<PAGE> 1
Registration No. 33-44792
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 5
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
NATIONWIDE VL SEPARATE ACCOUNT-A
(EXACT NAME OF TRUST)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and the Financial Statements.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) (1) of Rule 485
[ ] on (date) pursuant to paragraph (a) (1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable
fee in the amount of $500.00 has been paid to the Commission. Registrant filed
its Rule 24f-2 Notice for the fiscal year ended December 31, 1995, on February
26, 1996.
1 of 72
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 Item CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 . . . . . . . . . . . . . . . . . . . . . . Nationwide Life and Annuity
Insurance Company
The Variable Account
2 . . . . . . . . . . . . . . . . . . . . . . Nationwide Life and Annuity
Insurance Company
3 . . . . . . . . . . . . . . . . . . . . . . Custodian of Assets
4 . . . . . . . . . . . . . . . . . . . . . . Distribution of The Policies
5 . . . . . . . . . . . . . . . . . . . . . . The Variable Account
6 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
7 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
8 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
9 . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . . . . . . . . . Information About The
Policies; How The Cash Value
Varies; Right to Exchange for
a Fixed Benefit Policy;
Reinstatement; Other Policy
Provisions
11 . . . . . . . . . . . . . . . . . . . . . . Investments of The Variable
Account
12 . . . . . . . . . . . . . . . . . . . . . . The Variable Account
13 . . . . . . . . . . . . . . . . . . . . . . Policy Charges
Reinstatement
14 . . . . . . . . . . . . . . . . . . . . . . Underwriting and Issuance -
Premium Payments
Minimum Requirements for
Issuance of a Policy
15 . . . . . . . . . . . . . . . . . . . . . . Investments of the Variable
Account; Premium Payments
16 . . . . . . . . . . . . . . . . . . . . . . Underwriting and Issuance -
Allocation of Cash Value
17 . . . . . . . . . . . . . . . . . . . . . . Surrendering The Policy for
Cash
18 . . . . . . . . . . . . . . . . . . . . . . Reinvestment
19 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . . . . . . . . . Policy Loans
22 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
23 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
24 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
25 . . . . . . . . . . . . . . . . . . . . . . Nationwide Life and Annuity
Insurance Company
26 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . . . . . . . . . Nationwide Life and Annuity
Insurance Company
28 . . . . . . . . . . . . . . . . . . . . . . Company Management
29 . . . . . . . . . . . . . . . . . . . . . . Company Management
30 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . . . . . . . . . Nationwide Life and Annuity
Insurance Company
36 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 Item CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
38 . . . . . . . . . . . . . . . . . . . . . . Distribution of The Policies
39 . . . . . . . . . . . . . . . . . . . . . . Distribution of The Policies
40 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
41(a) . . . . . . . . . . . . . . . . . . . . . Distribution of The Policies
42 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . . . . . . . . . How The Cash Value Varies
45 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . . . . . . . . . How The Cash Value Varies
47 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
48 . . . . . . . . . . . . . . . . . . . . . . Custodian of Assets
49 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
51 . . . . . . . . . . . . . . . . . . . . . . Summary of The Policies;
Information About The
Policies
52 . . . . . . . . . . . . . . . . . . . . . . Substitution of Securities
53 . . . . . . . . . . . . . . . . . . . . . . Taxation of The Company
54 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Home Office
P.O. Box 182150
One Nationwide Plaza
Columbus, Ohio 43218-2150
(800) 533-5622, TDD (800) 238-3035
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES*
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VL SEPARATE ACCOUNT-A
The Life Insurance Policies offered by this prospectus are variable life
insurance policies (collectively referred to as the "Policies"). The Policies
are designed to provide life insurance coverage on the Insured named in the
Policy. The Policies may also provide a Cash Surrender Value if the Policy is
terminated during the lifetime of the Insured. The Death Benefit and Cash
Value of the Policies may vary to reflect the experience of Nationwide VL
Separate Account-A (the "Variable Account") or the Fixed Account to which Cash
Values are allocated.
The Policies described in this prospectus may meet the definition of
"modified endowment contracts" under Section 7702A of the Internal Revenue Code
(the "Code"). The Code provides for taxation of surrenders, partial
surrenders, loans, collateral assignments and other pre-death distributions
from modified endowment contracts in the same way annuities are taxed. Any
distribution is taxable to the extent the Cash Value of the Policy exceeds, at
the time of the distribution, the premiums paid into the Policy. The Code also
provides for a 10% tax penalty on the taxable portion of such distributions.
That penalty is applicable unless the distribution is 1) paid after the Policy
Owner is 59 1/2 or disabled; or 2) the distribution is part of an annuity to
the Policy Owner as defined in the Code (see "Tax Matters").
It may not be advantageous to replace existing insurance with Policies
described in this prospectus. It may also be disadvantageous to purchase a
policy to obtain additional insurance protection if the purchaser already owns
another variable life insurance policy. The policies may not be advantageous
for persons who may wish to make policy loans or withdrawals prior to attaining
age 59 1/2 (see "Tax Matters").
The Policy Owner may allocate premiums and Cash Value to one or more of
the sub-accounts of the Variable Account and the Fixed Account. The assets of
each sub-account will be used to purchase, at net asset value, shares of a
designated underlying Mutual Fund of the following series of the underlying
variable account underlying Mutual Fund options:
<TABLE>
<S> <C>
NATIONWIDE SEPARATE ACCOUNT TRUST: FIDELITY VARIABLE INSURANCE PRODUCTS FUND:
-Capital Appreciation Fund -Growth Portfolio
-Money Market Fund NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
-Government Bond Fund -Balanced Portfolio
-Total Return Fund TCI PORTFOLIOS, INC.:
-TCI Advantage
</TABLE>
Nationwide Life and Annuity Insurance Company ("the Company") guarantees that
the Death Benefit for a Policy will never be less than the Specified Amount
stated on the Policy data pages as long as the Policy is in force. There is no
guaranteed Cash Surrender Value. If the Cash Surrender Value is insufficient
to cover the charges under the Policy, the Policy will lapse.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
*The contract is titled a "Flexible Premium Variable Life Insurance Policy" in
Texas.
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.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this Prospectus is May 1, 1996.
1
<PAGE> 5
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Cash Value.
BENEFICIARY- The person to whom the proceeds due on the Insured's death are
paid.
CASH VALUE- The sum of the value of Policy assets in the Variable Account,
Fixed Account and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the
Policy, less any Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life and Annuity Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the Policy is in force.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Code. It represents the single premium required to
mature the Policy under guaranteed mortality and expense charges, and an
interest rate of 6%.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INSURED- The person whose life is covered by the Policy, and who is named on
the Policy Data Page.
MATURITY DATE- The Policy Anniversary on or following the Insured's 95th
birthday.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
MUTUAL FUND- An underlying mutual funds which correspond to the sub-accounts of
the Variable Account.
NET ASSET VALUE- The worth of one share at the end of a market day or at the
close of the New York Stock Exchange. Net Asset Value is computed by adding
the value of all portfolio holdings, plus other assets, deducting liabilities
and then dividing the results by the number of shares outstanding.
POLICY ANNIVERSARY- An anniversary of the Policy Date.
POLICY CHARGES- All deductions made from the value of the Variable Account, or
the Policy Cash Value.
POLICY DATE- The date the provisions of the Policy take effect, as shown on the
Policy Owner's Policy Data Page.
POLICY LOAN ACCOUNT- The Portion of the Cash Value which results from Policy
Loans.
POLICY OWNER- The person designated in the Policy application as the Owner.
POLICY YEAR- Each year commencing with the Policy Date and each Policy Date
anniversary thereafter.
SPECIFIED AMOUNT- A dollar amount used to determine the Death Benefit under a
Policy. It is shown on the Policy Data Page.
SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is
surrendered.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office is open for business or any other day during which there is sufficient
degree of trading that the current net asset value of the Accumulation Units
might be materially affected.
VALUATION PERIOD- A period commencing with the close of business on 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 Nationwide Life and
Annuity Insurance Company.
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY OF TERMS ......................................................... 2
SUMMARY OF THE POLICIES ................................................... 5
Variable Life Insurance .............................................. 5
The Variable Account and its Sub-Accounts ............................ 5
The Fixed Account .................................................... 5
Deductions and Charges ............................................... 5
Premiums ............................................................. 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY ............................. 6
THE VARIABLE ACCOUNT ...................................................... 6
Investments of the Variable Account .................................. 7
Fidelity Variable Insurance Products Fund ............................ 7
Nationwide Separate Account Trust .................................... 8
Neuberger & Berman Advisers Management Trust ......................... 8
TCI Portfolios, Inc.,
a member of the Twentieth Century Family of Mutual Funds .......... 8
Reinvestment ......................................................... 9
Transfers ............................................................ 9
Dollar Cost Averaging ................................................ 9
Substitution of Securities ........................................... 10
Voting Rights ........................................................ 10
INFORMATION ABOUT THE POLICIES ............................................ 10
Underwriting and Issuance ............................................ 10
-Minimum Requirements for Issuance of a Policy ....................... 11
-Premium Payments .................................................... 11
-Allocation of Cash Value ............................................ 12
-Short-Term Right to Cancel Policy ................................... 12
POLICY CHARGES ............................................................ 12
Deductions from Premiums ............................................. 12
Deductions from Cash Value ........................................... 12
-Charges on Surrender ................................................ 12
Administrative Charge ................................................ 12
-Cost of Insurance Charge ............................................ 12
Deductions from the Sub-Accounts ..................................... 13
-Mortality and Expense Risk Charge ................................... 13
-Administrative Expense Charge ....................................... 13
-Premium Tax Recovery Charge ......................................... 13
-Income Tax Charge ................................................... 14
HOW THE CASH VALUE VARIES ................................................. 14
How the Investment Experience is Determined .......................... 14
Net Investment Factor ................................................ 14
Valuation of Assets .................................................. 15
Determining the Cash Value ........................................... 15
Valuation Periods and Valuation Dates ................................ 15
SURRENDERING THE POLICY FOR CASH .......................................... 15
Right to Surrender ................................................... 15
Cash Surrender Value ................................................. 15
Partial Surrenders ................................................... 15
Maturity Proceeds .................................................... 16
Income Tax Withholding ............................................... 16
POLICY LOANS .............................................................. 16
Taking a Policy Loan ................................................. 16
Effect on Investment Performance ..................................... 16
Interest ............................................................. 16
Effect on Death Benefit and Cash Value ............................... 17
Repayment ............................................................ 17
HOW THE DEATH BENEFIT VARIES .............................................. 17
-Calculation of the Death Benefit .................................... 17
-Proceeds Payable on Death ........................................... 18
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY .............................. 18
CHANGES OF INVESTMENT POLICY .............................................. 19
GRACE PERIOD .............................................................. 19
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
REINSTATEMENT ............................................................. 19
THE FIXED ACCOUNT OPTION .................................................. 19
CHANGES IN EXISTING INSURANCE COVERAGE .................................... 20
Changes in the Specified Amount ...................................... 20
Changes in the Death Benefit Option .................................. 20
OTHER POLICY PROVISIONS ................................................... 20
Policy Owner ......................................................... 20
Beneficiary .......................................................... 20
Assignment ........................................................... 20
Incontestability ..................................................... 21
Error in Age or Sex .................................................. 21
Suicide .............................................................. 21
Nonparticipating Policies ............................................ 21
LEGAL CONSIDERATIONS ...................................................... 21
DISTRIBUTION OF THE POLICIES .............................................. 21
CUSTODIAN OF ASSETS ....................................................... 21
TAX MATTERS ............................................................... 21
Policy Proceeds ...................................................... 21
Taxation of the Company .............................................. 22
Other Considerations ................................................. 23
THE COMPANY ............................................................... 23
COMPANY MANAGEMENT ........................................................ 23
Directors of the Company ............................................. 23
Executive Officers of the Company .................................... 24
OTHER CONTRACTS ISSUED BY THE COMPANY ..................................... 25
STATE REGULATION .......................................................... 25
REPORTS TO POLICY OWNERS .................................................. 25
ADVERTISING ............................................................... 25
LEGAL PROCEEDINGS ......................................................... 25
EXPERTS ................................................................... 26
REGISTRATION STATEMENT .................................................... 26
LEGAL OPINIONS ............................................................ 26
APPENDIX 1 ................................................................ 27
APPENDIX 2 ................................................................ 28
FINANCIAL STATEMENTS ...................................................... 39
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
4
<PAGE> 8
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life and Annuity
Insurance Company (the "Company") are similar in many ways to fixed-benefit
whole life insurance. As with fixed-benefit whole life insurance, the Owner of
the Policy pays a premium for life insurance coverage on the person insured.
Also like fixed-benefit whole life insurance, the Policies may provide for a
Cash Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. (As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid.)
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the Death Benefit and
Cash Value of the Policies may increase or decrease to reflect the investment
performance of the Variable Account sub-accounts or the Fixed Account to which
Cash Values are allocated (see "How the Death Benefit Varies"). There is no
guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash
Surrender Value is insufficient to pay Policy Charges, the Policy will lapse.
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Cash Value in the Nationwide VL Separate
Account-A (the "Variable Account") at the time the Policy is issued. The
Policy Owner selects the sub-accounts of the Variable Account or the Fixed
Account into which the Cash Value will be allocated (see "Allocation of Cash
Value"). When the Policy is issued, the Cash Value will be allocated to the
Nationwide Separate Account Trust Money Market Fund Sub-Account (for any Cash
Value allocated to a Sub-Account on the application) or the Fixed Account until
the expiration of the period in which the Policy Owner may exercise his or her
short-term right to cancel the Policy. Cash Value not designated for the Fixed
Account will be placed in the Nationwide Separate Account Trust Money Market
Sub-Account. Assets of each sub-account are invested at net asset value in
shares of a corresponding underlying Mutual Fund. For a description of the
underlying Mutual Fund options and their investment objectives, see
"Investments of the Variable Account" located in this prospectus.
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account.
Cash Values allocated to the Fixed Account are credited with interest daily at
a rate declared by the Company. The interest rate declared is at the Company's
sole discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks.
The Company deducts a charge for the cost of insurance from the Policy's Cash
Value on the Policy Date and each Monthly Anniversary Day. The Company deducts
an annual policy administrative charge from the Policy's Cash Value at the
beginning of each Policy Year after the first. The current annual charge is
$90 for total premium payments less than $25,000 and $50 for total premium
payments greater than or equal to $25,000. This charge is guaranteed never to
exceed $135 for total premium payments less than $25,000 and $75 for total
premium payments greater than or equal to $25,000. The Company also deducts on
a daily basis from the assets of the Variable Account a charge to provide for
mortality and expense risks, administrative charges and premium tax recovery.
These current charges are equal on an annual basis to 1.30% of the Variable
Account assets for the first 10 Policy Years and 1.00% thereafter and are
guaranteed never to exceed 1.60% and 1.30% respectively. For Policies which
are surrendered, the Company may deduct a Surrender Charge. The Surrender
Charge associated with each premium payment will not exceed 8.5% of the premium
payment, and will be applied for nine years after the effective date of the
premium payment. The Surrender Charge is designed to recover certain expenses
incurred by the Company related to the sale of the Policies.
Underlying Mutual Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund option for
its most recently completed fiscal year, expressed as a percentage of the
underlying Mutual Fund's average assets are as follows:
<TABLE>
<S> <C>
NSAT Capital Appreciation Fund
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.04%
Total underlying Mutual Fund Expenses . . . . . . . . . . 0.54%
</TABLE>
5
<PAGE> 9
NSAT Money Market Fund
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.02%
Total underlying Mutual Fund Expenses . . . . . . . . . . 0.52%
NSAT Government Bond Fund
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.01%
Total underlying Mutual Fund Expenses . . . . . . . . . . 0.51%
NSAT Total Return Fund
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.01%
Total underlying Mutual Fund Expenses . . . . . . . . . . 0.51%
N&B Advisers Management Trust-Balanced Portfolio
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.19%
Total underlying Mutual Fund Expenses . . . . . . . . . . 1.04%
TCI Portfolios-TCI Advantage
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.00%
Total underlying Mutual Fund Expenses . . . . . . . . . . 1.00%
Fidelity-Growth Portfolio
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.61%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.09%
Total underlying Mutual Fund Expenses . . . . . . . . . . 0.70%
The Mutual Fund expenses shown above are assessed at the underlying Fund level
and are not direct charges against the Variable Account or reductions in Cash
Value. These underlying Mutual Fund expenses are taken into consideration in
computing each underlying Mutual Fund's net asset value, which is the share
price used to calculate the Variable Account's unit value. The management fees
and other expenses, some of which may be subject to fee waivers or expense
reimbursements, are more fully described in the prospectuses for each
individual underlying Mutual Fund option. The information relating to the
underlying Mutual Fund expenses was provided by the underlying Mutual Fund and
was not independently verified by the Company.
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000. A Policy may
be issued to an insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Nationwide Life and Annuity Company (the "Company"), formerly the Financial
Horizons Life Insurance Company, is a stock life insurance company organized
under the laws of the State of Ohio, and was established in February, 1981. The
Company is a member of the Nationwide Insurance Enterprise which includes
Nationwide Life Insurance Company, Nationwide Indemnity Company, Nationwide
Mutual Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide
Property and Casualty Insurance Company, National Casualty Company, West Coast
Life Insurance Company, Scottsdale Indemnity Company and Nationwide General
Insurance Company. The Company's Home Office is at One Nationwide Plaza,
Columbus, Ohio 43216.
The Company offers a multiple line of products, including annuities. As of
January 1, 1996, it is admitted to do business in 43 states and the District of
Columbia (for additional information, see "The Company").
THE VARIABLE ACCOUNT
The Nationwide VL Separate Account-A (formerly the Financial Horizons VL
Separate Account-1) (the "Variable Account") was established by the Company on
August 8, 1984. 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 the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the
6
<PAGE> 10
investment performance of the Variable Account. The Death Benefit and Cash
Value under the Policy may vary with the investment performance of the
investments in the Variable Account (see "How the Death Benefit Varies" and
"How the Cash Value Varies").
Premium payments and Cash Value are allocated within the Variable Account among
one or more sub-accounts. The assets of each sub-account are used to purchase
shares of the funds designated by the Policy Owner. Thus, the investment
performance of a Policy depends upon the investment performance of the
underlying Mutual Fund options designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Cash Value
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). When the policy is issued, the
Policy's Cash Value not allocated to the Fixed Account is placed in the
Nationwide Separate Account Trust Money Market sub-account (for any Cash Value
allocated to a Sub-Account on the application) or Fixed Account until
expiration of the period in which the Policy Owner may exercise his or her
short-term right to cancel the Policy. At the expiration of the period in
which the Policy Owner may exercise his or her short-term right to cancel the
Policy, shares of the underlying Mutual Funds specified by the Policy Owner are
purchased at net asset value for the respective sub-account(s). Such election
is subject to any minimum premium limitations which may be imposed by the
underlying Mutual Fund option(s). In addition, no less than 5% of premium may
be allocated to any one sub-account or the Fixed Account. The Policy Owner may
change the allocation of Cash Value or may transfer Cash Value from one
sub-account to another, subject to such terms and conditions as may be imposed
by each underlying Mutual Fund option and as set forth in this prospectus (see
"Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel
Policy"). Additional Premium Payments, upon acceptance, will be allocated to
the Nationwide Separate Account Trust Money Market Fund unless the Policy Owner
specifies otherwise (see "Premium Payments").
Each of the underlying Mutual Funds options is a series of registered
investment companies which receive investment advice from a registered
investment adviser:
1) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management and Research Company;
2) The Nationwide Separate Account Trust, managed by Nationwide
Financial Services, Inc.;
3) Neuberger & Berman Advisers Management Trust, managed by Neuberger &
Berman Management Incorporated; and
4) TCI Portfolios, Inc., managed by Investors Research Corporation, an
affiliate of Twentieth Century Companies.
A summary of investment objectives is contained in the description of each
underlying Mutual Fund option below. These underlying Mutual Fund options are
available only to serve as the underlying investment for variable annuity and
variable life contracts issued through separate accounts of life insurance
companies which may or may not be affiliated, also known as "mixed and shared
funding." There are certain risks associated with mixed and shared funding,
which is disclosed in the underlying Mutual Funds' prospectuses. A full
description of the underlying Mutual Fund options, their investment policies
and restrictions, risks and charges are contained in the prospectuses of the
respective underlying Mutual Funds. A prospectus for the underlying Mutual
Fund option(s) being considered must accompany this prospectus and should be
read in conjunction herewith.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The fund is an open-end, diversified, management investment company organized
as a Massachusetts business trust on November 13, 1981. The funds' shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. Fidelity Management and Research Company ("FMR") is the
fund's manager.
- - GROWTH PORTFOLIO
INVESTMENT OBJECTIVE: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent in
other mutual funds. It is also
7
<PAGE> 11
important to point out that the Portfolio makes most sense for you if you
can afford to ride out changes in the stock market, because it invests
primarily in common stocks. FMR also can make temporary investments in
securities such as investment-grade bonds, high-quality preferred stocks
and short-term notes, for defensive purposes when it believes market
conditions warrant.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts by a
Declaration of Trust dated, June 30, 1981, as subsequently amended. The Trust
offers shares in the four separate Funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to
life insurance company separate accounts to fund the benefits under variable
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 (the Company's sole stockholder).
- - CAPITAL APPRECIATION FUND
INVESTMENT OBJECTIVE: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long
term.
- - 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.
- - GOVERNMENT BOND FUND
INVESTMENT OBJECTIVE: To provide as high a level of income as is
consistent with capital preservation through investing primarily in bonds
and securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
- - TOTAL RETURN FUND
INVESTMENT OBJECTIVE: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
- - BALANCED PORTFOLIO
INVESTMENT OBJECTIVE: To provide long-term capital growth and reasonable
current income without undue risk to principal. The Balanced Portfolio
will seek to achieve its objective through investment of a portion of its
assets in common stocks and a portion of its assets in debt securities.
The Investment Adviser anticipates that the Balanced Portfolio's
investments will normally be managed so that approximately 60% of the
Portfolio's total assets will be invested in common stocks and the
remaining assets will be invested in debt securities. However, depending
on the Investment Adviser's views regarding current market trends, the
common stock portion of the Portfolio's investments may be adjusted
downward to as low as 50% or upward to as high as 70%. At least 25% of
the Portfolio's assets will be invested in fixed income senior
securities.
TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a
diversified, open-end management investment company, designed only to provide
investment vehicles for variable annuity and variable life insurance products
of insurance companies. As a member of the Twentieth Century Family of Mutual
Funds, TCI Portfolios is managed by Investors Research Corporation.
8
<PAGE> 12
- - TCI ADVANTAGE
INVESTMENT OBJECTIVE: Current income and capital growth. The fund will
seek to achieve its objective by investing in three types of securities.
The fund's investment manager intends to invest approximately (i) 20% of
the fund's assets in securities of the United States government and its
agencies and instrumentalities and repurchase agreements collateralized
by such securities with a weighted average maturity of six months or
less, i.e., cash or cash equivalents; (ii) 40% of the fund's assets in
fixed income securities of the United States government and its agencies
and instrumentalities with a weighted average maturity of three to ten
years; and (iii) 40% of the fund's assets in equity securities that are
considered by management to have better-than-average prospects for
appreciation. Assets will be purchased or sold, as the case may be, as
is necessary in response to changes in market value to maintain the asset
mix of the fund's portfolio at approximately 60% cash, cash equivalents
and fixed income securities and 40% equity securities. There can be no
assurance that the fund will achieve its investment objective.
(Although the Statement of Additional Information concerning TCI Portfolios,
Inc. refers to redemptions of securities in kind under certain conditions, all
surrendering or redeeming Policy Owners will receive cash from the Company.)
REINVESTMENT
The underlying Mutual Fund options described above have as a policy the
distribution of dividends in the form of additional shares (or fractions
thereof) of the underlying Mutual Funds. The distribution of additional shares
will not affect the number of Accumulation Units attributable to a particular
Policy (see "Allocation of Cash Value").
TRANSFERS
The Policy Owner may transfer Cash Value among the sub-accounts of the Variable
Account and the Fixed Account. A transfer will take effect on the date of
receipt of written notice at the Company's Home Office. Transfer requests must
be in a written form acceptable to the Company.
The Policy Owner may request a transfer of up to 100% of the Cash Value from
the Variable Account to the Fixed Account. The Policy Owner's Cash Value in
each Sub-Account will be determined as of the date the transfer request is
received in the Home Office in good order. The Company reserves the right to
restrict transfers to the Fixed Account to 25% of the Cash Value.
The Policy Owner may annually transfer a portion of the value of the Fixed
Account to the Variable Account and a portion of the Variable Account to the
Fixed Account, without penalty or adjustment. The Company reserves the right
to limit the amount of Cash Value transferred out of the Fixed Account each
Policy Year. Transfers from the Fixed Account must be made within 30 days
after the termination date of the interest rate guarantee period.
Transfers may be made once per Valuation Date and may be made either in writing
or, in states allowing such transfers, by telephone. 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
Policy 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 Policy
Owners.
Policy 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.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer 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
Policy Owner to utilize Dollar Cost Averaging, a long-term investment program
which provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect
against loss in a declining market. To qualify for Dollar Cost Averaging there
must be a minimum total Cash Value, less policy indebtedness, of $15,000.
Transfers for
9
<PAGE> 13
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 Policy
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 Policy 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 Policy Owners however, any discontinuation will
not affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the underlying Mutual Funds described in this prospectus should no
longer be available for investment by the Variable Account or, if in the
judgment of the Company's management further investment in such underlying
Mutual Funds should become inappropriate, the Company may eliminate
Sub-Accounts, combine two or more Sub-Accounts, or substitute shares of one or
more underlying Mutual Fund for other underlying Mutual Fund shares already
purchased or to be purchased in the future by premium payments under the
Policy. 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 and any state insurance department may impose.
VOTING RIGHTS
Voting rights under the Policies apply with respect to Cash Value allocated to
the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote
the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual
Funds. These shares will be voted in accordance with instructions from Policy
Owners who have an interest in the Variable Account. If the Investment Company
Act of 1940 or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The Policy Owner shall have the voting interest under a Policy. The number of
shares in each sub-account for which the Policy Owner may give voting
instructions is determined by dividing any portion of the Policy's Cash Value
derived from participation in that underlying Mutual Fund option by the net
asset value of one share of that underlying Mutual Fund. The number of shares
which a person has a right to vote will be determined as of a date chosen by
the Company, but not more than 90 days prior to the meeting of the underlying
Mutual Fund. 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.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the
underlying Mutual Funds' proxy material and a form with which to give such
voting instructions.
Notwithstanding contrary Policy Owner voting instructions, the Company may vote
underlying Mutual Fund shares in any manner necessary to enable the underlying
Mutual Fund to (1) make or refrain from making any change in the investments or
investment policies for any of the underlying Mutual Funds, if required by an
insurance regulatory authority; (2) refrain from making any change in the
investment policies or any investment adviser or principal underwriter of any
portfolio which may be initiated by Policy Owners or the underlying Mutual
Fund's Board of Directors, provided the Company's disapproval of the change is
reasonable and, in the case of a change in the investment policies or
investment adviser, is based on a good faith determination that such change
would be contrary to state law or otherwise inappropriate in light of the
portfolio's objective and purposes; or (3) enter into or refrain from entering
into any advisory agreement or underwriting contract, if required by any
insurance regulatory authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
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<PAGE> 14
The minimum amount of initial premium that will be accepted by the Company is
$10,000. Policies may be issued to Insureds issue ages 80 or younger. Before
issuing any Policy, the Company requires evidence of insurability satisfactory
to it, which may include a medical examination.
- -Premium Payments
The initial premium for a Policy is payable in full at the Company's Home
Office. The minimum amount of initial premium required is $10,000 for issue
ages 75 or younger and $50,000 for issue ages 76 through 80. The Specified
Amount is determined by treating the initial premium as equal to 100% of the
Guideline Single Premium. Upon payment of an initial premium, temporary
insurance may be provided, subject to a maximum amount. The effective date of
permanent insurance coverage is dependent upon completion of all underwriting
requirements, payment of the initial premium, and delivery of the Policy while
the Insured is still living.
The Policy Owner may make additional premium payments. The Policy is primarily
intended to be a single premium with a limited ability to make additional
payments. Subsequent premium payments under the Policy are permitted under the
following circumstances:
1. an additional premium payment is required to keep the Policy in force
(see "Grace Period"); or
2. except in Virginia, additional premium payments of at least $1,000 may be
made at any time provided the premium limits prescribed by the Internal
Revenue Service to qualify the Policy as a life insurance contract are
not violated.
Payment of additional premiums if accepted, may increase the Specified Amount
of insurance. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. The Company may also require
that any existing Policy indebtedness is repaid prior to accepting any
additional premium payments.
The Company will not accept a subsequent premium payment which would result in
total premiums paid exceeding the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
- -Allocation of Cash Value
At the time a Policy is issued, its Cash Value will be based on the Nationwide
Separate Account Trust Money Market Fund sub-account value or the Fixed Account
as if the Policy had been issued and the premium invested on the date the
premium was received in good order by the Company. When the Policy is issued,
the Cash Value will be allocated to the Nationwide Separate Account Trust Money
Market Fund sub-account (for any Cash Value allocated to a Sub-Account on the
application) or the Fixed Account until the expiration of the period in which
the Policy Owner may exercise his or her short-term right to cancel the Policy.
Cash Value not designated for the Fixed Account will be placed in the
Nationwide Separate Account Trust Money Market Sub-Account. At the expiration
of the period in which the Policy Owner may exercise his or her short term
right to cancel the Policy, shares of the underlying Mutual Funds specified by
the Policy Owner are purchased at net asset value for the respective
sub-account(s). The Policy Owner may change the allocation of Cash Value or
may transfer Cash Value from one sub-account to another, subject to such terms
and conditions as may be imposed by each Fund and as set forth in the
prospectus. Cash Value allocated to the Fixed Account at the time of
application may not be transferred prior to the first Policy Anniversary (see
"Transfers" and "Investments of the Variable Account").
The designation of investment allocations will be made by the prospective
Policy Owner at the time of application for a Policy. The Policy Owner may
change the way in which future premiums are allocated by giving written notice
to the Company. All percentage allocations must be in whole numbers, and must
be at least 5%. The sum of allocations must equal 100%.
- -Short-Term Right to Cancel Policy
A Policy may be returned for cancellation and a full refund of premium within
10 days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed
or delivered to the registered representative who sold it, or the Company.
Immediately after such mailing or delivery, the Policy will be deemed void
from the beginning. The Company will refund the total premiums paid within
seven days after it receives the Policy.
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<PAGE> 15
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
No deduction is made from any premium at the time of payment. 100% of each
premium payment is applied to the Cash Value.
DEDUCTIONS FROM CASH VALUE
The Company may deduct certain charges from the Policy's Cash Value. While the
Company reserves the right to change current charges, it has no present intent
to do so. These are comprised of the following items:
- -Charges on Surrender
No charges are deducted from any premium payment. The Company incurs certain
expenses related to the sale of the Policies. These expenses include
commissions paid to sales personnel, the cost of sales literature and other
promotional activity. To recover these expenses, the Company imposes a
Surrender Charge. The Surrender Charge may be insufficient to recover all
these expenses. Unrecovered expenses are borne by the Company's general assets
which may include profits, if any, from Mortality and Expense Risk Charges.
The initial premium payment and any subsequent premium payment which results in
an increased net amount at risk will have a Surrender Charge associated with it
that will be less than or equal to 8.5% of such premium payment, as set forth
in the chart in this provision. The Surrender Charge applies for nine years
after the effective date of each premium payment. Certain surrenders may
result in adverse tax consequences (see "Tax Matters").
<TABLE>
<CAPTION>
Completed Year(s) Charges on Completed Year(s) Charges on
Since Surrender as a Since Surrender as a
Premium Payment % Premium Payment Premium Payment % Premium Payment
<S> <C> <C> <C>
0 8.5% 5 7.0%
1 8.5% 6 6.0%
2 8.0% 7 5.0%
3 8.0% 8 4.0%
4 7.5% 9 0.0%
</TABLE>
In no event will the Surrender Charge deducted on surrender exceed 8.5% of the
total premiums paid.
The amount of the Surrender Charge may be eliminated when the Policies are
issued to an officer, director, former director, partner, employee, or retired
employee of the Company; an employee of the General distributor of the
Policies, Nationwide Financial Services, Inc.; an employee of an affiliate of
the Company or the General Distributor; or a duly appointed representative of
the Company who receives no commission as a result of the purchase.
Elimination of the Surrender Charge will be permitted by the Company only in
those situations where the Company does not incur sales or administrative
expenses normally associated with sales of a Policy. In no event will
reduction of the Surrender Charge be permitted where such reduction will be
unfairly discriminatory to any person.
- -Annual Administrative Charge
The Company deducts an annual administrative charge at the beginning of each
Policy Year after the first. It will be charged proportionately to the Cash
Values in each Variable sub-account and the Fixed Account. The amount of this
annual charge is determined by the total net premium payments (premium payments
less any previous partial surrenders) as follows:
Total Net Premium Payments
<TABLE>
<CAPTION>
Greater than But Less Current Annual Guaranteed Maximum Annual
or Equal to than Administrative Charge Administrative Charge
<S> <C> <C> <C>
$10,000 $25,000 $90 $135
$25,000 $50 $75
</TABLE>
- -Cost of Insurance Charge
A monthly deduction for the Cost of insurance is charged proportionately
against the Cash Value in each Sub-account and the Fixed Account on the Policy
Date and each Monthly Anniversary Day. The Company will
12
<PAGE> 16
determine the Monthly Cost of Insurance charge by multiplying the Applicable
Cost of Insurance rate by the net amount at risk. The net amount at risk is
equal to the Death Benefit minus the Cash Value.
Guaranteed cost of insurance charges will not exceed the cost based on the
guaranteed cost of insurance rate and the Policy's net amount at risk.
Guaranteed cost of insurance rates for Standard Simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for Standard Preferred issues are
based on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO). Guaranteed cost of insurance rates for substandard issues
are based on appropriate percentage multiples of the 1980 CSO. These mortality
tables are sex distinct. In addition, separate mortality tables will be used
for standard and non-tobacco.
For Policies issued in Texas, guaranteed cost of insurance rates
for Standard Simplified issues ("Special Class-Simplified" in Texas) are based
on 130% of the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rate class of an Insured may affect the cost of insurance rate. The
Company currently places Insureds into both standard rate classes and
substandard classes that involve a higher mortality risk. In an otherwise
identical Policy, an Insured in the standard rate class will have a lower cost
of insurance than an Insured in a rate class with higher mortality risks. The
Company may also issue certain Policies on a "Simplified Issue" basis to
certain categories of individuals. Due to the underwriting criteria
established for Policies issued on a Simplified Issue basis, actual rates for
healthy individuals will be higher than the current cost of insurance rates
being charged under otherwise identical Policies that are issued on a Preferred
basis.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company will deduct, on a daily basis, certain charges from the assets of
the Variable Account. On an annual basis, these charges are equivalent to:
<TABLE>
<CAPTION>
Policy Years Policy Years
1-10 11+
<S> <C> <C>
Current 1.30% 1.00%
Guaranteed Maximum 1.60% 1.30%
</TABLE>
While the Company reserves the right to change current charges, it has no
present intent to do so.
These charges consist of the following items:
- -Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing mortality and expense
charges. The mortality risk assumed under the Policies is that the Insured may
not live as long as expected. The expense risk assumed is that the actual
expenses incurred in issuing and administering the Policies may be greater than
expected. In addition, the Company assumes risks associated with the
nonrecovery of policy issue, underwriting, and other administrative expenses
due to Policies which lapse or are surrendered during the first ten years
following each premium payment.
To compensate the Company for assuming these risks associated with the
Policies, the Company deducts a daily charge from the assets of the sub-
accounts of the Variable Account. This charge currently is equivalent to an
effective annual rate of 0.75% . To the extent that future levels of
mortality and expenses are less than or equal to those expected, the Company
may realize a profit from these charges. This charge is guaranteed
not to exceed 0.90%.
- -Administrative Expense Charge
The Company deducts a daily Administrative Expense Charge to reimburse it for
expenses related to issuance and maintenance of the Policies including
underwriting, establishing policy records, accounting and record keeping, and
periodic reporting to Policy Owners. This charge is designed only to reimburse
the Company for its actual administrative expenses. In the aggregate, the
Company expects that the charges for administrative costs will be approximately
equal to the related expenses.
This charge is deducted daily from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an annual effective
rate of 0.25%. This charge is guaranteed not to exceed 0.40%.
- -Premium Tax Recovery Charge
Premium taxes are not deducted at the time a premium is paid. The Company pays
any state premium taxes attributable to a particular Policy when incurred by
the Company. The Company expects to pay an average state premium tax rate of
approximately 2.5% of premiums for all states, although such tax rates
generally can range from 0% to 4%. To reimburse the Company for the payment of
state premium taxes associated with the
13
<PAGE> 17
Policies, during the first ten Policy Years the Company deducts a daily charge
from the assets of the sub-accounts. This charge is computed on a daily basis,
and is equivalent to an annual effective rate of 0.30% of the assets of the
Variable Account during the first ten Policy Years, and 0% thereafter. This
charge may be more or less than the amount actually assessed by the state in
which a particular Policy Owner lives. The Company does not expect to make a
profit from this charge.
- -Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (See "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any premium applied since the previous Valuation
Date, plus or minus any investment results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the
investment experience of the Variable Account and/or the daily crediting of
interest in the Fixed Account and Policy Loan Account depending on the
allocation of Cash Value by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
sub-account. The conversion is accomplished by dividing the amount of Cash
Value allocated to a sub-account by the value of an Accumulation Unit for the
sub-account of the Valuation Period during which the allocation occurs.
The value of an Accumulation Unit for each sub-account was arbitrarily set
initially at $10 when the underlying Mutual Fund shares in that sub- account
were available for purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each sub-account for
the immediately preceding Valuation Period by the Net Investment Factor for the
sub-account during the subsequent Valuation Period. The value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by dividing
(a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund
held in the sub-account determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distributions made by the underlying Mutual Fund held in the
sub-account if the "ex- dividend" date occurs during the
current Valuation Period.
(b) is the net of:
(1) the net asset value per share of the underlying Mutual Fund
held in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period.
(c) is a factor representing the daily Mortality and Expense Risk Charge,
Administration Expense Charge and Premium Tax Recovery Charge deducted from the
Variable Account. Such factor is equal to an annual rate of 1.30% for the
first ten years and 1.00% thereafter of the daily net asset value of the
Variable Account.
For underlying Mutual Fund options that credit dividends on a daily basis and
pay such dividends once a month, the 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 and Expense Risk Charge, Administration Expense Charge,
and Premium Tax Recovery Charge and any charge or credit for tax reserves.
14
<PAGE> 18
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
net asset value.
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy and amounts credited to the Fixed Account is the Cash 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 premium is
received by the Company. If part or all of the Cash Value is surrendered or
charges or deductions are made against the Cash 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 Policy Owner's
interest in the Variable Account and the Fixed Account bears to the total Cash
Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited
with interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on the New
York Stock Exchange and ending at the close of business for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock Exchange
and the Company's Home Office is open for business or any other day during
which there is sufficient degree of trading that the current net asset value of
the Accumulation Units might be materially affected.
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the Insured
is living and receive its Cash Surrender Value. The cancellation will be
effective as of the date the Company receives a proper written request for
cancellation of the Policy. Such written request must be signed and, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a Commercial
Bank or Savings and Loan, which is a member of the Federal Deposit Insurance
Corporation. In some cases, the Company may require additional documentation
of a customary nature.
CASH SURRENDER VALUE
The Cash Surrender Value increases or decreases daily to reflect the investment
experience of the Variable Account and the daily crediting of interest in the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender and the Policy, minus any charges, indebtedness
or other deductions due on that date, which may also include a Surrender
Charge.
PARTIAL SURRENDERS
After the Policy has been in force for 5 Policy Years, the Policy Owner may
request a partial surrender. Partial surrenders will be permitted only if they
satisfy the following requirements:
1. The maximum partial surrender in any Policy Year is limited to 10%
of the total premium payments;
2. Partial surrenders must not result in a reduction of the Cash
Surrender Value below $10,000; and
3. After the partial surrender, the Policy continues to qualify as life
insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of
the partial surrender. Under Death Benefit Option 1, the Specified Amount is
reduced by the amount of the partial surrender, unless the death benefit is
based on the applicable percentage of cash value. In such a case, a partial
surrender will decrease the Specified Amount by the amount by which the partial
surrender exceeds the difference between the death benefit and Specified
Amount. Partial surrender amounts must be first deducted from the values in
the Variable Account sub-accounts. Partial surrenders will be deducted from
the Fixed Account only to the extent that insufficient values are available in
the Variable Account sub-accounts.
Surrender charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
15
<PAGE> 19
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th birthday. The maturity proceeds will be payable to the Policy Owner on
the Maturity Date provided the Policy is still in force. The Maturity Proceeds
will be equal to the amount of the Policy's Cash Value, less any indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income
tax purposes, one or more of the following: (1) the value each year of the
life insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value of the
policy exceeds the employer's interest in the policy. Participants should
consult with the sponsor or the administrator of the plan, and/or with their
personal tax or legal advisers, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
The Policy Owner may take a loan using the Policy as security. During the
first year, maximum Policy indebtedness is limited to 50% of the Cash Surrender
value less interest due on the next Policy Anniversary. After the first Policy
Year, the Maximum Policy Indebtedness is limited to 90% of the Cash Surrender
Value less interest due on the next Policy Anniversary. The Company will not
grant a loan for an amount less than $1,000 ($200 in Connecticut). Should the
Death Benefit become payable, the Policy be surrendered, or the Policy mature
while a loan is outstanding, the amount of Policy indebtedness will be deducted
from the Death Benefit, Cash Surrender Value or the Maturity Value,
respectively.
Maximum Policy Indebtedness, in Texas, is limited to 90% of the Cash Surrender
Value in the sub-accounts and 100% of the Cash Surrender Value in the Fixed
Account less interest due on the next Policy Anniversary.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings
and Loan which is a member of the Federal Deposit Insurance Corporation or
other guarantor institution as defined by federal securities laws and
regulations. Certain Policy loans may result in currently taxable income and
tax penalties (see "Tax Matters").
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the Variable Account to the Policy Loan Account. If the assets relating
to a Policy are held in more than one sub-account, withdrawals from
sub-accounts will be made in proportion to the assets in each Variable
Sub-account at the time of the loan. Policy Loans will be transferred from the
Fixed Account only when insufficient amounts are available in the Variable
Sub-accounts. The amount taken out of the Variable Account will not be
affected by the Variable Account's investment experience while the loan is
outstanding.
INTEREST
Amounts transferred to the Policy Loan Account will earn interest daily from
the date of transfer.
Policy Loans will be currently credited interest daily at an annual effective
rate of 5.0%. This rate is guaranteed never to be lower than 5.1%. The
Company may change the current interest crediting rate on Policy Loans at any
time at its sole discretion. This earned interest is transferred from the
Policy Loan Account to a Variable Account or the Fixed Account on each Policy
Anniversary. It will be allocated according to the Fund Allocation Factors in
effect at the time of the transfer.
The loan interest rate is 6% per year for all Policy Loans. Interest is
charged daily and is payable at the end of each Policy year. Unpaid interest
will be added to the existing policy indebtedness as of the due date and will
be charged interest at the same rate as the rest of the indebtedness.
16
<PAGE> 20
Whenever the total loan indebtedness plus accrued interest exceeds the Cash
Value less any Surrender Charges, the Company will send a notice to the Policy
Owner and the assignee, if any. The Policy will terminate without value 61
days after the mailing of the notice unless a sufficient repayment is made
during that period. A repayment is sufficient if it is large enough to reduce
the total loan indebtedness plus accrued interest to an amount equal to the
total Cash Value less any Surrender Charges plus an amount sufficient to
continue the Policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the Death
Benefit and Cash Value because the investment results of the Variable Account
or the Fixed Account will apply only to the non-loaned portion of the Cash
Value. The longer the loan is outstanding, the greater the effect is likely to
be. Depending on the investment results of the Variable Account or the Fixed
Account while the loan is outstanding, the effect could be favorable or
unfavorable.
REPAYMENT
All or part of a loan may be repaid at any time while the Policy is in force
during the insured's lifetime. Any payment intended as a loan repayment,
rather than a premium payment, must be identified as such. Loan repayments
will be credited to the Variable Sub-accounts and the Fixed Account in
proportion to the Policy Owner's Premium allocation in effect at the time of
the repayment. Each repayment may not be less than $1,000 ($50 in
Connecticut). The Company reserves the right to require that any loan
repayments resulting from Policy Loans transferred from the Fixed Account must
be first allocated to the Fixed Account.
HOW THE DEATH BENEFIT VARIES
- -Calculation of the Death Benefit
At issue, the Specified Amount is determined by treating the initial premium as
equal to 100% of the Guideline Single Premium. Additional premium payments, if
accepted, may increase the Specified Amount. Guideline Single Premiums vary by
attained age, sex, smoking classification, underwriting classification and
total premium payments. The following table illustrates representative initial
Specified Amounts, under Death Benefit Option 1, for non-tobacco.
<TABLE>
<CAPTION>
Issue $25,000 Single Premium $50,000 Single Premium
Age Male Female Male Female
<S> <C> <C> <C> <C>
35 $179,733 $208,354 $364,774 $423,008
40 143,373 166,704 290,792 338,264
45 114,856 134,300 232,769 272,332
50 92,583 108,739 187,452 220,323
55 75,306 88,601 152,298 179,349
60 62,112 72,636 125,453 146,866
65 52,094 59,930 105,070 121,014
</TABLE>
Generally, for a given premium payment, the initial Specified Amount is greater
for non-tobacco than standard and females than males. The Specified Amount is
shown in the Policy.
While the Policy is in force, the Death Benefit will never be less than the
Specified Amount. The Death Benefit may vary with the Cash Value of the
Policy, which depends on investment performance.
The Policy Owner may choose one of two Death Benefit Options. Under Option 1,
the Death Benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option 1, the amount of the Death Benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable the amount
of Death Benefit may increase. To see how and when investment performance will
begin to affect Death Benefits, please see the illustrations located in the
prospectus. 21 of 72REDLINED Under Option 2, the Death Benefit will be the
greater of the Specified Amount plus the Cash Value, or the Applicable
Percentage of Cash Value and will vary directly with the investment
performance.
Policy Owners who are satisfied with the amount of their current insurance
coverage and prefer to have favorable investment performance and any future
premium payments reflected in increased Policy Cash Values should choose Death
Benefit Option 1. Policy Owners who prefer to have favorable investment
performance and any future premium payments increase Death Benefits should
choose Death Benefit Option 2.
17
<PAGE> 21
The monthly Cost of Insurance for Option 1 will always be less than or equal to
the monthly Cost of Insurance for the same amount of specified amount under
Option 2 (see "Cost of Insurance Charge").
The term "applicable percentage" means:
1. 250% when the Insured is Attained Age 40 or less at the
beginning of a Policy Year; and
2. when the Insured is above Attained Age 40, the percentage shown
in the "Applicable Percentage of Cash Value Table" shown in
this provision.
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
- -Proceeds Payable on Death
The actual Death Proceeds payable on the Insured's death will be the Death
Benefit as described above, less any outstanding Policy loans and less any
unpaid Policy Charges. Under certain circumstances, the Proceeds may be
adjusted (see "Incontestability", "Error in Age or Sex" and "Suicide").
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a modified single premium life
insurance policy offered by the Company on the Policy Date. If not available,
the new policy may be a flexible premium adjustable life insurance policy
offered by the Company on the Policy Date. The benefits for the new policy
will not vary with the investment experience of a separate account. The
exchange must be elected within 24 months from the Policy Date. No evidence of
insurability will be required.
The Policy Owner and Beneficiary under the new Policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new
Policy will have a death benefit on the exchange date not more than the death
benefit of the original Policy immediately prior to the exchange date. The new
Policy will have the same policy date and issue age as the original Policy.
The initial Specified Amount and any increases in Specified Amount will have
the same rate class as those of the original Policy. Any indebtedness may be
transferred to the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two Policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
18
<PAGE> 22
CHANGES OF INVESTMENT POLICY
The Company may materially change the Investment Policy of the Variable
Account. The Company must inform the Policy Owner and obtain all necessary
regulatory approvals. Any change must be submitted to the various state
insurance departments which may disapprove it if deemed detrimental to the
interests of the Policy Owners or if it renders the Company's operations
hazardous to the public. If a Policy Owner objects, the Policy may be
converted to a substantially comparable General Account life insurance policy
on the life of the insured. The Policy Owner has the later of 60 days (6
months in Pennsylvania) from the date of the Investment Policy change or 60
days (6 months in Pennsylvania) from being informed of such change to make this
conversion. The Company will not require evidence of insurability for this
conversion.
The new policy will not be affected by the investment experience of any
separate account. The New Policy will be for an amount of insurance not
exceeding the Death Benefit of the Policy converted on the date of such
conversion.
GRACE PERIOD
If the Cash Surrender Value in the Policy is insufficient to pay the Cost of
Insurance Charges, Policy loan interest, or other charges which become due but
are unpaid, a grace period of 61 days will be allowed for payment of sufficient
premium to continue the Policy in force. The Company will notify the Policy
Owner of the amount required to continue the Policy in force. If the required
amount is not received within 61 days of the notice, the Policy will terminate
without value. If the Insured dies during the Grace Period, the Company will
pay the Death Proceeds.
REINSTATEMENT
If the Grace Period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
Owner may reinstate the Policy by:
1. submitting a written request at any time within 3 years after the end
of the Grace Period and prior to the Maturity Date;
2. providing evidence of insurability satisfactory to the Company;
3. paying sufficient premium to cover all policy charges that were due
and unpaid during the Grace Period;
4. paying sufficient premium to keep the Policy in force for 3 months
from the date of reinstatement; and
5. paying or reinstating any indebtedness against the Policy which
existed at the end of the Grace Period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day
on or next following the date the application for reinstatement is approved by
the Company. If the Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the appropriate Surrender Charge. Such Surrender Charge
will be based on the length of time from the date of premium payments to the
effective date of the reinstatement. Unless the Policy Owner has provided
otherwise, the allocation of the amount of the Surrender Charge, additional
premium payments, and any loan repayments will be based on the underlying
Mutual Fund Allocation factors in effect at the start of the Grace Period.
THE FIXED ACCOUNT OPTION
Because of exemptive and exclusionary provisions, interests in the Company's
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus relating to the
Fixed Account option. Disclosures regarding the General Account may, however,
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
As explained earlier, a Policy Owner may elect to allocate or transfer all or
part of the Cash Value to the Fixed Account and the amount allocated or
transferred becomes part of the Company's general assets (General Account). The
Company's General Account consists of all assets of the Company other than
those in the Variable Account and in other separate accounts that have been or
may be established by the Company. Subject to applicable law, the Company has
sole discretion over the investment of the assets of the General Account, and
Policy Owners do not share in the investment experience of those assets. The
Company guarantees that the part of the Cash Value invested under the
Fixed-Account option will accrue interest daily at an effective annual rate
that the Company declares periodically. The Fixed Account crediting rate will
not be
19
<PAGE> 23
less than an effective annual rate of 4%. Upon request and in the annual
statement the Company will inform a Policy Owner of the then applicable rate.
The Company is not obligated to credit interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
After the first Policy Year, the Policy Owner may request certain changes in
the insurance coverage under the Policy. Any request must be in writing and
received at the Company's Home Office. No change will take effect unless the
Cash Surrender Value, after the change, is sufficient to keep the Policy in
force for at least 3 months.
CHANGES IN THE SPECIFIED AMOUNT
Payment of additional premiums or changes in the Death Benefit Option may
require an increase to the Specified Amount. The minimum increase in the
Specified Amount permitted by the Company is $10,000. An approved increase
will have an effective date of the Monthly Anniversary Day on or next following
the date the company approves the supplemental application. The Company
reserves the right to limit such increases to one per Policy Year, and to
require satisfactory evidence of insurability for any increase in the Specified
Amount. In addition, the rate class, rate class multiple and rate type for the
increase in Specified Amount must be identical to those on the Policy Date.
The Specified Amount cannot be decreased if, after the decrease the policy
would fail to satisfy the definition of Life Insurance under Section 7702 of
the Code.
CHANGES IN THE DEATH BENEFIT OPTION
The Policy Owner may change the Death Benefit Option under the Policy. If the
change is from Option 1 to Option 2, the Specified Amount will be decreased by
the amount of the Cash Value. If the change is from Option 2 to Option 1, the
Specified Amount will be increased by the amount of the Cash Value. Evidence
of insurability is not required for a change from Option 2 to Option 1. The
Company reserves the right to require evidence of insurability for a change
from Option 1 to Option 2. The effective date of the change will be the
Monthly Anniversary Day on or next following the date the Company approves the
request for change. Only one change of option is permitted per Policy Year. A
change in Death Benefit Option will not be permitted if it results in the total
premiums paid exceeding the then current maximum premium limitations prescribed
by the Internal Revenue Service to qualify the Policy as a life insurance
contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While the Insured is living, all rights in this Policy are vested in the Policy
Owner named in the application or as subsequently changed, subject to
assignment, if any.
The Policy Owner may name a Contingent Policy Owner or a new Policy Owner while
the Insured is living. Any change must be in a written form satisfactory to
the Company and recorded at the Company's Home Office. Once recorded, the
change will be effective when signed. The change will not affect any payment
made or action taken by the Company before it was recorded. The Company may
require that the Policy be submitted for endorsement before making a change.
If the Policy Owner is other than the Insured and names no Contingent Owner,
and dies before the Insured, the Policy Owner's rights in this Policy belong to
the Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at
the Company's Home Office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by the
Company before it was recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving beneficiary, unless otherwise provided. Multiple
beneficiaries will be paid in equal shares, unless otherwise provided. If no
named Beneficiary survives the Insureds, the proceeds shall be paid to the
Policy Owner or the Policy Owner's estate.
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his or her rights in
the Policy. The assignment must be in writing, signed by the Policy Owner and
recorded by the Company at its Home Office. The Company is
20
<PAGE> 24
not responsible for any assignment not submitted for recording, nor is the
Company responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness owed to the Company before
it was recorded.
INCONTESTABILITY
The Company will not contest a Death Benefit based on representations in any
written application when such benefit has been in force, during the lifetime of
the Insured, for two years.
ERROR IN AGE OR SEX
If the Insured's age, sex or both, as stated in the application, are incorrect,
the affected benefits will be adjusted to reflect the correct age or sex.
SUICIDE
If the Insured dies by suicide within two years from the Policy Date, the
Company will pay no more than the sum of the premiums, less any unpaid loan.
If the Insured dies by suicide within two years from the date an application is
accepted for an increase in the Specified Amount, the Company will pay no more
than the amount paid for such additional benefit.
NONPARTICIPATING POLICIES
The Policies are nonparticipating. This means that they do not participate in
any dividend distribution of the Company's surplus.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from contributions made on or
after August 1, 1983. The Policies offered by this prospectus are based upon
actuarial tables which distinguish between men and women and thus the Policies
provide different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with
legal counsel, the impact of Norris on any employment related insurance or
benefit program before purchasing this Policy.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where
the Policies may lawfully be 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 Policies will be distributed by the General Distributor,
Nationwide Financial Services, Inc.
Nationwide Financial Services, Inc., One Nationwide Plaza, Columbus, Ohio
43216, ("NFS") acts as general distributor for 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 Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates. NFS is a wholly owned
subsidiary of the Company.
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.
Gross commissions paid by the Company on the sale of these Policies plus fees
for marketing services provided by the General Distributor are not more than
7.50% of the premiums paid.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are met, a Policy will
be treated as a life insurance policy for federal tax purposes. The Company
will monitor compliance with these tests. The Policy should thus
21
<PAGE> 25
receive the same Federal income tax treatment as fixed benefit life insurance.
As a result, the life insurance proceeds payable under a Policy are excludable
from gross income of the beneficiary under Section 101 of the Code.
The Policies described in this prospectus, meet the definition of "modified
endowment contracts" under Section 7702A of the Code. The Code defines
modified endowment contracts as those policies issued or materially changed
after June 21, 1988 on which the total premiums paid during the first seven
years exceed the amount that would have been paid if the policy provided for
paid up benefits after seven level annual premiums. The policies offered in
this prospectus typically fall within this definition. The Code provides for
taxation of surrenders, partial surrenders, loans, collateral assignments and
other pre-death distributions from modified endowment contracts in the same way
annuities are taxed. Any distribution is taxable to the extent the Cash Value
of the Policy exceeds, at the time of the distribution, the premiums paid into
the Policy. The code generally provides for a 10% tax penalty on the taxable
portion of such distributions. That penalty is applicable unless the
distribution is 1) paid after the Policy Owner is 59 1/2 or disabled; or 2) the
distribution is part of an annuity to the Policy Owner as defined in the Code.
Even though exchanges under Section 1035 of the Code qualify as material
changes, certain exchanges of pre-June 22, 1988 policies may retain their
non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. The
Company will monitor premiums paid and will notify the Policy Owner when the
policy's non-modified endowment status is in jeopardy. If a policy is not a
modified endowment contract, a cash distribution during the first fifteen years
after a policy is issued which causes a reduction in death benefits may still
become fully or partially taxable to the Owner pursuant to Section 7702(f)(7)
of the Code. The Policy Owner should carefully consider this potential effect
and seek further information before initiating any changes in the terms of the
policy. Under certain conditions, a policy may become a modified endowment as
a result of certain material changes or a reduction in benefits as defined by
Section 7702A(c) of the Code.
In addition to meeting the tests required under Section 7702, Section 817(h) of
the Code requires that the investments of separate accounts such as the
Variable Account be adequately diversified. Regulations under 817(h) provide
that a variable life policy failing to satisfy the diversification standards
will not be treated as life insurance unless such failure was inadvertent, is
corrected, and the Policy 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 Policy Owner if the income, for the period the policy was not
diversified, had been received by the Policy Owner. If the failure to
diversify is not corrected in this manner, the Policy Owner will be deemed the
owner of the underlying securities and taxed on the earnings of his or her
account.
Should the Secretary of the Treasury issue additional rules or regulations
limiting the number of funds, transfers between funds, exchanges of funds or
changes in investment objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code, the Company will take
whatever steps are available to remain in compliance.
A total surrender or cancellation of the Policy by lapse may have adverse tax
consequences depending on the circumstances. If the amount received by the
Policy Owner plus total Policy Indebtedness exceeds the premiums paid into the
Policy, the excess generally will be treated as taxable income, regardless of
whether or not the Policy is a modified endowment contract.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or Beneficiary.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Variable Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Variable Account are reinvested and
taken into account in determining the value of Accumulation Units. As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Policies.
The Company does not initially expect to incur any Federal income tax liability
that would be chargeable to the Variable Account. Based upon these
expectations, no charge is currently being made against the Variable Account
for federal income taxes. If, however, the Company determines that on a
separate company basis such taxes may be incurred, it reserves the right to
assess a charge for such taxes against the Variable Account.
The Company may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
22
<PAGE> 26
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisors should be consulted for more complete information.
This discussion is based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company serves as depositor for Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8,
MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI
Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account and Nationwide DC Variable Account, each of
which is a registered investment company, and each of which is a separate
investment account of the Company.
The Company, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In
general, all states have statutory administrative powers. Such regulation
relates, among other things, to licensing of insurers and their agents, the
approval of policy forms, the methods of computing reserves, the form and
content of statutory financial statements, the amount of policyholders' and
stockholders' dividends, and the type of distribution of investments permitted.
The Company operates in the highly competitive field of life insurance. There
are approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete
with the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the
other insurance companies in the group. The Company shares employees with
Nationwide Mutual Insurance Company, Nationwide Life Insurance Company and
Nationwide Mutual Fire Insurance Company.
The Company does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. The Company shares Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life and Annuity Insurance Company, together with Nationwide Mutual
Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide Life
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide General Insurance Company, and all of their affiliated
companies comprise the Nationwide Insurance Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Life Insurance Company is
the sole shareholder of Nationwide Life and Annuity Insurance Company.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
<S> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner and Manager, Fred W. Eckel
Sons and Eckel Farms, Inc. (1)
Willard J. Engel 1994 General Manager Lyon County
Cooperative Oil Company (1)
Fred C. Finney 1992 Owner and Operator, Moreland Fruit
Farm; Operator, Melrose Orchard
</TABLE>
23
<PAGE> 27
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
<S> <C> <C>
Charles L. Fuellgraf, Jr. *+ 1969 Chief Executive Officer, Fuellgraf
Electric Company, Electrical
Construction and Engineering Services (1)
Joseph J. Gasper *+ 1996 President and Chief Operating
Officer, Nationwide Life Insurance
Company and Nationwide Life and Annuity Insurance Company (2)
Henry S. Holloway ** 1986 Farm Owner and Operator (1)
D. Richard McFerson *+ 1988 Chairman and Chief Executive Officer,
Nationwide Insurance Enterprise (2)
David O. Miller ** 1985 Farm Owner and Land Developer;
President, Owen Potato Farm, Inc.;
Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Farm Owner and Operator (1)
James F. Patterson + 1989 Vice President, Pattersons, Inc. ;
President, Patterson Farms, Inc. (1)
Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms;
President and Chief Executive Officer,
K&B Transport, Inc. (1)
Robert L. Stewart 1989 Farm Owner and Operator; Owner,
Sunnydale Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farms (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
<FN>
- -------------------
*Member, Executive Committee +Member, Investment Committee
</TABLE>
1) Principal occupation for last five years.
2) Prior to assuming this current position, Messrs.. McFerson and Gasper
held other executive management positions with the companies.
Each of the directors is a director of the other major affiliates of the
Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of
the Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper
are directors of Nationwide Financial Services, Inc., a registered
broker-dealer.
Messrs. Gasper, Holloway, McFerson, Miller, Patterson and Shisler are directors
of Nationwide Corporation. Messrs. Fuellgraf, McFerson, Ms. Thomas and Mr.
Weihl are trustees of Nationwide Investing Foundation, a registered investment
company. Mr. McFerson is a trustee of Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide Investing Foundation II,
registered investment companies. Mr. Engel is a director of Western
Cooperative Transport.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME OFFICE HELD
<S> <C>
D. Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance
Enterprise
Joseph J. Gasper President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President, Law and Corporate Services and
Secretary
Robert A. Oakley Executive Vice President-Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
James E. Brock Senior Vice President - Life Company Operations
W. Sidney Druen Senior Vice President and General Counsel and Assistant
Secretary
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary
Richard A. Karas Senior Vice President - Sales and Financial Services
Mark A. Folk Vice President and Treasurer
</TABLE>
24
<PAGE> 28
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Each of the other officers listed above is also an
officer of each of the companies comprising the Nationwide Insurance
Enterprise. Each of the executive officers listed above has been associated
with the registrant in an executive capacity for more than the past five years,
except Mr. Folk, who joined the Registrant in 1993. From 1983-1993, Mr. Folk
served as a partner at the accounting firm KPMG Peat Marwick LLP.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable
contracts and policies with benefits which vary in accordance with the
investment experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a
prescribed form is filed with the Insurance Department each year covering the
operation of the Company for the preceding year and its financial condition as
of the end of such year. Regulation by the Insurance Department includes
periodic examination to determine the Company's contract liabilities and
reserves so that the Insurance Department may certify the items are correct.
The Company's books and accounts are subject to review by the Insurance
Department at all times and a full examination of its operations is conducted
periodically by the National Association of Insurance Commissioners. Such
regulation does not, however, involve any supervision of management or
investment practices or policies. In addition, the Company is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current Death Benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any
Policy debt, as well as interest on the debt for the preceding year.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as change in Specified Amount, change in Death Benefit Option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, increase in loan principal, loan repayments, unpaid loan interest added
to principal, reinstatement and termination.
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts . Furthermore,
the Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs based on selected tax brackets or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not engaged in
any material litigation of any nature.
25
<PAGE> 29
EXPERTS
The financial statements and schedules included herein have been included
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement
of the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216.
All the members of such firm are employed by the Nationwide Mutual Insurance
Company.
26
<PAGE> 30
APPENDIX 1
ILLUSTRATIONS OF WHEN ADDITIONAL
PREMIUM PAYMENTS ARE PERMITTED
Example 1: A male non-tobacco, age 35, purchases a Policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $179,733. In the 12th and subsequent policy years, annual premiums
of $2,177 may be paid without violating the premium limitations prescribed by
the Internal Revenue Service to qualify the Policy as a life insurance
contract. Additional premiums which increase the Specified Amount may be made
at any time, subject to the $1,000 minimum. The Company reserves the right to
require satisfactory evidence of insurability with any premium payment which
increases the net amount at risk. In addition, premium payments may be made at
any time if they are required to continue the Policy in force.
Example 2: A male non-tobacco, age 55, purchases a Policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $306,283. In the 11th and subsequent policy years, annual premiums
of $9,591 may be paid without violating the premium limitations prescribed by
the Internal Revenue Service to qualify the Policy as a life insurance
contract. Additional premiums which increase the Specified Amount may be made
at any time, subject to the $1,000 minimum. The Company reserves the right to
require satisfactory evidence of insurability with any premium payment which
increases the net amount at risk. In addition, premium payments may be made at
any time if they are required to continue the Policy in force.
27
<PAGE> 31
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and Death Benefits under a
Policy would vary over time if the hypothetical gross investment rates of
return were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and Death Benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the Policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional
premium payments are made, no Cash Values are allocated to the Fixed Account,
and there are no changes in the Specified Amount or Death Benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is
due to the daily charges made against the assets of the sub-accounts for
assuming mortality and expense risks, recovering premium taxes and providing
for administrative expenses. On a current basis, these charges are equivalent
to an annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to a maximum
annual effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying Mutual Fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.80%. This effective rate is based
on the average of the fund expenses for the preceding year for all mutual fund
options available under the policy as of April 30, 1995.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying Mutual
Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of - 2.10%, 3.90% and 9.90%,
respectively, in policy years one through ten, and -1.80%, 4.20% and 10.20%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.40%, 3.60% and 9.60%, respectively, in policy years one through
ten, and -2.10%, 3.90% and 9.90% thereafter.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the Policy. The values shown are for policies which are
issued as standard. Policies issued on a substandard basis would result in
lower Cash Values and Death Benefits than those illustrated. Death Benefit
Option 1 has been assumed in all the illustrations.
In addition, the illustrations reflect the fact that the Company deducts an
annual administrative charge at the beginning of each Policy Year after the
first. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the Variable Account. If such a
charge is made in the future, it will require a higher gross investment return
than illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
28
<PAGE> 32
<TABLE>
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
<CAPTION>
NEW YORK
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,657 8,807 43,190 10,242 9,392 43,190 10,826 9,976 43,190
2 11,025 9,246 8,396 43,190 10,415 9,565 43,190 11,654 10,804 43,190
3 11,576 8,830 8,030 43,190 10,585 9,785 43,190 12,555 11,755 43,190
4 12,155 8,408 7,608 43,190 10,750 9,950 43,190 13,536 12,736 43,190
5 12,763 7,978 7,228 43,190 10,908 10,158 43,190 14,605 13,855 43,190
6 13,401 7,539 6,839 43,190 11,059 10,359 43,190 15,771 15,071 43,190
7 4,071 7,088 6,488 43,190 11,199 10,599 43,190 17,043 16,443 43,190
8 4,775 6,622 6,122 43,190 11,325 10,825 43,190 18,430 17,930 43,190
9 5,513 6,136 5,736 43,190 11,435 11,035 43,190 19,946 19,546 43,190
10 16,289 5,629 5,629 43,190 11,525 11,525 43,190 21,603 21,603 43,190
15 20,789 2,780 2,780 43,190 11,822 11,822 43,190 33,219 33,219 44,513
20 26,533 (*) (*) (*) 11,292 11,292 43,190 52,000 52,000 63,440
25 33,864 (*) (*) (*) 8,829 8,829 43,190 81,482 81,482 94,520
30 43,219 (*) (*) (*) 1,295 1,295 43,190 127,84 127,847 136,797
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $65 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE> 33
<TABLE>
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
<CAPTION>
NEW YORK
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,616 8,766 43,190 10,199 9,349 43,190 10,781 9,931 43,190
2 11,025 9,110 8,260 43,190 10,268 9,418 43,190 11,495 10,645 43,190
3 11,576 8,600 7,800 43,190 10,327 9,527 43,190 12,267 11,467 43,190
4 12,155 8,084 7,284 43,190 10,374 9,574 43,190 13,101 12,301 43,190
5 12,763 7,561 6,811 43,190 10,407 9,657 43,190 14,004 13,254 43,190
6 13,401 7,029 6,329 43,190 10,424 9,724 43,190 14,981 14,281 43,190
7 14,071 6,483 5,883 43,190 10,420 9,820 43,190 16,039 15,439 43,190
8 14,775 5,920 5,420 43,190 10,393 9,893 43,190 17,185 16,685 43,190
9 15,513 5,336 4,936 43,190 10,337 9,937 43,190 18,426 18,026 43,190
10 16,289 4,726 4,726 43,190 10,248 10,248 43,190 19,772 19,772 43,190
15 20,789 1,168 1,168 43,190 9,283 9,283 43,190 29,002 29,002 43,190
20 26,533 (*) (*) (*) 6,352 6,352 43,190 43,855 43,855 53,504
25 33,864 (*) (*) (*) (*) (*) (*) 66,636 66,636 77,298
30 43,219 (*) (*) (*) (*) (*) (*) 101,66 101,661 108,777
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $120 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE> 34
<TABLE>
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,672 8,822 41,661 10,256 9,406 41,661 10,841 9,991 41,661
2 11,025 9,252 8,402 41,661 10,421 9,571 41,661 11,660 10,810 41,661
3 11,576 8,829 8,029 41,661 10,583 9,783 41,661 12,552 11,752 41,661
4 12,155 8,402 7,602 41,661 10,741 9,941 41,661 13,524 12,724 41,661
5 12,763 7,970 7,220 41,661 10,895 10,145 41,661 14,586 13,836 41,661
6 13,401 7,532 6,832 41,661 11,043 10,343 41,661 15,745 15,045 41,661
7 14,071 7,084 6,484 41,661 11,184 10,584 41,661 17,012 16,412 41,661
8 14,775 6,625 6,125 41,661 11,314 10,814 41,661 18,396 17,896 41,661
9 15,513 6,152 5,752 41,661 11,431 11,031 41,661 19,909 19,509 41,661
10 16,289 5,661 5,661 41,661 11,532 11,532 41,661 21,566 21,566 41,661
15 20,789 2,958 2,958 41,661 11,954 11,954 41,661 33,184 33,184 44,467
20 26,533 (*) (*) (*) 11,690 11,690 41,661 51,870 51,870 63,282
25 33,864 (*) (*) (*) 9,799 9,799 41,661 81,250 81,250 94,250
30 43,219 (*) (*) (*) 3,694 3,694 41,661 127,52 127,528 136,455
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $90 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE> 35
<TABLE>
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
GUARANTEED VALUES
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,623 8,773 41,661 10,206 9,356 41,661 10,788 9,938 41,661
2 11,025 9,109 8,259 41,661 10,267 9,417 41,661 11,494 10,644 41,661
3 11,576 8,592 7,792 41,661 10,319 9,519 41,661 12,258 11,458 41,661
4 12,155 8,071 7,271 41,661 10,359 9,559 41,661 13,084 12,284 41,661
5 12,763 7,543 6,793 41,661 10,385 9,635 41,661 13,979 13,229 41,661
6 13,401 7,006 6,306 41,661 10,396 9,696 41,661 14,948 14,248 41,661
7 14,071 6,457 5,857 41,661 10,387 9,787 41,661 15,997 15,397 41,661
8 14,775 5,892 5,392 41,661 10,355 9,855 41,661 17,135 16,635 41,661
9 15,513 5,306 4,906 41,661 10,295 9,895 41,661 18,369 17,969 41,661
10 16,289 4,697 4,697 41,661 10,204 10,204 41,661 19,708 19,708 41,661
15 20,789 1,165 1,165 41,661 9,252 9,252 41,661 28,920 28,920 41,661
20 26,533 (*) (*) (*) 6,412 6,412 41,661 43,694 43,694 53,307
25 33,864 (*) (*) (*) (*) (*) (*) 66,290 66,290 76,897
30 43,219 (*) (*) (*) (*) (*) (*) 101,03 101,032 108,104
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE> 36
<TABLE>
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,174 22,049 114,856 25,636 23,511 114,856 27,097 24,972 114,856
2 27,563 23,291 21,166 114,856 26,223 24,098 114,856 29,328 27,203 114,856
3 28,941 22,397 20,397 114,856 26,810 24,810 114,856 31,759 29,759 114,856
4 30,388 21,492 19,492 114,856 27,396 25,396 114,856 34,411 32,411 114,856
5 31,907 20,572 18,697 114,856 27,978 26,103 114,856 37,306 35,431 114,856
6 33,502 19,633 17,883 114,856 28,553 26,803 114,856 40,467 38,717 114,856
7 35,178 18,669 17,169 114,856 29,116 27,616 114,856 43,920 42,420 114,856
8 36,936 17,675 16,425 114,856 29,663 28,413 114,856 47,693 46,443 114,856
9 38,783 16,643 15,643 114,856 30,186 29,186 114,856 51,817 50,817 114,856
10 40,722 15,567 15,567 114,856 30,681 30,681 114,856 56,332 56,332 114,856
15 51,973 9,584 9,584 114,856 33,146 33,146 114,856 87,888 87,888 117,770
20 66,332 1,510 1,510 114,856 34,297 34,297 114,856 138,873 138,873 169,425
25 84,659 (*) (*) (*) 32,091 32,091 114,856 219,214 219,214 254,289
30 108,049 (*) (*) (*) 21,069 21,069 114,856 346,030 346,030 370,252
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE> 37
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
<TABLE>
<CAPTION>
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,010 21,885 114,856 25,465 23,340 114,856 26,920 24,795 114,856
2 27,563 22,932 20,807 114,856 25,837 23,712 114,856 28,914 26,789 114,856
3 28,941 21,839 19,839 114,856 26,189 24,189 114,856 31,070 29,070 114,856
4 30,388 20,726 18,726 114,856 26,515 24,515 114,856 33,402 31,402 114,856
5 31,907 19,589 17,714 114,856 26,813 24,938 114,856 35,927 34,052 114,856
6 33,502 18,421 16,671 114,856 27,075 25,325 114,856 38,663 36,913 114,856
7 35,178 17,215 15,715 114,856 27,293 25,793 114,856 41,626 40,126 114,856
8 36,936 15,959 14,709 114,856 27,457 26,207 114,856 44,836 43,586 114,856
9 38,783 14,642 13,642 114,856 27,555 26,555 114,856 48,317 47,317 114,856
10 40,722 13,254 13,254 114,856 27,577 27,577 114,856 52,095 52,095 114,856
15 51,973 4,962 4,962 114,856 26,531 26,531 114,856 78,002 78,002 114,856
20 66,332 (*) (*) (*) 20,838 20,838 114,856 119,65 119,657 145,981
25 84,659 (*) (*) (*) 4,679 4,679 114,856 183,45 183,457 212,810
30 108,049 (*) (*) (*) (*) (*) (*) 281,55 281,552 301,260
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE> 38
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
<TABLE>
<CAPTION>
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,836 88,336 306,283 102,69 94,191 306,283 108,548 100,048 306,283
2 110,250 93,571 85,071 306,283 105,34 96,849 306,283 117,822 109,322 306,283
3 115,763 90,250 82,250 306,283 108,02 100,023 306,283 127,957 119,957 306,283
4 121,551 86,860 78,860 306,283 110,70 102,707 306,283 139,044 131,044 306,283
5 127,628 83,384 75,884 306,283 113,39 105,891 306,283 151,185 143,685 306,283
6 134,010 79,805 72,805 306,283 116,06 109,067 306,283 164,497 157,497 306,283
7 140,710 76,105 70,105 306,283 118,72 112,726 306,283 179,113 173,113 306,283
8 147,746 72,256 67,256 306,283 121,34 116,349 306,283 195,180 190,180 306,283
9 155,133 68,229 64,229 306,283 123,92 119,922 306,283 212,872 208,872 306,283
10 162,889 63,997 63,997 306,283 126,43 126,430 306,283 232,394 232,394 306,283
15 207,893 39,461 39,461 306,283 139,73 139,732 306,283 368,719 368,719 427,714
20 265,330 2,589 2,589 306,283 149,09 149,098 306,283 586,184 586,184 627,217
25 338,635 (*) (*) (*) 146,52 146,527 306,283 934,517 934,517 981,243
30 432,194 (*) (*) (*) 108,30 108,303 306,283 1,478,079 1,478,079 1,551,983
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE> 39
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
<TABLE>
<CAPTION>
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,948 87,448 306,283 101,77 93,275 306,283 107,604 99,104 306,283
2 110,250 91,708 83,208 306,283 103,37 94,874 306,283 115,732 107,232 306,283
3 115,763 87,336 79,336 306,283 104,85 96,857 306,283 124,525 116,525 306,283
4 121,551 82,805 74,805 306,283 106,20 98,202 306,283 134,051 126,051 306,283
5 127,628 78,081 70,581 306,283 107,38 99,881 306,283 144,385 136,885 306,283
6 134,010 73,125 66,125 306,283 108,36 101,360 306,283 155,616 148,616 306,283
7 140,710 67,894 61,894 306,283 109,10 103,104 306,283 167,850 161,850 306,283
8 147,746 62,323 57,323 306,283 109,56 104,560 306,283 181,201 176,201 306,283
9 155,133 56,345 52,345 306,283 109,67 105,670 306,283 195,814 191,814 306,283
10 162,889 49,889 49,889 306,283 109,37 109,374 306,283 211,866 211,866 306,283
15 207,893 7,926 7,926 306,283 101,12 101,127 306,283 325,428 325,428 377,496
20 265,330 (*) (*) (*) 65,518 65,518 306,283 503,621 503,621 538,875
25 338,635 (*) (*) (*) (*) (*) (*) 783,619 783,619 822,800
30 432,194 (*) (*) (*) (*) (*) (*) 1,204,998 1,204,998 1,265,248
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE> 40
<TABLE>
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,508 88,008 211,021 102,37 93,874 211,021 108,241 99,741 211,021
2 110,250 92,854 84,354 211,021 104,683 96,812 211,021 117,213 108,713 211,021
3 115,763 89,070 81,070 211,021 106,972 98,972 211,021 127,070 119,070 211,021
4 121,551 85,137 77,137 211,021 109,240 101,240 211,021 137,933 129,933 211,021
5 127,628 81,027 73,527 211,021 111,476 103,976 211,021 149,939 142,439 211,021
6 134,010 76,704 69,704 211,021 113,660 106,668 211,021 163,251 156,251 211,021
7 140,710 72,123 66,123 211,021 115,796 109,796 211,021 178,060 172,060 211,021
8 147,746 67,225 62,225 211,021 117,840 112,840 211,021 194,591 189,591 215,996
9 155,133 61,951 57,951 211,021 119,777 115,777 211,021 212,875 208,875 232,034
10 162,889 56,238 56,238 211,021 121,591 121,591 211,021 232,962 232,962 249,269
15 207,893 16,637 16,637 211,021 129,219 129,219 211,021 371,196 371,196 389,756
20 265,330 (*) (*) (*) 124,397 124,397 211,021 586,902 586,902 616,247
25 338,635 (*) (*) (*) 77,122 77,122 211,021 915,212 915,212 960,973
30 432,194 (*) (*) (*) (*) (*) (*) 1,430,336 1,430,336 1,444,639
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY
NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE> 41
<TABLE>
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,130 86,630 211,021 100,970 92,470 211,021 106,812 98,312 211,021
2 110,250 89,907 81,407 211,021 101,644 93,144 211,021 114,088 105,588 211,021
3 115,763 84,356 76,356 211,021 102,066 94,066 211,021 121,987 113,987 211,021
4 121,551 78,419 70,419 211,021 102,196 94,196 211,021 130,609 122,609 211,021
5 127,628 72,016 64,516 211,021 101,980 94,480 211,021 140,072 132,572 211,021
6 134,010 65,041 58,041 211,021 101,345 94,345 211,021 150,520 143,520 211,021
7 140,710 57,359 51,359 211,021 100,195 94,195 211,021 162,134 156,134 211,021
8 147,746 48,791 43,791 211,021 98,404 93,404 211,021 175,149 170,149 211,021
9 155,133 39,127 35,127 211,021 95,825 91,825 211,021 189,878 185,878 211,021
10 162,889 28,128 28,128 211,021 92,288 92,288 211,021 206,608 206,608 221,071
15 207,893 (*) (*) (*) 53,214 53,214 211,021 321,185 321,185 337,245
20 265,330 (*) (*) (*) (*) (*) (*) 493,610 493,610 518,290
25 338,635 (*) (*) (*) (*) (*) (*) 744,737 744,737 781,974
30 432,194 (*) (*) (*) (*) (*) (*) 1,132,229 1,132,229 1,143,551
<FN>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $75 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE> 42
<PAGE> 1
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide VL Separate Account-A (formerly Financial Horizons VL Separate
Account-1)
Nationwide Life and Annuity Insurance Company (formerly Financial Horizons
Life Insurance Company)
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VL Separate Account-A (formerly Financial
Horizons VL Separate Account-1) as of December 31, 1995, and the related
statements of operations and changes in contract owners' equity and schedules of
changes in unit value for each of the years in the three year period then ended.
These financial statements and schedules of changes in unit value are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules of changes in unit value
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VL Separate Account-A (formerly Financial Horizons VL
Separate Account-1) as of December 31, 1995, and the results of its operations
and its changes in contract owners' equity and the schedules of changes in unit
value for each of the years in the three year period then ended in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NATIONWIDE VL SEPARATE ACCOUNT-A
(formerly Financial Horizons VL Separate Account-1)
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Growth Portfolio (FidGro)
1,203 shares (cost $27,185) $ 35,127
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
85 shares (cost $930) 1,145
Nationwide SAT - Government Bond Fund (NWGvtBd)
1,282 shares (cost $13,566) 14,562
Nationwide SAT - Money Market Fund (NWMyMkt)
1,941 shares (cost $1,941) 1,941
Nationwide SAT - Total Return Fund (NWTotRet)
960 shares (cost $9,900) 11,079
Neuberger & Berman - Balanced Portfolio (NBBal)
682 shares (cost $10,265) 11,942
TCI Portfolios - TCI Advantage (TCIAdv)
56,330 shares (cost $285,447) 348,683
--------
Total investments 424,479
Accounts receivable 294
--------
Total assets 424,773
========
CONTRACT OWNERS' EQUITY $424,773
========
</TABLE>
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
Multiple Payment Contracts and Flexible Premium ----- ----------
Contracts:
<S> <C> <C> <C>
Fidelity VIP - Growth Portfolio 2,002 $17.583952 $ 35,203
Nationwide SAT - Capital Appreciation Fund 78 14.713230 1,148
Nationwide SAT - Government Bond Fund 971 14.984933 14,550
Nationwide SAT - Money Market Fund 164 11.714295 1,921
Nationwide SAT - Total Return Fund 608 18.192762 11,061
Neuberger & Berman - Balanced Portfolio 820 14.878481 12,200
TCI Portfolios - TCI Advantage 276 13.112917 3,619
TCI Portfolios - TCI Advantage
Initial Funding by Depositor (note 1a) 25,000 13.802855 345,071
====== ========= =======
$424,773
========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 3
NATIONWIDE VL SEPARATE ACCOUNT-A
(formerly Financial Horizons VL Separate Account-1)
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------- -------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends $ 13,451 12,249 7,192
--------- ------- -------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares 36,212 134,821 99,921
Cost of mutual fund shares sold (35,326) (138,965) (99,869)
--------- ------- -------
Realized gain (loss) on investments 886 (4,144) 52
Change in unrealized gain (loss) on investments 53,488 (7,482) 13,210
--------- ------- -------
Net gain (loss) on investments 54,374 (11,626) 13,262
--------- ------- -------
Net investment activity 67,825 623 20,454
--------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 36,589 - 91,893
Surrenders (note 2d) (164) (9,107) (8,020)
Policy loans (net of repayments) (note 4) (23,321) - -
--------- ------- -------
Net equity transactions 13,104 (9,107) 83,873
--------- ------- -------
EXPENSES:
Deductions for surrender charges (note 2d) - - (2,559)
Redemptions to pay cost of insurance charges and
administrative charges (notes 2b and 2c) (12,670) (20,999) (6,826)
Deductions for asset charges (note 3) (621) (1,049) (298)
--------- ------- -------
Total expenses (13,291) (22,048) (9,683)
--------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY 67,638 (30,532) 94,644
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 357,135 387,667 293,023
--------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 424,773 357,135 387,667
========= ======= =======
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
NATIONWIDE VL SEPARATE ACCOUNT-A
(formerly Financial Horizons VL Separate Account-1)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VL Separate Account-A (formerly Financial Horizons VL
Separate Account-1) (the Account) was established pursuant to a resolution of
the Board of Directors of Nationwide Life and Annuity Insurance Company
(formerly Financial Horizons Life Insurance Company) (the Company) on August 8,
1984. The Account has been registered as a unit investment trust under the
Investment Company Act of 1940. On August 21, 1991, the Company (Depositor)
transferred to the Account, 50,000 shares of the TCI Portfolios, Inc.-TCI
Advantage fund for which the Account was credited with 25,000 accumulation
units. The value of the accumulation units purchased by the Company on August
21, 1991 was $250,000.
The Company offers Modified Single Premium and Flexible Premium Variable
Life Insurance Policies through the Account. The primary distribution for the
contracts is through banks and other financial institutions; however, other
distributors may be utilized.
(b) The Contracts
Only contracts with a front-end sales charge, a contingent deferred sales
charge and certain other fees, have been purchased. Additionally, contracts
without a front-end sales charge, but with a contingent deferred sales charge
and certain other fees, have been purchased. See note 2 for a discussion of
policy charges and note 3 for asset charges.
Contract owners may invest in the following:
Portfolio of the Fidelity Variable Insurance Products Fund (Fidelity VIP);
Fidelity VIP - Growth Portfolio (FidGro)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolio of the Neuberger & Berman Advisers Management Trust (Neuberger &
Berman);
Neuberger & Berman - Balanced Portfolio (NBBal)
Portfolio of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Advantage (TCIAdv)
At December 31, 1995, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain policy charges (see
notes 2 and 3). The accompanying financial statements include only contract
owners' purchase payments pertaining to the variable portions of their contracts
and exclude any purchase payments for fixed dollar investment options, the
latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing net
asset value per share at December 31, 1995. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, the
operations of the Company, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes are
the responsibility of the contract owner upon termination or withdrawal.
<PAGE> 5
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) POLICY CHARGES
(a) Deductions from Premiums
On multiple payment contracts and flexible premium contracts, the Company
deducts a charge for state premium taxes equal to 2.5% of all premiums received
to cover the payment of these premium taxes. The Company also deducts a sales
load from each premium payment received not to exceed 3.5% of each premium
payment. The Company may at its sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract by
liquidating units. The amount of the charge is based upon age, sex, rate class
and net amount at risk (death benefit less total contract value).
(c) Administrative Charges
For multiple payment contracts, the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to recover policy
maintenance, accounting, record keeping and other administrative expenses.
For flexible premium contracts, the Company currently deducts a monthly
administrative charge of $25 during the first policy year and $5 per month
thereafter (may deduct up to $7.50, maximum) to recover policy maintenance,
accounting, record keeping and other administrative expenses. Additionally, the
Company deducts an increase charge of $2.04 per year per $1,000 applied to any
increase in the specified amount during the first 12 months after the increase
becomes effective.
For single premium contracts, the Company deducts an annual administrative
charge which is determined as follows:
Purchase payments totalling less than $25,000 - $90/year
Purchase payments totalling $25,000 or more - $50/year
The above charges are assessed against each contract by liquidating units.
No charges were deducted from the initial funding, or from the earnings
thereon.
(d) Surrenders
Policy surrenders result in a redemption of the contract value from the
Account and payment of the surrender proceeds to the contract owner or designee.
The surrender proceeds consist of the contract value, less any outstanding
policy loans, and less a surrender charge, if applicable. The charge is
determined according to contract type.
For multiple payment contracts and flexible premium contracts, the amount
charged is determined based upon a specified percentage of the initial surrender
charge, which varies by issue age, sex and rate class. The charge is 100% of the
initial surrender charge in the first year, declining to 0% after the ninth
year.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. The charge is 8.5% in the
first year, and declines to 0% after the ninth year.
(3) ASSET CHARGES
For multiple payment contracts and flexible premium contracts, the Company
deducts charges from the contract to cover mortality and expense risk charges
related to operations, and to recover policy maintenance charges. The charge is
equal to an annual rate of .80%, with certain exceptions.
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations, and
to recover policy maintenance and premium tax charges. The charge is equal to an
annual rate of 1.30% during the first ten policy years, and 1.00% thereafter.
The above charges are assessed through the daily unit value calculation. No
charges are deducted from the initial funding, or from earnings thereon.
<PAGE> 6
(4) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% of a policy's
cash surrender value. On each policy anniversary following the initial loan, 6%
interest is due and payable to the Company.
At the time the loan is granted, the amount of the loan is transferred from
the Account to the Company's general account as collateral for the outstanding
loan. Collateral amounts in the general account are credited with the stated
rate of interest in effect at the time the loan is made, subject to a guaranteed
minimum rate. Loan repayments result in a transfer of collateral, including
interest, back to the Account.
(5) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each sub-account in the following format:
- - Beginning unit value - Jan. 1
- - Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying mutual
funds.)
- - Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- - Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
- - Ending unit value - Dec. 31
- - Percentage increase (decrease) in unit value.
- --------------------------------------------------------------------------------
<PAGE> 7
Schedule I
NATIONWIDE VL SEPARATE ACCOUNT-A
(formerly Financial Horizons VL Separate Account-1)
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
FidGro NWCapApp NWGvtBd NWMyMkt
------ -------- ------- -------
1995
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $13.094007 11.465403 12.720514 11.176411
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .072389 .653781 .903001 .629782
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.544905 2.696528 1.472503 .000000
- ---------------------------------------------------------------------------------------------------------------------
Asset charges (.127349) (.102482) (.111085) (.091898)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.583952 14.713230 14.984933 11.714295
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 34% 28% 18% 5%
=====================================================================================================================
1994
Beginning unit value - Jan. 1 $13.201441 11.662121 13.250482 10.845265
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .794469 .184927 .833925 .419275
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.799798) (.289863) (1.261429) .000000
- ---------------------------------------------------------------------------------------------------------------------
Asset charges (.102105) (.091782) (.102464) (.088129)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.094007 11.465403 12.720514 11.176411
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* (1)% (2)% (4)% 3%
=====================================================================================================================
1993
Beginning unit value - Jan. 1 $11.148182 10.725293 12.196370 10.639809
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .248048 .261975 .781559 .291848
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.903014 .761628 .376228 .000000
- ---------------------------------------------------------------------------------------------------------------------
Asset charges (.097803) (.086775) (.103675) (.086392)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.201441 11.662121 13.250482 10.845265
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 18% 9% 9% 2%
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWTotRet NBBal TCIAdv TCIAdv+
-------- ----- ------ -------
1995
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 14.205723 12.118394 11.321934 11.822996
- -------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 1.413734 .308616 .411556 .431938
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.703396 2.562255 1.477165 1.547921
- -------------------------------------------------------------------------------------------------------------------
Asset charges (.130091) (.110784) (.097738) .000000
- -------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.192762 14.878481 13.112917 13.802855
- -------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 28% 23% 16% 17%
===================================================================================================================
1994
Beginning unit value - Jan. 1 14.167308 12.640011 11.295721 11.701906
- -------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .717782 .493181 .297670 .309969
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.565055) (.916591) (.181209) (.188879)
- -------------------------------------------------------------------------------------------------------------------
Asset charges (.114312) (.098207) (.090248) .000000
- -------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 14.205723 12.118394 11.321934 11.822996
- -------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 0% (4)% 0% 1%
===================================================================================================================
1993
Beginning unit value - Jan. 1 12.875439 11.969093 10.657984 10.953160
- -------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .527331 .184591 .223352 .230690
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .873117 .583624 .502395 .518056
- -------------------------------------------------------------------------------------------------------------------
Asset charges (.108579) (.097297) (.088010) .000000
- -------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 14.167308 12.640011 11.295721 11.701906
- -------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 10% 6% 6% 7%
===================================================================================================================
</TABLE>
*An annualized rate of return cannot be determined as asset charges do not
include the policy charges described in note 2.
+ For Depositor, see note 1a.
See note 5.
- --------------------------------------------------------------------------------
<PAGE> 43
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and
Annuity Insurance Company (formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company) as of December
31, 1995 and 1994, 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,
1995. 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 Nationwide Life and Annuity
Insurance Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (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 26, 1996
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
Assets 1995 1994
------ -------- --------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $539,214 in 1995; $427,874 in 1994) $555,751 413,764
Equity securities (cost $10,256 in 1995; $9,543 in 1994) 11,407 9,411
Fixed maturities held-to-maturity, at amortized cost (fair value $78,690 in 1994) -- 82,631
Mortgage loans on real estate 104,736 95,281
Real estate 1,117 1,802
Policy loans 94 79
Short-term investments (note 13) 4,844 365
-------- --------
677,949 603,333
-------- --------
Accrued investment income 8,464 8,041
Deferred policy acquisition costs 23,405 41,540
Deferred Federal income tax -- 1,923
Other assets 208 270
Assets held in Separate Accounts (note 8) 257,556 177,933
-------- --------
$967,582 833,040
======== ========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 621,280 583,188
Accrued Federal income tax (note 7):
Current 708 10
Deferred 2,830 --
-------- --------
3,538 10
-------- --------
Other liabilities 5,031 4,663
Liabilities related to Separate Accounts (note 8) 257,556 177,933
-------- --------
887,405 765,794
-------- --------
Shareholder's equity (notes 3, 4, 5 and 12):
Capital shares, $40 par value. Authorized, issued and outstanding 66 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 20,123 15,349
Unrealized gains (losses) on securities available-for-sale, net 4,454 (3,703)
-------- --------
80,177 67,246
-------- --------
Commitments (note 9)
$967,582 833,040
======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues (note 14):
Traditional life insurance premiums $ 674 311 85
Universal life and investment product policy charges 4,322 3,601 2,345
Net investment income (note 5) 49,108 45,030 40,477
Realized (losses) gains on investments (note 5) (702) (625) 420
-------- -------- --------
53,402 48,317 43,327
-------- -------- --------
Benefits and expenses:
Benefits and claims 34,180 29,870 29,439
Amortization of deferred policy acquisition costs 5,508 6,940 4,128
Other operating costs and expenses 6,567 6,320 5,424
-------- -------- --------
46,255 43,130 38,991
-------- -------- --------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 7,147 5,187 4,336
-------- -------- --------
Federal income tax expense (benefit) (note 7):
Current 2,012 2,103 1,982
Deferred 361 (244) (630)
-------- -------- --------
2,373 1,859 1,352
-------- -------- --------
Income before cumulative effect of changes in accounting principles 4,774 3,328 2,984
Cumulative effect of changes in accounting principles, net (note 3) -- -- (514)
-------- -------- --------
Net income $ 4,774 3,328 2,470
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
-------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 2,640 43,960 9,551 21 56,172
Net income -- -- 2,470 -- 2,470
Unrealized gains on equity securities, net -- -- -- 17 17
------- ------- ------- ------
-------
Balance, end of year $ 2,640 43,960 12,021 38 58,659
======= ======= ======= ====== =======
1994:
Balance, beginning of year 2,640 43,960 12,021 38 58,659
Capital contribution -- 9,000 -- -- 9,000
Net income -- -- 3,328 -- 3,328
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 4,698 4,698
Unrealized losses on securities available-
for-sale, net -- -- -- (8,439) (8,439)
------- ------- ------- ------- -------
Balance, end of year $ 2,640 52,960 15,349 (3,703) 67,246
======= ======= ======= ======= =======
1995:
Balance, beginning of year 2,640 52,960 15,349 (3,703) 67,246
Net income -- -- 4,774 -- 4,774
Unrealized gains on securities available-
for-sale, net -- -- -- 8,157 8,157
------- ------- ------- ------- -------
Balance, end of year $ 2,640 52,960 20,123 4,454 80,177
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1994 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,774 3,328 2,470
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Capitalization of deferred policy acquisition costs (6,754) (7,283) (10,351)
Amortization of deferred policy acquisition costs 5,508 6,940 4,128
Amortization and depreciation 878 473 660
Realized losses (gains) on invested assets, net 702 625 (420)
Deferred Federal income tax expense (benefit) 361 (244) (784)
Increase in accrued investment income (423) (750) (1,078)
Decrease (increase) in other assets 62 (126) 326
Increase (decrease) in policy liabilities 627 926 (202)
Increase (decrease) in accrued Federal income tax payable 698 (254) 666
Increase (decrease) in other liabilities 368 (505) 2,843
-------- -------- --------
Net cash provided by (used in) operating activities 6,801 3,130 (1,742)
-------- -------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 41,729 24,850 --
Proceeds from sale of securities available-for-sale 3,070 13,170 134
Proceeds from maturity of fixed maturities held-to-maturity 11,251 8,483 28,829
Proceeds from sale of fixed maturities -- -- 2,136
Proceeds from repayments of mortgage loans on real estate 8,673 5,733 3,804
Proceeds from sale of real estate 655 -- --
Proceeds from repayments of policy loans 50 2 2
Cost of securities available-for-sale acquired (79,140) (94,130) (661)
Cost of fixed maturities held-to maturity acquired (8,000) (15,544) (100,671)
Cost of mortgage loans on real estate acquired (18,000) (11,000) (31,200)
Cost of real estate acquired (10) (52) (2)
Policy loans issued (66) (80) (2)
-------- -------- --------
Net cash used in investing activities (39,788) (68,568) (97,631)
-------- -------- --------
Cash flows form financing activities:
Proceeds from capital contribution -- 9,000 --
Increase in universal life and investment product account balances 79,523 95,254 127,050
Decrease in universal life and investment product account balances (42,057) (40,223) (33,159)
-------- -------- --------
Net cash provided by financing activities 37,466 64,031 93,891
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,479 (1,407) (5,482)
Cash and cash equivalents, beginning of year 365 1,772 7,254
-------- -------- --------
Cash and cash equivalents, end of year $ 4,844 365 1,772
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company, formerly 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 42 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
insurance 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 currently 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 and the disclosures of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses for the reporting period. Actual
results could differ significantly from those estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly 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
The Company is required to classify its fixed maturity securities
and equity securities as held-to-maturity, available-for-sale or
trading. Fixed maturity securities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity and are stated at
amortized cost. Fixed maturity securities not classified as
held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred Federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1995.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances.
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 March, 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121 -
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (SFAS 121). SFAS 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be
disposed of. The statement is effective for fiscal years beginning
after December 15, 1995 and earlier application is permitted.
Previously issued financial statements shall not be restated. The
Company will adopt SFAS 121 in 1996 and the impact on the
financial statements is not expected to be material.
(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. 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.
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 asset fees, cost of insurance,
policy administration and surrender charges that have been earned
and assessed against policy account balances during the period.
Policy benefits and claims that are charged to expense include
benefits and claims incurred in the period in excess of related
policy account balances and interest credited to policy account
balances.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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, asset fees,
cost of insurance, policy administration and surrender charges.
For years in which gross profits are negative, deferred policy
acquisition costs are amortized based on the present value of
gross revenues. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 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 (NMIC).
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.
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.
(g) 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.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(h) Reclassification
Certain items in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 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 Statement of Financial Accounting Standards No.
115 - Accounting for Certain Investments in Debt and Equity Securities.
As of January 1, 1994, the Company classified fixed maturity securities
with amortized cost and fair value of $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:
<TABLE>
<S> <C>
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
========
</TABLE>
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in the
1993 statement of income as the cumulative effect of changes in
accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 2(f)) $ (79)
Accrual method of recognizing postretirement benefits other than
pensions (net of tax benefit of $234) (note 11) (435)
-----
$(514)
=====
</TABLE>
(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
publications of the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed. The Company has no material
permitted statutory accounting practices.
The statutory capital shares and surplus of the Company as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$54,978, $48,947 and $35,875, respectively. The statutory net income of
the Company as reported to regulatory authorities for the years ended
December 31, 1995, 1994 and 1993 was $8,023, $6,173 and $3,539,
respectively.
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Investments
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $35,093 36,720 --
Equity securities 713 16 13
Fixed maturities held-to-maturity 4,530 540 34,023
Mortgage loans on real estate 9,106 8,437 7,082
Real estate 273 175 167
Short-term investments 348 207 295
Other 41 19 --
------- ------- -------
Total investment income 50,104 46,114 41,580
Less: investment expenses 996 1,084 1,103
------- ------- -------
Net investment income $49,108 45,030 40,477
======= ======= =======
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $(822) 260 --
Fixed maturities -- -- 856
Mortgage loans on real estate 110 (832) (246)
Real estate and other 10 (53) (190)
----- ----- -----
$(702) (625) 420
===== ===== =====
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Gross unrealized gains (losses) $ 17,688 (14,242)
Adjustment to deferred policy acquisition costs (10,836) 8,545
Deferred Federal income tax (2,398) 1,994
-------- --------
$ 4,454 (3,703)
======== ========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 30,647 (32,692) --
Equity securities 1,283 (190) 26
Fixed maturities held-to-maturity 3,941 (8,407) 5,710
-------- -------- --------
$ 35,871 (41,289) 5,736
======== ======== ========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly 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 securities
available-for-sale were as follow as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 3,492 18 -- 3,510
Obligations of states and political subdivisions 271 -- (1) 270
Debt securities issued by foreign governments 6,177 301 -- 6,478
Corporate securities 332,425 10,116 (925) 341,616
Mortgage-backed securities 196,849 7,649 (621) 203,877
-------- -------- -------- --------
Total fixed maturities 539,214 18,084 (1,547) 555,751
Equity securities 10,256 1,151 -- 11,407
-------- -------- -------- --------
$549,470 19,235 (1,547) 567,158
======== ======== ======== ========
</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>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
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
======== ======== ======== ========
</TABLE>
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
were unrealized on those securities.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1995, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
-------- --------
<S> <C> <C>
Due in one year or less $ 39,072 39,427
Due after one year through five years 224,262 231,200
Due after five years through ten years 75,380 77,726
Due after ten years 3,651 3,521
-------- --------
342,365 351,874
Mortgage-backed securities 196,849 203,877
-------- --------
$539,214 555,751
======== ========
</TABLE>
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Proceeds from the sale of securities available-for-sale during
1995 and 1994 were $3,070 and $13,170, respectively, while proceeds
from sales of investments in fixed maturity securities during 1993 were
$2,136. Gross gains of $64 ($373 in 1994 and $205 in 1993) and gross
losses of $6 ($73 1994 and none in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $2,000 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $600.
As permitted by the FASB's Special Report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities, issued in November, 1995, the Company transferred all of
its fixed maturity securities previously classified as held-to-maturity
to available-for-sale. As of December 14, 1995, the date of transfer,
the fixed maturity securities had amortized cost of $77,405, resulting
in a gross unrealized gain of $1,709.
Fixed maturity securities that were non-income producing for the twelve
month period preceding December 31, 1995 had a carrying value of $996
(none in 1994).
Real estate is presented at cost less accumulated depreciation of $81
in 1995 ($97 in 1994) and valuation allowances of $229 in 1995 ($472 in
1994).
As of December 31, 1995, the recorded investment of mortgage loans on
real estate considered to be impaired (under Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of
a Loan as amended by Statement of Financial Accounting Standards No.
118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure) was $966, for which there was no valuation
allowance. During 1995, the average recorded investment in impaired
mortgage loans on real estate was approximately $242 and no interest
income was recognized on those loans.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Allowance, beginning of year $ 860
Reduction of the allowance credited to operations (110)
-----
Allowance, end of year $ 750
=====
</TABLE>
Foreclosures of mortgage loans on real estate were $631 in 1994. No
mortgage loans on real estate were in process of foreclosure or
in-substance foreclosed as of December 31, 1994 .
Fixed maturity securities with an amortized cost of $2,806 and $2,786
as of December 31, 1995 and 1994, respectively, were on deposit with
various regulatory agencies as required by law.
(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 approximately 5.6%, 5.3% and 6.0% for the years
ended December 31, 1995, 1994 and 1993, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(7) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 5,249 5,879
Securities available-for-sale -- 4,985
Liabilities in Separate Accounts 3,445 3,111
Mortgage loans on real estate and real estate 338 458
Other assets and other liabilities 708 101
-------- --------
Total gross deferred tax assets 9,740 14,534
-------- --------
Deferred tax liabilities:
Securities available-for-sale 6,308 --
Deferred policy acquisition costs 6,262 12,611
-------- --------
Total gross deferred tax liabilities 12,570 12,611
-------- --------
$ (2,830) 1,923
======== ========
</TABLE>
The Company has determined that valuation allowances are not necessary
as of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that
some portion of the total gross deferred tax assets will not be
realized. 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.
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------- --------------------- ---------------------
Amount % Amount % Amount %
------------ ------- ------------ ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 2,501 35.0 $ 1,815 35.0 $ 1,518 35.0
Tax exempt interest and dividends
received deduction (150) (2.1) (50) (1.0) (206) (4.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 36 0.8
Other, net 22 0.3 94 1.8 4 0.1
------- ---- ------- ---- ------- ----
Total (effective rate of each year $ 2,373 33.2 $ 1,859 35.8 $ 1,352 31.2
======= ==== ======= ==== ======= ====
</TABLE>
Total Federal income tax paid was $1,314, $2,357 and $1,316 during the
years ended December 31, 1995, 1994 and 1993, respectively.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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. SFAS 107 defines the fair value of a financial
instrument as the amount at which the financial instrument could be
exchanged in a current transaction between willing parties. In cases
where quoted market prices are not available, fair value is based on
estimates using present value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Short-term investments and policy loans: The carrying amount
reported in the balance sheets for these instruments approximates
their fair value.
Fixed maturity and equity securities: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Separate Account assets and liabilities: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
Mortgage loans on real estate: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
Investment contracts: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Policy reserves on life 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.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------ ----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $555,751 555,751 413,764 413,764
Equity securities 11,407 11,407 9,411 9,411
Fixed maturities held-to-maturity -- -- 82,631 78,690
Mortgage loans on real estate 104,736 111,501 95,281 92,340
Policy loans 94 94 79 79
Short-term investments 4,844 4,844 365 365
Assets held in Separate Accounts 257,556 257,556 177,933 177,933
Liabilities
-----------
Investment contracts 616,984 601,582 579,903 563,331
Policy reserves on life insurance contracts 4,296 4,520 3,285 3,141
Liabilities related to Separate Accounts 257,556 246,996 177,933 168,749
</TABLE>
(9) Additional Financial Instruments Disclosures
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
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 $8,500 extending into
1996 were outstanding as of December 31, 1995.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 28% (27% in 1994) in any geographic area and no more than 14.8%
(8.2% in 1994) with any one borrower.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------ --------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 1,854 878 8,263 3,940 14,935
East South Central -- -- 1,877 11,753 13,630
Mountain -- -- -- 1,964 1,964
Middle Atlantic 882 1,820 901 -- 3,603
New England -- 895 1,963 -- 2,858
Pacific 1,923 8,600 8,211 8,838 27,572
South Atlantic 3,953 -- 9,928 15,797 29,678
West North Central -- 1,500 -- -- 1,500
West South Central 3,881 969 -- 4,932 9,782
-------- -------- -------- -------- --------
$ 12,493 14,662 31,143 47,224 105,522
======== ======== ======== ======== ========
Less valuation allowances and unamortized discount 786
--------
Total mortgage loans on real estate, net $104,736
========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------ --------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
1994:
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 40,674 96,175
======= ====== ====== ======
Less valuation allowances and unamortized discount 894
-------
Total mortgage loans on real estate, net $95,281
=======
</TABLE>
(10) Pension Plan
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds an allocation of pension
costs accrued for employees of affiliates whose work efforts benefit
the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance
Companies and Affiliates Retirement Plan was merged with the Farmland
Mutual Insurance Company Employees' Retirement Plan and the Wausau
Insurance Companies Pension Plan to form the Nationwide Insurance
Enterprise Retirement Plan. Immediately prior to the merger, the plans
were amended to provide consistent benefits for service after January
1, 1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1995, 1994 and 1993 were $214, $265 and $131,
respectively.
The net periodic pension cost for the Nationwide Insurance Companies
and Affiliates Retirement Plan as a whole for the years ended December
31, 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and Employers Life
Insurance Company of Wausau, a wholly owned subsidiary of NLIC. Prior
to the merger, the assets of the Nationwide Insurance Companies and
Affiliates Retirement Plan were invested in a group annuity contract of
NLIC.
(11) Postretirement Benefits Other Than Pensions
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
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.
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 in the 1993 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. Certain affiliated companies elected to amortize their initial
transition obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1995 and 1994 was $808 and $771, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1995 and 1994 was $66 and $119,
respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Information regarding the funded status of the plan as a whole
as of December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(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, $70,034
of shareholder's equity, as presented in the accompanying financial
statements, is so restricted as to dividend payments in 1996.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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 $4,844 and $365 as of December 31, 1995
and 1994, respectively, and are included in short-term investments on
the accompanying balance sheets.
Certain annuity products are sold through an affiliated company, which
is a subsidiary of Nationwide Corporation. Total commissions paid to
the affiliate for the three years ended December 31, 1995 were $6,638,
$6,935 and $10,041, respectively.
(14) Segment Information
The Company operates in the long-term savings and life insurance lines
of business in the life insurance industry. Long-term savings
operations include both qualified and non-qualified individual annuity
contracts. Life insurance operations include universal life and
variable universal life issued to individuals. Corporate primarily
includes investments, and the related investment income, which are not
specifically allocated to one of the two operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in
accounting principles for the years ended December 31, 1995, 1994 and
1993 and assets as of December 31, 1995, 1994 and 1993, by business
segment.
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 50,669 45,234 39,684
Life insurance 179 173 187
Corporate 2,554 2,910 3,456
--------- --------- ---------
$ 53,402 48,317 43,327
========= ========= =========
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 4,514 3,739 2,134
Life insurance (387) (996) (1,254)
Corporate 3,020 2,444 3,456
--------- --------- ---------
$ 7,147 5,187 4,336
========= ========= =========
Assets:
Long-term savings 931,939 789,147 693,915
Life insurance 2,565 2,393 2,027
Corporate 33,078 41,500 30,097
--------- --------- ---------
$ 967,582 833,040 726,039
========= ========= =========
</TABLE>
<PAGE> 44
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 5 to Form S-6 Registration Statement
comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 65 pages.
Representations and Undertakings.
Accountants' Consent
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<CAPTION>
<S> <C> <C>
1. Power of Attorney dated April 4, 1996. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2
authorizing the establishment of the Registrant, for the Nationwide VL Separate Account-A, and hereby
adopted incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2
for the Nationwide VL Separate Account-A, and hereby
incorporated herein by reference.
4. Form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VL Separate Account-A (File No. 33-44792),
and hereby incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2
for the Nationwide VL Separate Account-A, and hereby
incorporated herein by reference.
6. Application Form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VL Separate Account-A (File No. 33-44792),
and hereby incorporated herein by reference.
7. Opinion of Counsel Included with the Registration Statement on Form S-6 for
the Nationwide VL Separate Account-A (File No. 33-44792),
and hereby incorporated herein by reference.
</TABLE>
<PAGE> 45
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and the Company hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 (the "Act"). The Registrant and the Company
elect to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with respect to
the Policies described in the prospectus. The Policies have been designed in
such a way as to qualify for the exemptive relief from various provisions of
the Act afforded by Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges") assumed by
the Company under the Policies. The Company represents that the risk charges
are within the range of industry practice for comparable policies and
reasonable in relation to all of the risks assumed by the issuer under the
Policies. Actuarial memoranda demonstrating the reasonableness of these
charges are maintained by the Company, and will be made available to the
Securities and Exchange Commission (the "Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available to
the Commission on request a memorandum setting forth the basis for this
representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and reports
as may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
<PAGE> 46
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company
(formerly Financial Horizons Life Insurance Company) and
Contract Owners of Nationwide VL Separate Account-A
(formerly Financial Horizons VL Separate Account 1):
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
<PAGE> 47
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Nationwide Life and Annuity VL Separate Account-A, certifies that
it meets the requirements of Securities Act Rule 485(b) for effectiveness of
this Post-Effective Amendment No. 5 and has duly caused this Post-Effective
Amendment No. 5 to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Columbus, and State of Ohio, on this 26th day of April 1996.
NATIONWIDE VL SEPARATE ACCOUNT-A
---------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(seal) ---------------------------------------------
attest: (Sponsor)
W. SIDNEY DRUEN By: JOSEPH P. RATH
- ----------------------- ----------------------------
W. Sidney Druen Joseph P. Rath
Assistant Secretary Vice President and Associate
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 5 has been signed below by the following persons in the
capacities indicated on the 26th day of April, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief
- ------------------------------------ Operating Office and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board
- ------------------------------------ and Director
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer-
- ------------------------------------ Nationwide Insurance Enterprise and
D. Richard MCferson Director
DAVID O. MILLER Director
- ------------------------------------
DAVID O. MILLER
C. RAY NOECKER Director
- ------------------------------------
C. RAY NOECKER
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------ Chief Financial Officer
ROBERT A. OAKLEY
JAMES F. PATTERSON Director By: JOSEPH P. RATH
- ------------------------------------ --------------------------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ARDEN L. SHISLER Director
- ------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------------
Harold W. Weihl
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of NATIONWIDE LIFE AND ANNUITY 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,
Joseph J. Gasper, 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 4th day of April, 1996.
<TABLE>
<S> <C>
/s/ LEWIS J. ALPHIN /s/ DAVID O. MILLER
- ------------------------------------------------------ ------------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ KEITH W. ECKEL /s/ C. RAY NOECKER
- ------------------------------------------------------ ------------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ WILLARD J. ENGEL /s/ ROBERT A. OAKLEY
- ------------------------------------------------------ ------------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President
and Chief Financial Officer
/s/ FRED C. FINNEY
- ------------------------------------------------------ /s/ JAMES F. PATTERSON
Fred C. Finney, Director ------------------------------------------------------
James F. Patterson, Director
/s/ CHARLES L. FUELLGRAF, JR.
- ------------------------------------------------------ /s/ ARDEN L. SHISLER
Charles L. Fuellgraf, Jr., Director ------------------------------------------------------
Arden L. Shisler, Director
/s/ JOSEPH J. GASPER
- ------------------------------------------------------ /s/ ROBERT L. STEWART
Joseph J. Gasper, President and ------------------------------------------------------
Chief Operating Officer and Director Robert L. Stewart, Director
/s/ HENRY S. HOLLOWAY /s/ NANCY C. THOMAS
- ------------------------------------------------------ ------------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ D. RICHARD MCFERSON /s/ HAROLD W. WEIHL
- ------------------------------------------------------ ------------------------------------------------------
D. Richard McFerson, Chairman and Harold W. Weihl, Director
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
</TABLE>
