits under variable
insurance or annuity policies issued by life insurance companies. The assets of
the Trust are managed by Nationwide Financial Services, Inc. of One Nationwide
Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of Nationwide Life
Insurance Company.
-GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with the preservation of capital. It seeks to achieve its
objective by investing in a diversified portfolio of securities issued or
backed by the U.S. Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
-SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less than $1 billion at the time
of purchase. Nationwide Financial Services, Inc. ("NFS"), the Fund's
adviser, has employed a group of sub-advisers, each of which will manage
a portion of the Fund's portfolio. These sub-advisers are the Dreyfus
Corporation, Neuberger & Berman, L.P., Pictet International Management
Limited, Van Eck Associates Corporation, Strong Capital Management, Inc.
and Warburg, Pincus Counsellors, Inc. 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 different
investment styles, NFS hopes to increase prospects for investment return
and to reduce market risk and volatility.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to purchase
payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the Investment Company
Act of 1940 or any Regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares 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 the voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions with respect to the
proportion of the underlying Mutual Fund shares held in the Variable Account
corresponding to his or her interest in the Variable Account.
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<PAGE> 14
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments
will not be affected by the death rates of persons receiving such payments or
of the general population by virtue of annuity rates incorporated in the
Contract which cannot be changed.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis and
is equal to an annual rate of 0.80% of the daily net asset value of the
Variable Account. The deduction of the Mortality Risk 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. 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 deduction of the Expense Risk
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. The Company expects to generate a profit through assessing this
charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the purchase payments for
these Contracts. However, the Contingent Deferred Sales Charge (CDSC), referred
to below, when it is applicable, will be used to cover expenses relating to the
sale of the Contracts, including commissions paid to sales personnel, the costs
of preparation of sales literature and other promotional activity. The Company
expects to recover most of its distribution costs relating to the sale of the
Contracts from the Contingent Deferred Sales Charge. Any shortfall will be made
up from the General Account of the Company, which may indirectly include
portions of the Mortality and Expense Risk Charges, since the Company expects
to generate a profit from these charges. The maximum amount that may be paid
to a selling agent on the sale of these Contracts is 6.90% of purchase
payments.
The Contingent Deferred Sales Charge is calculated by multiplying the
applicable Contingent Deferred Sales Charge percentages noted below by the
purchase payments that are surrendered. For purposes of calculating the amount
of the Contingent Deferred Sales Charge, surrenders are considered to come
first from the oldest purchase payment made to the Contract, then from the next
oldest purchase payment and so forth, with any earnings deemed to be withdrawn
last. (Earnings are not subject to any surrender charges.) For tax purposes, a
surrender is treated as a withdrawal of earnings first. This charge will apply
in the amounts set forth below to purchase payments withdrawn within the time
periods set forth. In no event will any Contingent Deferred Sales Charge be
made against any values which have been held under the Contract for at least 84
months, or to commencement of an annuity payout under Contracts which have been
in effect for at least two years, or upon the death of the Annuitant. The
Contingent Deferred Sales Charge applies as follows to purchase payments
withdrawn:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
Once each year after a purchase payment has been made under the Contract,
10% of that purchase payment may be withdrawn without imposition of the
Contingent Deferred Sales Charge. This free withdrawal
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<PAGE> 15
privilege is non-cumulative and must be used in the year available. Withdrawals
may be restricted for Contracts issued pursuant to the terms of a Tax Sheltered
Annuity or other Qualified Plan. No sales charges are deducted on redemptions
used to purchase units in the Fixed Account of this annuity (see "Fixed Account
Allocations").
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For Tax Sheltered Annuity Contracts and Qualified Contracts, the Company
will waive the Contingent Deferred Sales Charge when:
1. 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));
2. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
3. 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;
4. the Plan Participant has participated in the Contract for at
least 15 years as determined from the Contract Anniversary date;
5. the Plan Participant dies; or
6. the Plan Participant annuitizes after 2 years in the Contract.
For Non-Qualified Contracts and Individual Retirement Annuities other
than SEP-IRA Contracts, the Company will waive the Contingent Deferred Sales
Charge when:
1. the Annuitant dies; or
2. the Contract Owner annuitizes after 2 years in the Contract.
In addition, the Company may waive or reduce the Contingent Deferred
Sales Charge for Non-Qualified Contracts when sales are made without commission
or other standard distribution expenses, resulting in savings to the company
for the cost of the distribution effort.
After the third Contract Anniversary, the Contingent Deferred Sales
Charge will not apply if the Owner is confined to a long term care facility or
hospital, and has been so confined for a continuous 90 day period as of the
date of the request for surrender.
When a Contract described in this Prospectus is exchanged for another
Contract issued by the Company, of the type and class which the Company
determined is eligible for such exchange, the Company will waive the Contingent
Deferred Sales Charge on the first Contract.
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where prohibited by state law.
CONTRACT MAINTENANCE CHARGE AND ADMINISTRATION CHARGE
The Company deducts a Contract Maintenance Charge and an Administration
Charge from the Contract Value to reimburse it for administrative expenses
relating to the issuance and maintenance of the Contract. The Administration
Charge is equal on an annual basis to 0.15% of the daily net asset value of the
Variable Account. The deduction of the Administration Charge is made from each
sub-account in the same proportion that the contract Value in each sub-account
bears to the total Contract Value in the Variable Account. The Company will
monitor these charges to ensure that they do not exceed annual administration
expenses. 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.
The Contract Maintenance Charge will apply in the amounts set forth below:
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<PAGE> 16
For Individual Retirement Annuities and Non-Qualified Contracts the Contract
Maintenance Charge is a one-time set up fee. The Contract Maintenance Charge
varies from $50 to $0. Variances are based upon the initial purchase payment
as follows:
<TABLE>
<CAPTION>
One-Time
Initial Purchase Payment Contract Maintenance Charge
<S> <C>
Up to $14,999 $50
$15,000 to $39,999 $30
$40,000 and over $0
</TABLE>
For Qualified, Tax Sheltered Annuity, and SEP-IRA Contracts, there is no
Contract Maintenance Charge.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon purchase
payments received by the Company. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. The 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 taxes
from a Contract Owner's Contract Value either: (1) at the time the Contract is
surrendered, (2) at annuitization, or (3) in those states which require, at the
time purchase payments are made to the Contract.
EXPENSES OF THE VARIABLE ACCOUNT
Expenses of the Variable Account include: (1) administration expenses
relating to the issuance and maintenance of the Contracts; (2) expenses
relating to the mortality risks associated with the guarantee of annuity
purchase rates at issue for the life of the Contracts and the payment of
minimum death benefits regardless of the investment experience of the Variable
Account; and (3) expenses associated with the risk assumed by the Company in
guaranteeing that the Contract Maintenance Charge and administrative fee will
not be increased regardless of the actual administrative expenses of the
Company.
Deductions from and expenses paid of the assets of the underlying Mutual
Funds are described in each of the underlying Mutual Fund's prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his or her participation in the Variable Account
allocated among one or more of the sub-accounts which consist of shares in the
underlying Mutual Funds. Shares of the respective underlying Mutual Funds
specified by the Contract Owner are purchased at net asset value for the
respective sub- account(s) and converted into Accumulation Units. Such
election is subject to any minimum purchase payment limitations which may be
imposed by the underlying Mutual Funds designated. The election as to
allocation of purchase payments or as to transfers of the Contract Value from
one sub-account to another may be changed by the Contract Owner 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.
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<PAGE> 17
TRANSFERS
The Owner may request a transfer of up to 100% of the Contract Value from
the Variable Account to the Fixed Account. No penalty shall be assessed with
respect to any such transfer. The Company reserves the right to restrict
transfers from the Variable to the Fixed Account to 25% of the Contract Value
for any 12 month period. The Company, at its sole discretion, reserves the
right to refuse transfers or deposits to the Fixed Account if the Fixed Account
is greater than or equal to 30% of the total Contract Value. The Company may,
in any Contract Year, restrict transfers from the Variable Account to the Fixed
Account to 10% of the Variable Account at the time of the transfer. All
amounts transferred must remain on deposit in the Fixed Account until the
expiration of the Interest Rate Guarantee Period. The Interest Rate Guarantee
Period expires on the final day of a calendar quarter during which the one year
anniversary of the allocation to the Fixed Account occurs. Therefore, the
Interest Rate Guarantee Period for deposits or transfers to the Fixed Account
may continue for up to three months after a one year period has expired. 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 Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred from the Fixed Account to the
Variable Account will be determined by the Company, at its sole discretion, but
will not be less than 10% of the total value of the portion of the Fixed
Account that is maturing and will be declared upon the expiration date of the
then current Interest Rate Guarantee Period. Should the Company exercise this
right, the specific percentage will be declared upon the expiration date of the
then current Interest Rate Guarantee Period. Transfers from the Fixed Account
must be made within 45 days after the expiration date of the then current
Interest Rate 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 must be made prior to the Annuitization Date.
Transfers among the sub-accounts may be made either in writing, or by
telephone, in states allowing such transfers, by telephone. This telephone
exchange privilege is made available to Contract Owners automatically without
their having to elect the privilege. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Such procedures may include any or all of the following, or such other
procedures as the Company may, from time to time, deem reasonable: requesting
identifying information, such as name, contract number, Social Security number,
and/or personal identification number; tape recording all telephone
transactions; and providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record. Although failure
to follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant to actions
taken by the Company in reliance on telephone instructions reasonably believed
to be genuine shall be borne by the Contract Owner. The Company may withdraw
the telephone exchange privilege upon 30 days' written notice to Contract
Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Annuitant. Any assignment will take effect upon
receipt by the Company of a written notice thereof executed by the Contract
Owner. The Company assumes no responsibility for the validity or sufficiency of
any assignment. The Company shall not be liable as to any payment or other
settlement made by the Company before receipt of the assignment. Qualified
Contracts may not be assigned, pledged or otherwise transferred except under
such conditions as may be allowed by applicable law.
If this Contract is a Non-Qualified Contract, any portion of Contract
Value attributable to purchase payments made after August 13, 1982, which is
pledged or assigned shall be treated as a distribution and shall be included in
gross income to the extent that the cash value exceeds the investment in the
Contract, for the taxable year in which assigned or pledged. In addition, any
Contract Values assigned would, under certain conditions, be subject to a tax
penalty equal to 10% of the amount which is included in gross income.
Individual Retirement Annuities, Individual Retirement Accounts, and Tax
Sheltered Annuities are not eligible for assignment.
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LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity may receive a loan from his or her Contract Value, subject to
the terms of the Contract, the Plan, and Section 72 of the Internal Revenue Code
("Code"), which imposes restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period. Additional loans are subject to the
contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated above.
For salary reduction Tax Sheltered Annuities, loans may only be secured by
the Contract Value. For loans from Qualified Contracts and other Tax Sheltered
Annuities, the Company reserves the right to limit a 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% or any lesser rate as permitted by
law. 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, unless specified otherwise.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If a Contract Owner who is not the Annuitant dies prior to
annuitization and while the loan is outstanding, the distribution will be
reduced by the amount of the loan outstanding plus any 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 Section
1035 of the Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the
employer's plan.
Loan repayments must be identified as such or else they will be treated as
purchase payments, and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify
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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, Non
Qualified Contracts and SEP-IRA Contracts are not eligible for loans.
BENEFICIARY PROVISIONS
Subject to the terms of any existing assignment, the Contract Owner may
change the Beneficiary from time to time during the lifetime of the Annuitant,
by written notice to the Company. The change will, upon receipt by the Company
at its home office, take effect as of the time the written notice was signed,
whether or not the Annuitant is living at the time of recording, but without
further liability as to any payment or settlement made by the Company before
receipt of such change.
Unless otherwise provided in the Contract or in an effective change of
Beneficiary designation, all rights and interests of any Beneficiary
predeceasing the Annuitant shall vest in the Contingent Beneficiary if
designated. If a Contingent Beneficiary is not designated or predeceases the
Beneficiary, all rights and interests of the Beneficiary will vest in the
Contract Owner or the Contract Owner's estate. The Beneficiary will be the
designated person or persons who survive the Annuitant, and if more than one
survive, they will share equally unless otherwise specified in the Beneficiary
designation.
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 named, the Joint Owner possesses an undivided interest in the entire
Contract, along with the Owner. When a Joint Owner is named, the exercise of any
ownership right in the Contract shall require a written indication, signed by
both the Owner and Joint Owner, of an intent to exercise such right, unless the
Owner and Joint Owner provide in the application that the exercise of any such
ownership right may be made by either the Owner or Joint Owner independently of
one another. In this latter situation, the Company will not be liable for any
loss, liability, cost, or expense for acting in accordance with the instructions
of either the Owner or Joint Owner. Unless otherwise indicated, references to
"Contract Owner" or "Owner" in this prospectus will apply to both the Owner and
Joint Owner.
The Annuitant may become the Contract Owner on and after the Annuitization
Date, subject to the terms elected at annuitization. Where the Contract is not
issued in connection with a Qualified Plan, Tax Sheltered Annuity or Individual
Retirement Annuity, and the Contract Owner or Joint Owner dies before the
Annuitization Date, a distribution will be paid in accordance with the "Death of
Contract Owner" provision. If the Annuitant does not survive the Contract Owner
or if the Owner and the Annuitant are the same person, contract ownership will
be determined in accordance with the "Death Benefit At Death Of Annuitant Prior
To The Annuitization Date" provision. Where the Contract is issued pursuant to a
Tax Sheltered Annuity or a Qualified Plan, the rights of the Owner, Joint Owner,
and Annuitant may be subject to the terms of the Plan.
Prior to the Annuitization Date, the Contract Owner may name a new Owner
at any time which will automatically revoke any prior choice. Such change may be
subject to state and federal gift taxes and may be treated as an assignment of
the Contract for federal income tax purposes. Such an assignment would result in
a deemed distribution of the Contract. Any request for change must be made in
writing and received by the Company at its home office. A request for change of
Owner must be a "Proper Written Application." The Company may require 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
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 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 by the Company. A
change of the Annuitant shall be treated as the death of the Owner for purposes
of the "Death of Contract Owner" provision, if the Owner is not an individual.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds described in this prospectus
should no longer be available for investment by the Variable Account or, if in
the judgment of the Company's management, further
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investment in such underlying Mutual Fund shares should become inappropriate in
view of the purposes of the Contract, the Company may substitute shares of
another underlying Mutual Fund for underlying Mutual Fund shares already
purchased or to be purchased in the future by purchase payments under the
Contract. No substitution of securities in the Variable Account may take place
without prior approval of the Securities and Exchange Commission, and under such
requirements as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life and Annuity
Insurance Company by writing P.O. Box 182008, Columbus, Ohio 43218-2008, or
calling (800) 533-5622, TDD (800) 238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date a portion of the Contract Value may be applied
to the Annuity Payment Option elected in accordance with the Annuity Table
stated 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 Annuity Commencement 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. Once
Variable Annuity payments begin, the Owner may exchange amounts among the
sub-account options once per year.
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 (which is used for
establishing the first variable annuity payment) (see "Net Investment Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the first variable annuity
payments. A higher assumption would mean a higher initial payment but more
slowly rising or more rapidly falling subsequent payments. A lower assumption
would have the opposite effect. If the actual investment rate is at the annual
rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the net
amount available to apply under any Annuity Payment Option is less than $5,000,
the Company shall have the right to pay such amount in one lump sum in lieu of
the payments otherwise provided for. In addition, if the payments provided for
would be or become less than $50, the Company shall have the right to change the
frequency of payments to such intervals as will result in payments of at least
that amount.
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 terms of a Qualified Plan, annuitization may occur during the first 2
years, subject to approval by the Company.
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CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. No further changes in the 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 Annuitant's 85th birthday or such other Annuity
Commencement Date provided under the Contract Owner's Qualified Plan.
ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuity Commencement Date, elect one of the following Annuity
Payment Options.
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 THE ANNUITANT 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) 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 (2) below.
(2) The present value, computed as of the date in which notice of
death is received by the Company at its home office, of the
guaranteed number of annuity payments remaining after receipt of
such notice and to which the deceased would have been entitled
had he or she not died, commuted at the Assumed Investment Rate
effective in determining the Annuity Tables, shall be paid in a
lump sum.
Some of the stated Annuity Options may not be available in all states. The
Owner may request an alternative non-guaranteed option by giving notice in
writing prior to annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity Payment
Option, the Contract Value will continue to accumulate. Contracts issued in
connection with Qualified Plans, Individual Retirement Annuities or Tax
Sheltered Annuities are subject to the minimum distribution requirements set
forth in the Plan, Contract, or Internal Revenue Code.
DEATH OF CONTRACT OWNER
Upon the death of the Owner or Joint Owner, if any, the following rules
will apply in those situations in which the Contract was not issued in
connection with a Qualified Plan, Tax Sheltered Annuity or Individual Retirement
Annuity.
1. In the event the death occurs before the Annuitization Date, the
entire interest of the Contract, less any applicable deductions
(which may include a Contingent Deferred Sales Charge), must be
distributed within five years after the Owner's death. In the
alternative, the party entitled to receive the distribution may
elect to receive the distribution in the form of a life annuity
or an annuity for a period certain not exceeding his or her life
expectancy. Such an annuity must begin within one year from the
date of the Owner's death.
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If the deceased Owner and the Annuitant are not the same person,
the distribution described above will be paid to the Joint Owner,
if any. If no Joint Owner is named, the Annuitant will receive the
distribution. No Death Benefit is payable upon the death of the
Contract Owner, but distribution must be made as described above.
If the deceased Owner and the Annuitant are the same person or if
the Annuitant predeceases the Owner, the distribution will be made
in accordance with the distribution requirements set forth in the
"Death Benefit At Death Of Designated Annuitant Prior To The
Annuitization Date" provision, provided, however, that all
distributions made as a result of the death of the Owner shall be
made within the time limits set forth in this paragraph.
If the person entitled to receive the distribution is the Owner's
spouse, the Contract may be continued by such spouse without
compliance with the distribution rules set forth herein.
2. In the event the 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 in effect as of the date of the Contract
Owner/Annuitant's death.
If the Contract Owner is not a natural person, the death of the Annuitant
(or a change of the Annuitant) will be treated like a death of the Contract
Owner and will result in a distribution pursuant to Section (1), regardless of
whether a Contingent Annuitant has also been named. The distribution will take
the form of either:
(a) the Death Benefit described below (if the Annuitant has died and
there is no Contingent Annuitant), or, in all other cases,
(b) the benefit described in Section (1) above, except that in the
event of a change of Annuitant, the benefit will be paid to the
Contract Owner if the Annuitant is living, or as a Death Benefit
to the Beneficiary upon the death of the Annuitant (and the
Contingent Annuitant, if any) prior to the expiration of the
period described in Section (1) above.
In the event the Owner is not an individual, the death of the Annuitant
(or a change of the Annuitant) will result in a distribution pursuant to
paragraph (1) above, regardless of whether or not a Contingent Annuitant has
been named.
Contracts issued in connection with Qualified Plans, Individual Retirement
Annuities or Tax Sheltered Annuities will be subject to specific rules, set
forth in the Plan, Contract, or Internal Revenue Code, concerning distributions
upon the death of the Owner or the Annuitant (see "Required Distribution For
Qualified Plans or Tax Sheltered Annuities" and "Required Distribution for
Individual Retirement Annuities").
DEATH BENEFIT AT DEATH OF ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Annuitant dies prior to the Annuitization Date, a Death Benefit
will be paid to the Beneficiary upon receipt of due proof of death of the
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 either a single sum payment or an
Annuity Payment Option.
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.
Contracts issued in connection with Qualified Plans, Tax Sheltered
Annuities, or Individual Retirement Annuities will be subject to specific rules
set forth in the Plan or Contract concerning distributions upon death of the
Annuitant.
If the Annuitant dies prior to the first day of the calendar month
following his or her 85th birthday, the value of the Death Benefit will be the
greater of (i) the sum of all purchase payments, less any amounts surrendered,
(ii) the Contract Value or (iii) the Contract Value as of the most recent
five-year Contract Anniversary, less any amounts surrendered since the most
recent five-year Contract Anniversary. If the Annuitant dies on or after his or
her 85th birthday, then the Death Benefit will be equal to the Contract Value.
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If the Owner/Annuitant dies prior to the first day of the calendar month
following his or her 85th birthday, and
1. the Contract Value is less than the Death Benefit as defined
above, and
2. the Beneficiary is entitled to continue the Contract indefinitely
(in the case of a beneficiary-spouse) or for any period of time
consistent with Section 72 of the Internal Revenue Code (in the
case of non-spousal beneficiaries), then the following option will
be provided:
At the direction of the Beneficiary, and in lieu of
distribution of the Death Benefit, the Company will credit the
Contract with the difference between the Contract Value and the
Death Benefit. Any such credit shall be made among the various
sub- accounts of the Variable Account and the Fixed Account in
the same proportional allocation existing at the time of the
Owner/Annuitant's death.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Internal Revenue Code and regulations thereunder, as
applicable, and will be paid, notwithstanding anything else contained herein, to
the Owner/Annuitant under the Annuity Payment Option selected, over
A. the life of the Owner/Annuitant or the lives of the
Owner/Annuitant and the Owner/Annuitant's designated Beneficiary;
or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as those terms are used in
Code Section 401(a)(9)(C)), the Required Beginning Date will be the later of the
dates determined under the preceding sentence or April 1 of the calendar year
following the calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Qualified Plan or Tax Sheltered Annuity must be distributed
by December 31 of the calendar year which includes the fifth anniversary of his
or her death unless:
(a) In the case of a Tax Sheltered Annuity, the Owner names
his or her surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the Annuity as a Tax Sheltered Annuity established for his
or her benefit; or
(ii) receive distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
beneficiary elects to receive a distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
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
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expectancy and joint and last survivor expectancy are computed by the use of
return multiples contained in Section 1.72-9 of the Income Tax 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. 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 exceeding the Owner's
life expectancy or the life expectancy of the Owner and the Owner's spouse or
designated Beneficiary.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year which includes the fifth anniversary of his or
her death 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 over his or her life (or a
period not exceeding his or her life expectancy) and commencing
not later than December 31 of the year in which the Owner would
have attained age 70-1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse and
such beneficiary elects to receive a distribution of the account 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 to the extent that a surviving spouse beneficiary may elect to
treat the Contract as his or her own, in the same manner as is described in
Section (a)(i) above.
If the amounts distributed are less than those 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 purchase payments 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 purchase payments, the amount of any distribution,
the amount by which non-deductible contributions for all years exceed
non-taxable distributions for all years, and the total balance of all Individual
Retirement Annuities and Accounts.
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 determine whether the Death Benefit or any other payment
constitutes a direct skip as defined in Section 2612 of the Internal Revenue
Code, and the amount of the tax on the generation-skipping transfer resulting
from such direct skip. If applicable, the payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Internal Revenue Code.
A direct skip may occur when property is transferred to or a Death Benefit
is paid to an individual two or more generations younger than the Contract
Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING-The Contract Owner may direct the automatic reallocation
of Contract Values to the underlying Mutual Fund options on a predetermined
percentage basis every three months. If the last day of the three month period
falls on a Saturday, Sunday, recognized holiday or any other day when the New
York Stock
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Exchange is closed, the Asset Rebalancing exchange will occur on the last
business day before that day. Asset Rebalancing will not affect future
allocations of purchase payments. An Asset Rebalancing request must be made in
writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Internal Revenue Code may have superseding plan restrictions with
regard to the frequency of fund exchanges and underlying Mutual Fund options.
The Contract Owner may want to contact a financial adviser in order to discuss a
specific Contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owners; however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING-The Contract Owner may direct the Company to
automatically transfer funds from the Money Market sub-account or the Fixed
Account to any other sub-account within the Variable Account on a monthly basis.
This service is intended to allow the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time. The Company makes no guarantees that Dollar Cost
Averaging will result in a profit or protect against loss. To qualify for Dollar
Cost Averaging, there must be a minimum total Contract Value of $15,000.
Transfers for purposes of Dollar Cost Averaging can only be made from the Money
Market sub-account or the Fixed Account. The minimum monthly Dollar Cost
Averaging transfer is $100. In addition, Dollar Cost Averaging monthly transfers
from the Fixed Account must be equal to or less than 1/30th of the Fixed Account
value when the Dollar Cost Averaging program is requested. Transfers out of the
Fixed Account, other than for Dollar Cost Averaging, may be subject to certain
additional restrictions (see "Transfers"). A written election of this service,
on a form provided by the Company, must be completed by the Contract Owner in
order to begin transfers. Once elected, transfers from the Money Market
sub-account or the Fixed Account will be processed monthly until either the
value in the Money Market sub-account or the Fixed Account is completely
depleted or the Contract Owner instructs the Company in writing to cancel the
monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners however; any such
discontinuation would not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS-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 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. Unless otherwise directed by the
Contract Owner, the Company will withhold 20% for federal income taxes from each
Systematic Withdrawal. The Contract Owner may discontinue Systematic Withdrawals
at any time by notifying the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners; however, such
discontinuation would not affect Systematic Withdrawal programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
If the Contract Owner withdraws amounts pursuant to a Systematic
Withdrawal program, then the Contract Owner may withdraw each Contract Year
without a CDSC an amount up to the greater of (i) 10% of the total sum of all
purchase payments made to the contract at the time of withdrawal, less any
purchase payments previously withdrawn that were subject to a CDSC, or (ii) the
specified percentage of the Contract Value based on the Contract Owner's age, as
shown in the following table:
<TABLE>
<CAPTION>
CONTRACT OWNER'S AGE PERCENTAGE OF CONTRACT VALUE
-------------------- ----------------------------
<S> <C>
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
</TABLE>
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If the total amounts withdrawn in any Contract Year exceed the CDSC-free
amount as calculated under the Systematic Withdrawal method described above,
then such total withdrawn amounts will be eligible only for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section, and the total amount of CDSC charged during the Contract
Year will be determined in accordance with that provision.
The Contract Value and the Contract Owner's age for purposes of applying
the CDSC-free withdrawal percentage described above are determined as of the
date the request for a Systematic Withdrawal program is received and recorded by
the Company at its home office (In the case of Joint Owners, the older Owner's
age will be used). The Contract Owner may elect to take such CDSC-free amounts
only once each Contract Year. Furthermore, this CDSC-free withdrawal privilege
for Systematic Withdrawals is non- cumulative, that is, free amounts not taken
during any given Contract Year cannot be taken as free amounts in a subsequent
Contract Year.
Systematic Withdrawals are not available prior to the expiration of the
ten day free look provision of Contract. The Company also reserves the right
to assess a processing fee for this service. A Systematic Withdrawal program
will terminate automatically at the end of each Contract Year and may be
reinstated only pursuant to a new request.
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
immediately 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 at the end of
each calendar quarter detailing the Contract activity during the calendar
quarter. Instead of receiving an immediate confirmation of transactions made
pursuant to some types of periodic payment plan (such as a dollar cost averaging
program) or salary reduction arrangement, the Contract Owner may receive
confirmation of such transactions in their quarterly statements. The Contract
Owner should review the information in these statements carefully. All errors or
corrections must be reported to the Company immediately to assure proper
crediting to the Owner's Contract. The Company will assume all transactions are
accurate unless the Contract Owner notifies the Company otherwise within 30 days
after receipt of the statement. The Company will also send to Contract Owners
each year an semi-annual report and a annual report containing financial
statements for the Variable Account, as of June 30 and December 31,
respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase payments are allocated to one or more sub-accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Fund options by the Contract Owner, and converted into Accumulation Units.
The initial first year purchase payment must be at least $5,000 for
Non-Qualified Contracts or $2,000 for Individual Retirement Annuities. 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 $100
each for Non-Qualified Contracts and $150 for Individual Retirement Annuities.
The Company, however, reserves the right to lower the purchase payment minimum
for certain employer sponsored programs. The Company may reject any purchase
payment that does not meet the minimum payment requirement. 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 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.
The initial purchase payment allocated to designated sub-accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase, if the Application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and the
Company may retain the purchase payment for up to 5 business days while
attempting to complete an incomplete
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Application. If the Application cannot be made complete within 5 days, the
prospective purchaser will be informed of the reasons for the delay and the
purchase payment will be returned immediately unless the prospective purchaser
specifically consents to the Company retaining the purchase payment until the
Application is made complete. Thereafter, the purchase payment will be priced
within 2 business days.
Purchase payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each sub-account was
arbitrarily set initially at $10 when underlying Mutual Fund shares in that
sub-account were 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 asset value per share of the underlying Mutual Fund held in
the sub-account determined as of the end of the immediately preceding
Valuation Period, and
(c) is a factor representing the Mortality Risk Charge, Expense Risk Charge
and Administration Charge deducted from the Variable Account. Such factor
is equal to an annual rate of 1.40% of the daily net asset value of the
Variable Account.
For underlying Mutual Funds that credit dividends on a daily basis and pay
such dividends once a month (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, and any charge or credit for tax reserves (see "Charge For Tax
Provisions").
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account
attributable to the Contract 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 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.
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SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Annuitant, the Company will, upon proper
written application by the Contract Owner deemed by the Company to be in good
order, allow the Contract Owner to surrender a portion or all of the Contract
Value. "Proper Written Application" means that the surrender must be requested
in writing by the Contract Owner, 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, by a Commercial Bank or by a
Savings and Loan which is a member of the Federal Deposit Insurance Corporation.
In some cases (for example, requests by a corporation, partnership, agent,
fiduciary, or surviving Joint Owner), the Company will require additional
documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all sub-accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each sub-account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the sub-accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's home office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
purchase payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
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. A participant will not, therefore,
be entitled to 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 period of
participation in the Optional Retirement Program. The Company issues this
Contract to participants in the Optional Retirement Program in reliance upon,
and in compliance with, Rule 6c-7 of the Investment Company Act of 1940.
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 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 Internal Revenue Code (403(b)(7)
Custodial Accounts), may be executed only-
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
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B. The surrender limitations described in A. above also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to Tax Sheltered Annuities after the last plan
year beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event of
a ten-day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Internal Revenue
Code, upon proper direction by the Contract Owner. The foregoing is the
Company's understanding of the withdrawal restrictions which are currently
applicable under Section 401(k)(2)(B), Section 403(b)(11) and Revenue Ruling
90-24. Such restrictions are subject to legislative change and/or
reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the
plan terms and Internal Revenue Code tax provisions when the contract is issued
pursuant to a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Internal Revenue Code (the "Code") governs taxation of
annuities in general. That section sets forth different rules for annuities
purchased by Qualified Plans, Individual Retirement Annuities and Tax Sheltered
Annuities, and annuities which are not purchased by such plans (for discussion
of tax treatment of Non-Qualified Contracts, see below. For discussion of tax
treatment of other Contracts, see "Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts and Tax Sheltered Annuities.")
The tax treatment of Qualified Plans, Individual Retirement Annuities, and
Tax Sheltered Annuities and annuities purchased by such plans is controlled by
the Internal Revenue Code. You should consult your financial consultant or tax
adviser to discuss in detail your particular tax situation and the use of the
Contracts.
Generally the amount of any payment of items of interest to a nonresident
alien of the United States shall be subject to withholding of a tax equal to
thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A
payment may not be subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the recipient's
conduct of a trade or business in the United States and such payment is
includable in the recipient's gross income.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are
taxable to the Contract Owner to the extent that the cash value of the Contract
exceeds the Contract Owner's investment at the time of the distribution.
Distributions, for this purpose, include partial surrenders, dividends, or any
portion of the Contract which is assigned or pledged; or for Contracts issued
after April 22, 1987, any portion of the Contract transferred by gift. For these
purposes, a transfer by gift may occur upon annuitization if the Contract Owner
and the Annuitant are not the same individual. In determining the taxable amount
of a distribution, all annuity
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contracts issued after October 21, 1988, by the same company to the same
policyholder 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 which may be issued to prevent the avoidance of
the purpose of these rules). 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 changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for Qualified Contracts, Individual Retirement Annuities and Tax Sheltered
Annuities; immediate annuities; and certain Contracts owned for the benefit of
an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase.
Internal Revenue Code Section 72 also provides for a penalty, equal to 10%
of any distribution which is includable in gross income, if such distribution is
made prior to attaining age 59-1/2, the death or disability of the Contract
Owner. The penalty does not apply if the distribution is one of a series of
substantially equal periodic payments made over the life or life expectancy (or
joint lives or life expectancies) of the Annuitant (and the Annuitant's
Beneficiary), or the purchase of an immediate annuity, or is allocable to an
investment in the Contract before August 14, 1982. A Contract Owner wishing to
begin taking distributions to which the 10% tax penalty does not apply should
forward a written request to the Company. Upon receipt of a written request from
the Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company Policy and subject to limitations of the Contract including
but not limited to first year withdrawals. If the Annuitant selects an annuity
for life or life expectancy and changes the method of payment before the
expiration of 5 years and the attainment of age 59-1/2, the early withdrawal
penalty will apply. The penalty will be equal to that which would have been
imposed had no exception applied from the outset, and the Annuitant will also
pay interest on the amount of the penalty from the date it would have originally
applied until it is actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for distribution to be made upon the death of the
Contract Owner or Joint Owner (see "Death of Contract Owner").
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 or estimated payments, during a
calendar year.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Internal Revenue Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless the
failure to satisfy the regulations was inadvertent, the failure is corrected,
and the Owner or the Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the Owner if the
income, for the period the contract was not diversified, had been received by
the Owner. If the failure to diversify is not corrected in this manner, the
Owner of an annuity contract will be deemed the Owner of the underlying
securities and will be taxed on the earnings of his or her account. The Company
believes, under its interpretation of the Code and regulations thereunder, that
the investments underlying this Contract meet these diversification standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
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QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of purchase payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Internal Revenue Code of 1986, as amended, permits the rollover of
most distributions from Qualified Plans to other Qualified Plans, Individual
Retirement Accounts, or Individual Retirement Annuities. Most distributions from
Tax Sheltered Annuities may be rolled into another Tax Sheltered Annuity, an
Individual Retirement Account, or an Individual Retirement Annuity.
Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary, or c) for a
specified period of ten years or more; or
2. a required minimum distribution.
Any distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the distribution is transferred directly
to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities may not
provide life insurance benefits. If the Death Benefit exceeds the greater of the
Contract Value or the sum of all purchase payments (less any surrenders), it is
possible the Internal Revenue Service could determine that the Individual
Retirement Account or Individual Retirement Annuity does not qualify for the
desired tax treatment.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of the Employee Retirement Income Security Act (ERISA). It is
the responsibility of the plan and its fiduciaries to determine and satisfy
section 404(c) requirements.
ADVERTISING
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 held in the sub-account has been in
existence, if the underlying Mutual Fund has not been in existence for one of
the prescribed periods. 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 will 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.
A "yield" and "effective yield" may also 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
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price of the sub-account's units. Yield is an annualized figure, which means
that it is assumed that the sub-account generates the same level of net income
over a 52-week period. The "effective yield" is calculated similarly but
includes the effect of assumed compounding calculated under rules prescribed by
the Securities and Exchange Commission. The effective yield will be slightly
higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
sub-accounts of the Variable Account relative to the performance of other
variable annuity sub-accounts or mutual funds with similar or different
objectives, or the investment industry as a whole. 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 indices, 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., Morningstar, Donoghue's, CDA/Wiesenberger;
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, U.S. News and
World Report, National Underwriter; rating services such as LIMRA, Value, Best's
Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and other
publications such as the Wall Street Journal, Barron's, Columbus Dispatch,
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 Mutual Funds based upon total return
performance. These rating services and publications rank the performance of the
underlying Mutual Funds against all underlying mutual funds over specified
periods and against funds in specified categories. The rankings may or may not
include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the company or the contract.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE COMPANY
IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE FUTURE
RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR LESS
THAN ORIGINAL COST.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company and the Variable
Account are parties or to which any of their property is subject.
The General Distributor, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculations of Performance . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
30
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<PAGE> 33
APPENDIX
Purchase payments allocated to 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 is generally subject to the provisions of the 1933 or 1940
Acts, and we have been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus which relate to
the Fixed Account 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 VA Separate Account- A 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 (see
"Interest Rate Guarantee Period"). Transfer under this provision must be made
within 45 days after the expiration date of the guarantee period. The Company
reserves the right to refuse transfers or deposits to the Fixed Account if the
Fixed Account is greater than or equal to 30% of the total
31
33 OF 77
<PAGE> 34
Contract Value. Owners who have entered into a Dollar Cost Averaging Agreement
with the Company (see "Dollar Cost Averaging") may transfer from the Fixed
Account to the Variable Account under the terms of that agreement.
ANNUITY PAYMENT PERIOD FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES AND ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1983 "Table
a" Individual Annuity Mortality Table (set back six years) and 3.0% interest.
32
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<PAGE> 35
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 4, 1995
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE NATIONWIDE VA SEPARATE ACCOUNT-A
OF NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Prospectus
and should be read in conjunction with the Prospectus dated December 4, 1995.
The Prospectus may be obtained from Nationwide Life and Annuity Insurance
Company by writing P. O. Box 182008, Columbus, Ohio 43218-2008, or calling 1-
800-533-5622.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculations of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-A is a separate investment account of
Nationwide Life and Annuity Insurance Company ("Company"). On April 7, 1988,
ownership of the Company changed from Nationwide Mutual Insurance Company to
Nationwide Life Insurance Company. The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned by
Nationwide Life Insurance Company. The common stock of Nationwide Life Insurance
Company is owned by Nationwide Corporation. All of the common stock of
Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.3%)
and Nationwide Mutual Fire Insurance Company (4.7%).
SERVICES
The Company, which has responsibility for administration of the Contracts
and the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of the
underlying Mutual Funds.
The financial statements have been included herein in reference upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may request a transfer of up to 100% of the Contract
Value from the Variable Account to the Fixed Account. The Company reserves the
right to restrict the transfer to 25% of the Contract Value in any 12 month
period. The Company, at its sole discretion, reserves the right to refuse
transfers or deposits to the Fixed Account if the Fixed Account is greater or
equal to 30% of the total Contract Value. The Company may, in any Contract Year,
restrict transfers from the Variable Account to the Fixed Account to 10% of the
Variable Account at the time of the transfer. Transfers to the Fixed Account
must remain on deposit in the Fixed Account until the end of the current
Interest Rate Guarantee Period. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such portion will be determined by the
Company at its sole discretion (but will not be less than 10% of the total value
of the portion of the Fixed Account that is maturing), and will be declared upon
the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter;
therefore the Interest Rate Guarantee Period for deposits or transfers in
1
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<PAGE> 36
the Fixed Account may continue for up to three months after a one year period
has expired. Transfers under this provision must be made within 45 days after
the expiration date of the guarantee period. Owners who have entered into a
Dollar Cost Averaging agreement with the Company may transfer from the Fixed
Account to the Variable Account under the terms of that agreement.
Transfers from the Fixed Account may not be made prior to the first
Contract Anniversary. Transfers must also be made prior to the Annuitization
Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, an affiliate of the Company. During the year ended December 31,
1994, no underwriting commissions were paid by the Company to NFS.
CALCULATIONS OF PERFORMANCE
All performance advertising shall include quotations of standardized
average annual total return, calculated in accordance with standard method
prescribed by rules of the Securities and Exchange Commission, to facilitate
comparison with standardized average annual total return advertised by other
variable annuity separate accounts. Standardized average annual total return
advertised for a specific period is found by first taking a hypothetical $1,000
investment in each of the sub-accounts' units on the first day of the period at
the offering price, which is the Accumulation Unit Value per unit ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and this quotient is taken to the Nth root (N
represents the number of years in the period) and 1 is subtracted from the
result which is then expressed as a percentage, carried to at least the nearest
hundredth of a percent. Standardized average annual total return reflects the
deduction of a maximum $30 Contract Maintenance Charge and a 1.30% Mortality,
Expense Risk and Administration Charge. The redeemable value also reflects the
effect of any applicable Contingent Deferred Sales Charge that may be imposed at
the end of the period (see "Contingent Deferred Sales Charge" located in the
prospectus). No deduction is made for premium taxes which may be assessed by
certain states.
Nonstandardized average annual total return may also be advertised, and is
calculated in a manner similar to standardized average annual total return
except the nonstandardized average annual total return is based on a
hypothetical initial investment of $10,000 and does not reflect the deduction of
any applicable Contingent Deferred Sales Charge. Reflecting the Contingent
Deferred Sales Charge would decrease the level of the performance advertised.
The Contingent Deferred Sales Charge is not reflected because the Contract is
designed for long term investment. An assumed initial investment of $10,000 will
be used because that figure more closely approximates the size of a typical
Contract than does the $1,000 figure used in calculating the standardized
average annual total return quotations. The amount of the hypothetical initial
investment used affects performance because the Contract Maintenance Charge is a
fixed per contract charge.
The standardized average annual total return and nonstandardized average
annual total return quotations will be current to the last day of the calendar
quarter preceding the date on which an advertisement is submitted for
publication. Both the standardized average annual total return and the
nonstandardized average annual total return will be based on the rolling
calendar quarters and will cover at least periods of one, five, and ten years,
or a period covering the time the mutual fund held in the sub-account has been
in existence, if the mutual fund has not been in existence for one of the
prescribed periods. 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 average annual total return and nonstandardized average annual 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.
Quotations of standardized average annual total return and
non-standardized average annual total return are based upon historical earnings
and will fluctuate. Any quotation of performance, therefore, should not be
considered a guarantee of future performance. Factors affecting a sub-account's
performance include general market conditions, operating expenses and investment
management. A Contract Owner's account when redeemed may be more or less than
original cost.
Any current yield quotations of the Nationwide Separate Account Trust
Money Market Fund sub-account, subject to Rule 482 of the Securities Act of
1933, shall consist of a seven calendar day historical yield, carried at least
to the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, exclusive of capital changes, in the value of
hypothetical pre-existing account having a balance of one
2
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<PAGE> 37
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. The Nationwide Separate
Account Trust Money Market Fund sub-account's effective yield is computed
similarly but includes the effect of assumed compounding on an annualized basis
of the current yield quotations of the Fund. For the seven day period ended
December 30, 1994, the Nationwide Separate Account Trust Money Market Fund
sub-account's unit value yield and effective unit value yield were 4.32% and
4.41%, respectively.
The Nationwide Separate Account Trust Money Market Fund sub-account's
yield and effective yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the fund's portfolio, portfolio
quality and average maturity, changes in interest rates, and the fund's
expenses. Although the sub-account determines its yield on the basis of a seven
calendar day period, it may use a different time period on occasion. The yield
quotes may reflect the expense limitation described "Investment Manager and
Other Services" in the fund's Statement of Additional Information. There is no
assurance that the yields quoted on any given occasion will remain in effect for
any period of time and there is no guarantee that the net asset values will
remain constant. It should be noted that a Contract Owner's investment in the
Nationwide Separate Account Trust Money Market Fund sub-account is not
guaranteed or insured. Yields of other money market funds may not be comparable
if a different base or another method of calculation is used.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
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<PAGE> 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Financial Horizons Life Insurance Company:
We have audited the accompanying balance sheets of Financial Horizons Life
Insurance Company (a wholly owned subsidiary of Nationwide life Insurance
Company) as of December 31,1994 and 1993, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31,1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Financial Horizons Life
Insurance Company as of December 31,1994 and 1993, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31,1994, in conformity with generally accepted accounting
principles.
As discussed in note 2 to the financial statements, in 1994 the Company adopted
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1995
4
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<PAGE> 39
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets 1994 1993
------ --------------- -------------
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $427,874 in 1994) $413,764 -
Equity securities (cost $9,543 in 1994; $527 in 1993) 9,411 585
Fixed maturities held-to-maturity, at amortized cost (fair value $78,690
in 1994; $479,587 in 1993) 82,631 456,539
Mortgage loans on real estate 95,281 91,463
Real estate 1,802 1,211
Policy loans 79 -
Short-term investments (note 13) 365 1,772
--------------- -------------
603,333 551,570
--------------- -------------
Accrued investment income 8,041 7,291
Deferred policy acquisition costs 41,540 32,651
Deferred Federal income tax 1,923 -
Other assets 270 144
Assets held in Separate Accounts (note 8) 177,933 134,383
--------------- -------------
$833,040 726,039
=============== =============
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 583,188 527,231
Accrued Federal income tax (note 7):
Current 10 264
Deferred - 334
--------------- -------------
10 598
--------------- -------------
Other liabilities 4,663 5,168
Liabilities related to Separate Accounts (note 8) 177,933 134,383
--------------- -------------
765,794 667,380
--------------- -------------
Shareholder's equity (notes 3, 4 and 12):
Capital shares, $40 par value. Authorized 66 shares (100 shares in 1993),
issued and outstanding 66 shares 2,640 2,640
Paid-in additional capital 52,960 43,960
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $8,546 ($0 in 1993) and deferred
Federal income tax benefit of $1,994 ($20 expense in 1993) (3,703) 38
Retained earnings 15,349 12,021
--------------- -------------
67,246 58,659
Commitments (note 9) --------------- -------------
$833,040 726,039
=============== =============
</TABLE>
See accompanying notes to financial statements.
39 of 77
<PAGE> 40
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
--------------- ------------- ----------
Revenues (note 14):
Traditional life insurance premiums $ 311 85 93
Universal life and investment product policy charges 3,601 2,345 1,055
Net investment income (note 5) 45,030 40,477 32,726
Realized gains (losses) on investments (note 5) (625) 420 374
--------------- ------------- -----------
48,317 43,327 34,248
--------------- ------------- -----------
Benefits and expenses:
Benefits and claims 29,870 29,439 25,242
Amortization of deferred policy acquisition costs 6,940 4,128 1,737
Other operating costs and expenses 6,320 5,424 4,264
--------------- ------------- -----------
43,130 38,991 31,243
--------------- ------------- -----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 5,187 4,336 3,005
--------------- ------------- -----------
Federal income tax (note 7):
Current expense 2,103 1,982 504
Deferred (benefit) expense (244) (630) 501
--------------- ------------- -----------
1,859 1,352 1,005
--------------- ------------- -----------
Income before cumulative effect of changes in
accounting principles 3,328 2,984 2,000
Cumulative effect of changes in accounting principles,
net of tax (note 3) - (514) -
--------------- ------------- -----------
Net income $ 3,328 2,470 2,000
=============== ============= ===========
</TABLE>
See accompanying notes to financial statements.
40 of 77
<PAGE> 41
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
------------- ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 2,640 43,960 - 7,551 54,151
Net income - - - 2,000 2,000
Unrealized gains on equity
securities, net of deferred
Federal income tax - - 21 - 21
------------- ------------ ---------------- ------------ -----------------
Balance, end of year $ 2,640 43,960 21 9,551 56,172
============= ============ ================ ============ =================
1993:
Balance, beginning of year 2,640 43,960 21 9,551 56,172
Net income - - - 2,470 2,470
Unrealized gains on equity
securities, net of deferred
Federal income tax - - 17 - 17
------------- ------------ ---------------- ------------ -----------------
Balance, end of year $ 2,640 43,960 38 12,021 58,659
============= ============ ================ ============ =================
1994:
Balance, beginning of year 2,640 43,960 38 12,021 58,659
Capital contributions - 9,000 - - 9,000
Net income - - - 3,328 3,328
Adjustment for change in
accounting for certain investments
in debt and equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 4,698 - 4,698
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (8,439) - (8,439)
------------- ------------ ----------------- ------------ -----------------
Balance, end of year $ 2,640 52,960 (3,703) 15,349 67,246
============= ============ ================= ============ =================
</TABLE>
See accompanying notes to financial statements.
41 of 77
<PAGE> 42
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,328 2,470 2,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Capitalization of deferred policy acquisition costs (7,283) (10,351) (11,512)
Amortization of deferred policy acquisition costs 6,940 4,128 1,737
Amortization and depreciation 473 660 (32)
Realized losses (gains) on invested assets, net 625 (420) (374)
Deferred Federal income tax (benefit) expense (244) (784) 501
Increase in accrued investment income (750) (1,078) (1,799)
(Increase) decrease in other assets (126) 326 269
Increase (decrease) in policyholder account balances 926 (202) 288
Decrease (increase) in accrued Federal income tax payable (254) 666 (452)
Decrease (increase) in other liabilities (505) 2,843 1,104
----------------- ------------- -------------
Net cash provided by (used in) operating activities 3,130 (1,742) (8,270)
----------------- ------------- -------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 24,850 - -
Proceeds from sale of securities available-for-sale 13,170 134 -
Proceeds from maturity of fixed maturities held-to-maturity 8,483 28,829 6,734
Proceeds from sale of fixed maturities - 2,136 23,515
Proceeds from repayments of mortgage loans on real estate 5,733 3,804 1,100
Proceeds from repayments of policy loans 2 2 -
Cost of securities available-for-sale acquired (94,130) (661) -
Cost of fixed maturities held-to maturity acquired (15,544) (100,671) (155,804)
Cost of mortgage loans on real estate acquired (11,000) (31,200) (21,000)
Cost of real estate acquired (52) (2) (901)
Policy loans issued (80) (2) -
---------------- ------------ -------------
Net cash used in investing activities (68,568) (97,631) (146,356)
---------------- ------------ -------------
Cash flows form financing activities:
Proceeds from capital contribution 9,000 - -
Increase in universal life and investment product account balances 95,254 127,050 170,818
Decrease in universal life and investment product account balances (40,223) (33,159) (16,778)
---------------- ------------ -------------
Net cash provided by financing activities 64,031 93,891 154,040
---------------- ------------ -------------
Net decrease in cash and cash equivalents (1,407) (5,482) (586)
Cash and cash equivalents, beginning of year 1,772 7,254 7,840
---------------- ------------ -------------
Cash and cash equivalents, end of year $ 365 1,772 7,254
================ ============ =============
</TABLE>
See accompanying notes to financial statements.
42 of 77
<PAGE> 43
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(000's omitted)
(1) Organization and Description of Business
----------------------------------------
Financial Horizons Life Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company is a life insurer licensed in 41 states and the
District of Columbia. The Company sells primarily fixed and
variable rate annuities through banks and other financial
institutions. In addition, the Company sells universal life and other
interest-sensitive life products and is subject to competition from
other insurers throughout the United States. The Company is subject
to regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs for
the insurer beyond those recorded in the financial statements. The
Company mitigates this risk by operating throughout the United
States, thus reducing its exposure to any single jurisdiction, and
also by employing underwriting practices which identify and
minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
sound credit and collection policies and by providing for any
amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The
Company mitigates this risk by charging fees for non-conformance
with certain policy provisions, by offering products that transfer
this risk to the purchaser, and/or by attempting to match the
maturity schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) which differ from
statutory accounting practices prescribed or permitted by regulatory
authorities. See note 4.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
revenues and expenses for the period. Actual results could differ
significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are
adequate.
43 of 77
<PAGE> 44
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(a) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed maturities in
accordance with the then existing accounting standards, and accordingly,
fixed maturity securities were carried at amortized cost, adjusted for
amortization of premium or discount, since the Company had both the ability
and intent to hold these securities until maturity. Equity securities were
carried at fair value with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of shareholder's
equity.
In May 1993, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.115- ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115 requires
fixed maturities and equity securities to be classified as either
held-to-maturity, available-for-sale, or trading. The Company has no
trading securities. The Company adopted SFAS 115 as of January 1, 1994,
with no effect on net income. See note 3 regarding the effect on
shareholder's equity.
Fixed maturity securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity and are stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains
and losses, net of adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs
that would have been required as a charge or credit to operations had such
unrealized amounts been realized.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. Loans in foreclosure and loans considered in-substance
foreclosed as of the balance sheet date are placed on non-accrual status
and written down to the fair value of the existing property to derive a new
cost basis. Real estate is carried at cost less accumulated depreciation
and valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 114 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN (SFAS 114).
SFAS 114, which was amended by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 118 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME
RECOGNITION AND DISCLOSURE in October, 1994, requires the measurement of
impaired loans be based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The impact on the
financial statements of adopting SFAS 114 as amended is not expected to be
material. Previously issued financial statements shall not be restated.
The Company will adopt SFAS 114 as amended in 1995.
(b) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits and
consist primarily of certain annuities with life contingencies. Premiums
for traditional life insurance products are recognized as revenue when due
and collected. Benefits and expenses are associated with earned premiums
so as to result in recognition of profits over the life of the contract.
This association is accomplished by the provision for future policy
benefits.
44 of 77
<PAGE> 45
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual
deferred annuities and immediate annuities without life contingencies.
Revenues for universal life and investment products consist of cost of
insurance, policy administration and surrender charges that have been
earned and assessed against policy account balances during the period.
Policy benefits and claims that are charged to expense include benefits and
claims incurred in the period in excess of related policy account balances
and interest credited to policy account balances.
(c) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable selling expenses have been deferred for universal life and
investment products. Deferred policy acquisition costs are being amortized
with interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest margins,
cost of insurance, policy administration and surrender charges. For years
in which gross profits are negative, deferred policy acquisition costs are
amortized based on the present value of gross revenues. Beginning January
1, 1994, deferred policy acquisition costs are adjusted to reflect the
impact of unrealized gains and losses on fixed maturity securities
available-for-sale. See note 2(a).
(d) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders' funds
which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the statements of income and cash flows except
for the fees the Company receives for administrative services and risks
assumed.
(e) Future Policy Benefits
----------------------
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
(f) Federal Income Tax
------------------
The Company files a consolidated Federal income tax return with Nationwide
Mutual Insurance Company.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change from the
deferred method of accounting for income tax of APB Opinion 11 to the asset
and liability method of accounting for income tax. Under the asset and
liability method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under this method,
the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred
tax assets to the amounts expected to be realized.
Prior to 1993, the Company applied the deferred method of accounting for
income tax which recognized deferred income tax for income and expense
items that are reported in different years for financial reporting purposes
and income tax purposes using the tax rate applicable for the year of
calculation. Under the deferred method, deferred tax is not adjusted for
subsequent changes in tax rates. See note 7.
The Company has reported the cumulative effect of the change in method of
accounting for income tax in the 1993 statement of income. See note 3.
45 of 77
<PAGE> 46
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(g) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on
benefits and claims incurred are deducted from the respective income
and expense accounts.
(h) Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers
all short-term investments with original maturities of three months
or less to be cash equivalents.
(i) Reclassification
----------------
Certain items in the 1993 and 1992 financial statements have
been reclassified to conform to the 1994 presentation.
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of a new accounting standard by the FASB as described
in Note 2(a). As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $380,974 and
$399,556, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994, has been recorded
as a direct credit to shareholder's equity as follows:
Excess of fair value over amortized cost of fixed
maturity securities available-for-sale $ 18,582
Adjustment to deferred policy acquisition costs (11,355)
Deferred Federal income tax (2,529)
--------------
$ 4,698
==============
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The
effect as of January 1, 1993, the date of adoption, has been recognized
in the 1993 statement of income as the cumulative effect of changes in
accounting principles, as follows:
Asset/liability method of recognizing income tax (note 7) $ (79)
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $234), (note 11) (435)
Net cumulative effect of changes in accounting
principles $ (514)
=======
(4) Basis of Presentation
---------------------
The financial statements have been prepared in accordance with GAAP.
An Annual Statement, filed with the Department of Insurance of the
State of Ohio (the Department), is prepared on the basis of accounting
practices prescribed or permitted by such regulatory authority.
Prescribed statutory accounting practices include a variety of
publicationsof the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed. The Company has no material
permitted statutory accounting practices.
46 of 77
<PAGE> 47
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<TABLE>
The following reconciles the statutory net income (loss) as reported to regulatory authorities to net income as shown in the
accompanying financial statements:
<CAPTION>
1994 1993 1992
----------- --------- ----------
<S> <C> <C> <C>
Statutory net income (loss) $ 6,173 3,539 (2,092)
Adjustments to restate to the basis of GAAP:
Increase in deferred policy acquisition costs, net 343 6,223 9,775
Future policy benefits (3,587) (7,401) (5,217)
Deferred Federal income tax benefit (expense) 244 630 (501)
Valuation allowances and other than temporary
declines accounted for directly in surplus (553) (440) (266)
Interest maintenance reserve 84 476 301
Cumulative effect of changes in accounting principles, net of tax - (514) -
Other, net 624 (43) -
----------- ---------- ---------
Net income per accompanying statements of income $ 3,328 2,470 2,000
=========== ========== =========
</TABLE>
<TABLE>
The following reconciles the statutory capital shares and surplus as reported to regulatory authorities to shareholder's equity as
shown in the accompanying financial statements:
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Statutory capital shares and surplus $ 48,947 35,875 33,723
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 41,540 32,651 26,428
Nonadmitted assets - 2 13
Asset valuation reserve 3,516 2,152 1,166
Interest maintenance reserve 629 545 69
Future policy benefits (15,106) (11,518) (4,117)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 1,923 (334) (1,110)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (669) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (14,110) - -
Other, net (93) (45) -
----------- ---------- ---------
Shareholder's equity per accompanying balance sheets $67,246 58,659 56,172
=========== ========== =========
</TABLE>
<TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the years ended December 31:
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 36,720 - -
Equity securities 16 13 -
Fixed maturities held-to-maturity 540 34,023 28,107
Mortgage loans on real estate 8,437 7,082 4,831
Real estate 175 167 101
Short-term 207 295 398
Other 19 - 20
----------- ---------- ---------
Total investment income 46,114 41,580 33,457
Less: investment expenses 1,084 1,103 731
----------- ----------- ---------
Net investment income $ 45,030 40,477 32,726
=========== =========== =========
</TABLE>
47 of 77
<PAGE> 48
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<TABLE>
An analysis of the change in gross unrealized gains (losses) on securities
available-for-sale and fixed maturities held-to-maturity follows for the years
ended December 31:
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $(32,692) - -
Equity securities (190) 26 32
Fixed maturities held-to-maturity (8,407) 5,710 (1,906)
--------- --------- ---------
$(41,289) 5,736 (1,874)
========= ========= =========
</TABLE>
<TABLE>
An analysis of realized gains (losses) on investments by investment type follows for the years ended December 31:
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $ 260 - -
Fixed maturities - 856 736
Mortgage loans on real estate (332) 4 (96)
--------- ---------- ----------
(72) 860 640
--------- ---------- ----------
Valuation allowances:
Mortgage loans on real estate (500) (250) (110)
Real estate and other (53) (190) (156)
--------- ---------- ----------
(553) (440) (266)
--------- ---------- ----------
$ (625) 420 374
========= ========== ==========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
were as follow as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 4,442 92 - 4,534
Obligations of states and political
subdivisions 273 - (21) 252
Debt securities issued by foreign governments 8,517 15 (452) 8,080
Corporate securities 214,332 518 (7,903) 206,947
Mortgage-backed securities 200,310 1,291 (7,650) 193,951
------------- ---------- ---------- --------------
Total fixed maturities 427,874 1,916 (16,026) 413,764
Equity securities 9,543 45 (177) 9,411
------------- ---------- ---------- --------------
$437,417 1,961 (16,203) 423,175
============= ========== =========== ==============
The amortized cost and estimated fair value of fixed maturity corporate securities held-to-maturity as of December 31, 1994
are $82,631 and $78,690, respectively. Gross gains of $130 and gross losses of $4,071 are unrealized on these securities.
</TABLE>
48 of 77
<PAGE> 49
<TABLE>
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amortized cost and estimated fair value of investments in fixed maturity securities were as follows as of December 31, 1993:
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 12,630 1,315 - 13,945
Obligations of states and political subdivisions 275 5 - 280
Debt securities issued by foreign governments 8,606 393 (19) 8,980
Corporate securities 252,000 13,725 (411) 265,314
Mortgage-backed securities 183,028 8,757 (717) 191,068
----------- ----------- ----------- -----------
$456,539 24,195 (1,147) 479,587
=========== =========== =========== ===========
As of December 31, 1993 unrealized gain on equity securities was $58 before providing for deferred Federal income tax.
The amortized cost and estimated fair value of fixed maturity securities available-for-sale and fixed maturity securities held-to-
maturity as of December 31, 1994, by contractual maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
</TABLE>
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---------- ----------
Fixed maturity securities available-for-sale
--------------------------------------------
<S> <C> <C>
Due in one year or less $ 25,898 25,970
Due after one year through five years 171,126 164,870
Due after five years through ten years 30,540 28,973
---------- ----------
227,564 219,813
Mortgage-backed securities 200,310 193,951
---------- ----------
$427,874 413,764
========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 7,000 6,923
Due after one year through five years 41,563 40,381
Due after five years through ten years 32,524 30,003
Due after ten years 1,544 1,383
---------- ----------
$ 82,631 78,690
========== ==========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1994 were
$13,170, while proceeds from sales of investments in fixed maturity securities
during 1993 were $2,136 ($23,515 in 1992). Gross gains of $373 ($205 in 1993
and $706 in 1992) and gross losses of $73 (none in 1993 and 1992) were realized
on those sales.
Real estate is presented at cost less accumulated depreciation of $97 in 1994
($58 in 1993) and valuation allowancesof $472 in 1994 ($420 in 1993). Other
valuation allowances are $860 in 1994 ($360 in 1993) on mortgage loans on real
estate.
The Company generally initiates foreclosure proceedings on all mortgage loans
on real estate delinquent sixty days. Foreclosures of mortgage loans on real
estate were $631 in 1994 ($0 in 1993). No mortgage loans on real estate were
in process of foreclosure or in-substance foreclosed as of December 31, 1994
and 1993.
Investments with an amortized cost of $2,786 and $2,785 as of December 31, 1994
and 1993, respectively, were on deposit with various regulatory agencies as
required by law.
49 of 77
<PAGE> 50
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(6) Future Policy Benefits
----------------------
The liability for future policy benefits for investment products has been
established based on policy terms, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 5.3%, 6.0% and 6.9% for the years ended December 31, 1994,
1993 and 1992, respectively.
(7) Federal Income Tax
------------------
The Company adopted Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes (SFAS 109), as of January 1, 1993. See note
3. The 1992 financial statements have not been restated to apply the
provisions of SFAS 109.
The significant components of deferred income tax benefit for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $(244) (666)
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws and rates - 36
---------- ----------
$(244) (630)
========== ==========
</TABLE>
For the year ended December 31, 1992, deferred income tax expense results from
timing differences in the recognition of income and expense for income tax and
financial reporting purposes. The primary sources of those timing differences
were deferred policy acquisition costs (deferred expense of $2,688) and
reserves for future policy benefits (deferred benefit of $2,746).
Total Federal income tax expense for the years ended December 31, 1994, 1993
and 1992 differs from the amount computed by applying the U.S. Federal income
tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $1,815 35.0 $1,518 35.0 $1,022 34.0
Tax exempt interest and dividends
received deduction (50) (1.0) (206) (4.7) (20) (0.7)
Current year increase in U.S. Federal
income tax rate - - 36 0.8 - -
Other, net 94 1.8 4 0.1 3 (0.1)
---------- ----- ---------- ----- ---------- -----
Total (effective rate of each year) $1,859 35.8 $1,352 31.2 $1,005 33.4
========== ===== ========== ===== ========== =====
</TABLE>
Total Federal income tax paid was $2,357, $1,316 and $956 during the years
ended December 31, 1994, 1993 and 1992, respectively.
50 of 77
<PAGE> 51
<TABLE>
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<CAPTION>
The tax effects of temporary differences that give rise to significant components of the net deferred tax asset (liability) as
of December 31 are as follows:
<S> <C> <C>
1994 1993
--------------- ---------------
Deferred tax assets:
Future policy benefits $ 5,879 6,096
Securities available-for-sale 4,985 -
Liabilities in Separate Accounts 3,111 2,688
Mortgage loans on real estate and real estate 458 268
Other assets and other liabilities 101 668
--------------- ---------------
Total gross deferred tax assets 14,534 9,720
--------------- ---------------
Deferred tax liabilities:
Deferred policy acquisition costs 12,611 9,603
Fixed maturities and equity securities - 451
--------------- ---------------
Total gross deferred tax liabilities 12,611 10,054
--------------- ---------------
Net deferred tax asset (liability) $ 1,923 (334)
=============== ===============
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date
of adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could
offset capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires
disclosure of fair value information about existing on and off-balance
sheet financial instruments. In cases where quoted market prices are
not available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flow.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could
cause these estimates to vary materially. In that regard, the derived
fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in the
immediate settlement of the instruments. SFAS 107 excludes certain
assets and liabilities from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the
underlying value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically
exempted from SFAS 107 disclosures, estimated fair value of policy
reserves on insurance contracts are provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company
in estimatingits fair value disclosures:
SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the balance sheets for these instruments approximate
their fair value.
51 of 77
<PAGE> 52
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity securities is
based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair value is estimated using values
obtained from independent pricing services or, in the case of private
placements, is estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality
and maturity of the investments. The fair value for equity securities
is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The fair
value of liabilities related to Separate Accounts is the amount
payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses, using
interest currently being offered for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations. Fair value for mortgages
in default is valued at the estimated fair value of the underlying
collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: The estimated fair value is
the amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
<TABLE>
<CAPTION>
Carrying amount and estimated fair value of financial instruments subject to SFAS 107 and policy reserves on insurance contracts
were as follows as of December 31:
<S> <C> <C> <C> <C>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ------------- ------------- -------------
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $413,764 413,764 - -
Equity securities 9,411 9,411 585 585
Fixed maturities held-to-maturity 82,631 78,690 456,539 479,587
Mortgage loans on real estate 95,281 92,340 91,463 96,168
Policy loans 79 79 - -
Short-term investments 365 365 1,772 1,772
Assets held in Separate Accounts 177,933 177,933 134,383 134,383
Liabilities
-----------
Investment contracts 579,903 563,331 524,362 505,926
Policy reserves on insurance contracts 3,285 3,141 2,869 2,811
Liabilities related to Separate Accounts 177,933 168,749 134,383 126,407
</TABLE>
52 of 77
<PAGE> 53
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
----------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on
the balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate of
$6,000 extending into 1995 were outstanding as of December 31, 1994.
SIGNIFICANT CONCENTRATIONS OF CREKIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no
more than 27% (34% in 1993) in any geographic area and no more than
8.2% (9.8% in 1993) with any one borrower. The summary below depicts
loans by remaining principal balance as of each December 31:
<TABLE>
<Caption
Apartment
Office Warehouse Retail & other Total
----------- ------------ ---------- ----------- -----------
1994:
<S> <C> <C> <C> <C> <C>
East North Central $1,921 2,254 10,290 4,959 19,424
East South Central - - 1,921 9,876 11,797
Mountain - - - 1,986 1,986
Middle Atlantic 882 1,872 1,909 - 4,663
New England - 921 1,983 - 2,904
Pacific 1,952 6,873 6,310 4,910 20,045
South Atlantic 1,965 - 10,049 13,970 25,984
West North Central - 1,500 - - 1,500
West South Central 1,921 978 - 4,973 7,872
---------- ------------ ------------ ------------ -------------
$8,641 14,398 32,462 40,675 96,175
=========== ============ ============ ============
Less valuation allowances and unamortized discount 894
-------------
Total mortgage loans on real estate, net $95,281
=============
1993:
East North Central $1,929 2,381 10,340 4,973 19,263
East South Central - - 1,925 7,968 9,893
Middle Atlantic 882 1,916 1,929 - 4,727
New England - 943 2,000 - 2,943
Pacific 1,978 2,988 6,385 4,964 16,315
South Atlantic 1,977 - 11,338 17,600 30,915
West North Central - 1,500 - - 1,500
West South Central 1,949 986 - 3,000 5,935
---------- ------------ ------------ ------------ ------------
$8,175 10,714 33,917 38,505 91,851
========== ============ ============ ============
Less valuation allowances and unamortized discount 388
------------
Total mortgage loans on real estate, net $91,463
============
</TABLE>
53 of 77
<PAGE> 54
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated
companies, in a pension plan covering all employees who have completed
at least one thousand hours of service within a twelve-month period
and who have met certain age requirements. Plan contributions
are invested in a group annuity contract with NLIC. Benefits are
based upon the highest average annual salary of any three consecutive
years of the last ten years of service. The Company funds an
allocation of pension costs accrued for employees of affiliates whose
work efforts benefit the Company.
Pension costs charged to operations by the Company during the
years ended December 31, 1994, 1993 and 1992 were $265, $131, and $91,
respectively.
The net periodic pension cost for the plan as a whole for the
years ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
---------- ---------- ----------
Net periodic pension cost $ 55,046 34,067 25,970
========== ========== ==========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
<TABLE>
Information regarding the funded status of the plan as a whole as of December 31, 1994 and 1993 follows:
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
54 of 77
<PAGE> 55
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company
participates with other affiliated companies in life and health care
defined benefit plans for qualifying retirees. Postretirement life
and health care benefits are contributory and available to full time
employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement life
insurance contributions are based on age and coverage amount of each
retiree. Postretirement health care benefit contributions are
adjusted annually and contain cost-sharing features such as
deductibles and coinsurance. The accounting for the health care plan
anticipates future cost-sharing changes to the written plan that are
consistent with the Company's expressed intent to increase the retiree
contribution amount annually for expected health care inflation. The
Company's policy is to fund the cost of health care benefits in
amounts determined at the discretion of management. The Company began
funding in 1994. Plan assets are invested in group annuity contracts
of NLIC.
Effective January 1, 1993, the Company adopted the provisions
of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992,
which was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $669 ($435 net of related income tax benefit) was
recorded on the statement of income as a cumulative effect of a change
in accounting principle. See note 3. The adoption of SFAS 106,
including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $739
to $761 in 1993. Net periodic postretirement benefit cost for 1994
was $119. The Company's accrued postretirement benefit obligation as
of December 31, 1994 and 1993 was $771 and $739, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
---------- ----------
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
---------- ----------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
---------- ----------
Plan assets less than accumulated postretirement benefit obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
---------- ----------
Accrued postretirement benefit obligation $(150,264) (184,120)
========== ==========
</TABLE>
55 of 77
<PAGE> 56
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
---------- ----------
Net periodic postretirement benefit cost $22,597 21,018
========== ==========
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point increase in the assumed
health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866
and $2,377, respectively.
(12) Regulatory Risk-Based Capital and Dividend Restriction
------------------------------------------------------
Ohio, the Company's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas
for determining the amount of risk-based capital specify various
weighting factors that are applied to financial balances or various
levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of the company's regulatory total
adjusted capital, as defined by the NAIC, to its authorized control
level risk-based capital, as defined by the NAIC. Companies below
specific trigger points or ratios are classified within certain
levels, each of which requires specified corrective action. The
Company exceeds the minimum risk-based capital requirements.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $58,823
of shareholder's equity, as presented in the accompanying financial
statements, is restricted as to dividend payments in 1995.
(13) Transactions With Affiliates
----------------------------
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts
on deposit with NCMC and CCMC were $365 and $1,772 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying balance sheets.
56 of 77
<PAGE> 57
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(14) Major Lines of Business
-----------------------
The Company operates in the life insurance line of business in the
life insurance industry. Life insurance operations include
universal life, variable universal life and annuity contracts issued
to individuals.
The following table summarizes the revenues and income (losses) before
Federal income tax and cumulative effect of changes in accounting
principles for the years ended December 31, 1994, 1993 and 1992 and
assets as of December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
------------ ------------ ------------
Revenues:
Life insurance $ 45,407 39,871 30,878
Investment income allocated to capital and surplus 2,910 3,456 3,370
------------ ------------ ------------
Total $ 48,317 43,327 34,248
============ ============ ============
Income (losses) before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 2,743 880 (365)
Investment income allocated to capital and surplus 2,444 3,456 3,370
------------ ------------ ------------
Total $ 5,187 4,336 3,005
============ ============ ============
Assets:
Life insurance 765,794 667,380 494,221
Capital and surplus 67,246 58,659 56,172
------------ ------------ ------------
Total $833,040 726,039 550,393
============ ============ ============
</TABLE>
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized losses allocable to policyholders in
1994 were $41,495 and $42, respectively.
(15) Subsequent Event
----------------
On January 30, 1995, the Company received approval from the Ohio
Secretary of State to change its name to Nationwide Life and Annuity
Insurance Company.
57 of 77
<PAGE> 58
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) To be filed by Financial Statements:
<TABLE>
<S> <C>
(1) Financial statements and schedule included PAGE
in Prospectus (Part A):
Condensed Financial Information. N/A
(2) Financial statements included 38
in Part B:
Those financial statements required by
Item 23 to be included in Part B have been
incorporated therein by reference to the
Statement of Additional Information (Part
A).
Nationwide VA Separate Account-A: N/A
Financial Horizons Life Insurance Company:
Independent Auditors' Report. 38
Balance Sheets as of December 39
31, 1994 and 1993.
Statements of Income for the years 40
ended December 31, 1994, 1993 and 1992.
Statements of Shareholder's Equity for the 41
years ended December 31, 1994, 1993 and
1992.
Statements of Cash Flows for the years 42
ended December 31, 1994, 1993 and 1992.
Notes to Financial Statements. 43
</TABLE>
58 of 77
<PAGE> 59
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with this
Registration Statement and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contracts
between the Registrant and Principal
Underwriter - Filed previously with this
Registration Statement and hereby
incorporated by reference.
(4) The form of the variable annuity contract -
Filed previously with this Registration
Statement and hereby incorporated herein by
reference.
(5) Variable Annuity Application - Filed
previously with this Registration Statement
and hereby incorporated herein by
reference.
(6) Articles of Incorporation of Depositor -
Filed previously with this Registration
Statement and hereby incorporated herein by
reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
this Registration Statement and hereby
incorporated herein by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with this
Registration Statement and hereby
incorporated herein by reference.
59 of 77
<PAGE> 60
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
60 of 77
<PAGE> 61
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health, and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales
One Nationwide Plaza Financial Services
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
61 of 77
<PAGE> 62
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
62 of 77
<PAGE> 63
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
(Casualty)
Nationwide Mutual Fire Insurance Company Ohio Insurance Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Colonial Insurance Company of California California Insurance Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Property & Casualty Insurance Ohio Insurance Company
Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Neckura Insurance Group
SVM Sales GMBH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
</TABLE>
63 of 77
<PAGE> 64
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Company Texas Insurance Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Redevelopment Ohio Redevelopment of blighted
Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York New York Workers Compensation Claims
Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
64 of 77
<PAGE> 65
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
Nationwide Corporation Ohio Organized for the purpose
of acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts
of other persons,
associations, corporations,
domestic or foreign and to
form or acquire the control
of other corporations
Nationwide Health Care Corporation Ohio Develops and operates
Managed Care Delivery
System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery
System
** West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance
Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
65 of 77
<PAGE> 66
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
* Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer in
Deferred Compensation
Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and
Corporation Administration of Deferred
Employee Compensation Plans
for Public Employees
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
</TABLE>
66 of 77
<PAGE> 67
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health
and Medicare Supplement
Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and Reinsurance
Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
</TABLE>
67 of 77
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance Services of California Insurance Broker
California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan
administration, record
keeping and consulting and
compensation consulting
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent
for Policies placed through
Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
</TABLE>
68 of 77
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Nationwide Financial Institution Oklahoma Life Insurance Agency
Distributors Agency of Oklahoma, Inc.
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Institution Ohio Insurance Agency
Distributors Agency of Ohio, Inc.
Landmark Financial Services of New York, New York Life Insurance Agency
Inc.
Nationwide Financial Institution Alabama Life Insurance Agency
Distributors Agency of Alabama, Inc.
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Nationwide Financial Institution Texas Life Insurance Agency
Distributors Agency of Texas, Inc.
Colonial General Insurance Agency, Inc. Arizona Insurance Agency
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Video Eagle, Inc. Ohio Operates Several Video
Cable Systems
</TABLE>
69 of 77
<PAGE> 70
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-II Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide DC Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-5 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Issuer of Annuity Contracts
Account Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
</TABLE>
70 of 77
<PAGE> 71
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. (AMU) |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | (WISCONSIN) | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares | | Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | |______| |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | CASH MANAGEMENT |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
| |
| _____________________________ | __________________________
| | NATIONWIDE | | | THE BEAK AND |
| | COMMUNICATIONS INC. | | | WIRE CORPORATION |
| | | | | |
| | Common Stock: 14,750 Shares | | | Common Stock: 750 Shares |
|___| ------------- |__|___| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
71 of 77
<PAGE> 73
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENCY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
<FN>
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
</TABLE>
December 31, 1994
Page 2
72 of 77
<PAGE> 76
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 17, 1995 was 0 and 0, respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations
and expressly authorized by the General Corporation Law of the
State of Ohio, for indemnification by the Company of any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by
reason of the fact that such person is or was a director, officer
or employee of the Company, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection
with such action, suit or proceeding, to the extent and under the
circumstances permitted by the General Corporation Law of the
State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, NACo Variable Account and
the Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates. NFS
also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 E. Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
</TABLE>
73 of 77
<PAGE> 77
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Peter F. Frenzer Vice Chairman, President
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Director
1247 Stafford Road
Darlington, MD 21034
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
D. Richard McFerson President and
One Nationwide Plaza Chief Executive Officer--Nationwide
Columbus, OH 43215 Insurance Enterprise and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Chairman of the Board of Directors
14282 King Road
Bowling Green, OH 43402
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
</TABLE>
74 of 77
<PAGE> 78
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager and Treasurer
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide
Financial N/A N/A N/A N/A
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Gary E. Berndt
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, is issued by the
Registrant in reliance upon, and in compliance with, the
Securities and Exchange Commission's no-action letter to the
American Council of Life Insurance (publicly available November
28, 1988) which permits withdrawal restrictions to the extent
necessary to comply with IRC Section 403(b)(11).
75 of 77
<PAGE> 79
Offered by Nationwide Life and Annuity
Insurance Company
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
Nationwide VA Separate Account-A
Individual Deferred Variable Annuity Contracts
PROSPECTUS
December 4, 1995
76 of 77
<PAGE> 80
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE VA SEPARATE ACCOUNT-A certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment which has caused this Post-Effective Amendment to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 30th
day of November, 1995.
NATIONWIDE VA SEPARATE ACCOUNT-A
---------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
---------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
---------------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 30th day of
November, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -------------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- -------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------
Fred C. Finney
PETER F. FRENZER President/Chief Operating
- ------------------------------- Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- ------------------------------- and Director
Henry S. Holloway
D. RICHARD MCFERSON Chief Executive Officer
- ------------------------------- and Director
D. Richard McFerson
DAVID O. MILLER Director
- -------------------------------
David O. Miller
C. RAY NOECKER Director
- -------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------- --------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ROBERT H. RICKEL Director
- -------------------------------
Robert H. Rickel
ARDEN L. SHISLER Director
- -------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------
Harold W. Weihl
</TABLE>
77 of 77
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the Nationwide VA Separate Account-A, the Nationwide VA Separate
Account-B, the Nationwide VA Separate Account-C and the Nationwide VA
Separate Account-Q and the registration of fixed interest rate options subject
to a market value adjustment offered under some or all of the aforementioned
Individual Variable Annuity Contracts in connection with the Nationwide
Multiple Maturity Separate Account-A; and the registration of variable life
insurance policies in connection with the Nationwide VL Separate Account-A, of
Nationwide Life and Annuity Insurance Company, hereby constitutes and appoints
D. Richard McFerson, Peter F. Frenzer, Gordon E. McCutchan, W. Sidney Druen,
and Joseph P. Rath, and each of them with power to act without the others,
his/her attorney, with full power of substitution and resubstitution, for and
in his/her name, place and stead, in any and all capacities, to approve, and
sign such Registration Statements and any and all amendments thereto, with
power to affix the corporate seal of said corporation thereto and to attest
said seal and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorneys, and each of them, full power and authority to do
and perform all and every act and thing requisite to all intents and purposes
as he/she might or could do in person, hereby ratifying and confirming that
which said attorneys, or any of them, may lawfully do or cause to be done by
virtue hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this fifth day of April, 1995.
/s/ Lewis J. Alphin /s/ C. Ray Noecker
- ------------------------------------- --------------------------------------
Lewis J. Alphin, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------- --------------------------------------
Willard J. Engel, Director Robert A. Oakley, Senior Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director --------------------------------------
James F. Patterson, Director
/s/ Peter F. Frenzer
- ------------------------------------- /s/ Robert H. Rickel
Peter F. Frenzer, President/Chief -------------------------------------
Operating Officer and Director Robert H. Rickel, Director
/s/ Charles L. Fuellgraf, Jr. /s/ Arden L. Shisler
- ------------------------------------- --------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Henry S. Holloway /s/ Robert L. Stewart
- ------------------------------------- --------------------------------------
Henry S. Holloway, Chairman of the Robert L. Stewart, Director
Board, Director
/s/ Nancy C. Thomas
/s/ D. Richard McFerson --------------------------------------
- ------------------------------------- Nancy C. Thomas, Director
D. Richard McFerson, Chief Executive
Officer and Director /s/ Harold W. Weihl
-------------------------------------
/s/ David O. Miller Harold W. Weihl, Director
- -------------------------------------
David O. Miller, Director
