<PAGE> 1
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
REGISTRATION STATEMENT
TO FORM S-6
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)
-------------------
Title and amount of securities being registered: Single premium variable
life insurance policies. Such policies are not issued in predetermined amounts
or units.
The Registrant elects to register an indefinite number of securities by
this registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940.
Approximate date of proposed public offering: (As soon as practicable
after the effective date of this Registration Statement).
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
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1 of 75 REDLINED
<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
38..............................................................................Distribution of The Policies
39..............................................................................Distribution of The Policies
40..............................................................................Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
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) 547-7548, 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
surrendered during the lifetime of the Insured. The Death Benefit and Cash Value
of the Policies may vary to reflect the experience of the 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 a "modified
endowment contract" under Section 7702A of the Internal Revenue Code (the
"Code"). The Code provides for taxation in the same manner as annuities for
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts. 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 contract is titled a "Flexible Premium Variable Life Insurance Policy" in
Texas.
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 in the following series of the underlying variable
account Mutual Fund options:
<TABLE>
<S> <C>
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.: NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
-American Century VP Balanced -Limited Maturity Bond Portfolio
-American Century VP Capital Appreciation -Growth Portfolio
-American Century VP International -Partners Portfolio
DREYFUS OPPENHEIMER VARIABLE ACCOUNT FUNDS:
-Dreyfus Stock Index Fund -Bond Fund
-Dreyfus Socially Responsible Growth Fund -Global Securities Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND: -Multiple Strategies Fund
-High Income Portfolio** STRONG SPECIAL FUND II, INC.:
-Equity-Income Portfolio -Special Fund II
-Growth Portfolio STRONG VARIABLE INSURANCE FUNDS, INC.:
-Multiple Strategies Fund -International Stock Fund II
-Overseas Portfolio -Discovery Fund II, Inc.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: VAN ECK WORLDWIDE INSURANCE TRUST:
-Asset Manager Portfolio -Gold and Natural Resources Fund
-Contrafund Portfolio -Worldwide Bond Fund
NATIONWIDE SEPARATE ACCOUNT TRUST: VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
-Capital Appreciation Fund -American Capital Real Estate Securities Fund
-Money Market Fund WARBURG PINCUS TRUST:
-Government Bond Fund -International Equity Portfolio
-Small Company Fund -Small Company Growth Portfolio
-Total Return Fund
</TABLE>
** The High Income Portfolio may invest in lower quality debt securities
commonly referred to as junk bonds.
1
<PAGE> 5
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.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
THE COMPANY (NATIONWIDE LIFE AND ANNUITY INSURANCE 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 DATE OF THIS PROSPECTUS IS __________________.
2
<PAGE> 6
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 those of 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 100th
birthday.
MONTHLY ANNIVERSARY DATE- The same day as the Policy Date for each succeeding
month.
NET ASSET VALUE- The worth of one share of a Mutual Fund as calculated at the
end of each business day. Net Asset Value is computed by adding the value of all
portfolio holdings, plus other assets, deducting liabilities and then dividing
the result 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.
UNDERLYING MUTUAL FUNDS- The Underlying mutual funds which correspond to the
sub-accounts of the Variable Account.
VALUATION DATE- Each day both the New York Stock Exchange and the Company's Home
Office is open for business or any other day during which there is a sufficient
degree of trading such that the current net asset value of the Accumulated 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- Nationwide VL Separate Account-A, a separate investment
account of Nationwide Life and Annuity Insurance Company.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS......................................................................................................3
SUMMARY OF THE POLICIES................................................................................................6
Variable Life Insurance.......................................................................................6
The Variable Account and its Sub-Accounts.....................................................................6
The Fixed Account.............................................................................................6
Deductions and Charges........................................................................................6
Premiums......................................................................................................9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY..........................................................................9
THE VARIABLE ACCOUNT...................................................................................................9
Investments of the Variable Account...........................................................................9
American Century Variable Portfolios, Inc., member of American Century(SM) Investments ......................10
Dreyfus......................................................................................................11
Fidelity Variable Insurance Products Fund....................................................................11
Fidelity Variable Insurance Products Fund II.................................................................12
Nationwide Separate Account Trust............................................................................12
Neuberger & Berman Advisers Management Trust.................................................................13
Oppenheimer Variable Account Funds...........................................................................14
Strong Special Fund II, Inc..................................................................................14
Strong Variable Insurance Funds, Inc.........................................................................14
Van Eck Worldwide Insurance Trust............................................................................15
Van Kampen American Capital Life Investment Trust............................................................15
Warburg Pincus Trust.........................................................................................15
Reinvestment.................................................................................................16
Transfers....................................................................................................16
Dollar Cost Averaging........................................................................................16
Substitution of Securities...................................................................................17
Voting Rights................................................................................................17
INFORMATION ABOUT THE POLICIES........................................................................................18
Underwriting and Issuance....................................................................................18
-Minimum Requirements for Issuance of a Policy...............................................................18
-Premium Deposits............................................................................................18
-Allocation of Cash Value....................................................................................18
-Short-Term Right to Cancel Policy...........................................................................19
POLICY CHARGES........................................................................................................19
Deductions from Premiums.....................................................................................19
Monthly Deductions...........................................................................................19
-Cost of Insurance Charge....................................................................................19
-Administrative Expense Charge...............................................................................19
-Tax Expense Charge..........................................................................................20
-Mortality and Expense Risk Charge...........................................................................20
Surrender Charges............................................................................................20
HOW THE CASH VALUE VARIES.............................................................................................21
How the Investment Experience is Determined..................................................................21
Net Investment Factor........................................................................................21
Valuation of Assets..........................................................................................21
Determining the Cash Value...................................................................................22
Valuation Periods and Valuation Dates........................................................................22
SURRENDERING THE POLICY FOR CASH......................................................................................22
Right to Surrender...........................................................................................22
Cash Surrender Value.........................................................................................22
Partial Surrenders...........................................................................................22
Maturity Proceeds............................................................................................23
Income Tax Withholding.......................................................................................23
POLICY LOANS..........................................................................................................23
Taking a Policy Loan.........................................................................................23
Effect on Investment Performance.............................................................................23
Interest.....................................................................................................24
Effect on Death Benefit and Cash Value.......................................................................24
Repayment....................................................................................................24
HOW THE DEATH BENEFIT VARIES..........................................................................................24
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
-Calculation of the Death Benefit............................................................................24
-Proceeds Payable on Death...................................................................................25
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY..........................................................................25
CHANGES OF INVESTMENT POLICY..........................................................................................25
GRACE PERIOD..........................................................................................................26
REINSTATEMENT.........................................................................................................26
THE FIXED ACCOUNT OPTION..............................................................................................26
OTHER POLICY PROVISIONS...............................................................................................27
Policy Owner.................................................................................................27
Beneficiary..................................................................................................27
Assignment...................................................................................................27
Incontestability.............................................................................................27
Error in Age or Sex..........................................................................................27
Suicide......................................................................................................27
Nonparticipating Policies....................................................................................27
LEGAL CONSIDERATIONS..................................................................................................28
DISTRIBUTION OF THE POLICIES..........................................................................................28
CUSTODIAN OF ASSETS...................................................................................................28
TAX MATTERS...........................................................................................................28
Policy Proceeds..............................................................................................28
Taxation of the Company......................................................................................29
Other Considerations.........................................................................................30
THE COMPANY...........................................................................................................30
COMPANY MANAGEMENT....................................................................................................30
Directors of the Company.....................................................................................30
Executive Officers of the Company............................................................................31
OTHER CONTRACTS ISSUED BY THE COMPANY.................................................................................32
STATE REGULATION......................................................................................................32
REPORTS TO POLICY OWNERS..............................................................................................32
ADVERTISING...........................................................................................................32
LEGAL PROCEEDINGS.....................................................................................................33
EXPERTS...............................................................................................................33
REGISTRATION STATEMENT................................................................................................33
LEGAL OPINIONS........................................................................................................33
APPENDIX..............................................................................................................34
FINANCIAL STATEMENTS..................................................................................................45
</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.
5
<PAGE> 9
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.
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 and/or the Fixed Account (the "Variable Account") at the time the
Policy is issued. The Policy Owner selects the sub-accounts of the Variable
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. (See "Short-Term Right to Cancel
Policy.") Assets of each sub-account are invested at net asset value in shares
of a corresponding Underlying Mutual Fund option. For a description of the
Underlying Mutual Fund options and their investment objectives, see "Investments
of the Variable Account." The Policy Owner also can have Cash Value allocated to
the Fixed Account.
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 3%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the Cash Value of the Policy. These
charges are made for administrative expenses, state premium taxes, federal
taxes, providing life insurance protection and assuming the mortality and
expense risks.
The Company deducts a monthly charge for the cost of insurance, administrative
charges, premium tax, and federal tax from the Policy's Cash Value attributable
to the Variable Account and Fixed Account. The Company also deducts on a monthly
basis from the Cash Value attributable to the Variable Account, a charge to
provide for mortality and expense risks. For Policies which are surrendered in
the first 9 Policy Years, the Company deducts a Surrender Charge not to exceed
10% of the initial Premium Payment. This includes a charge for deferred sales
expenses and premium tax recovery. The sales surrender charge will never exceed
7.5% of the initial premium payments. For a complete discussion of all charges,
deductions and reductions of charges, see "Charges and Other Deductions."
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 for its most
recently completed fiscal year, expressed as a percentage of the Underlying
Mutual Fund's average assets, are as follows:
6
<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Management Fees Other Expenses Total Expenses
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, 1.00% 0.00% 1.00%
- --------------------------------------
Inc.-American Century VP Balanced
- ----------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
- --------------------------------------
Inc.-American Century VP Capital Appreciation
- ----------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.50% 0.00% 1.50%
- --------------------------------------
Inc.-American Century VP International
- ----------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.27% 0.12% 0.39%
- ----------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund 0.69% 0.58% 1.27%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas Portfolio 0.76% 0.15% 0.91%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79%
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
- ----------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
- ----------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- ----------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
- ----------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.25% 1.25%
- ----------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
- ----------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers Management Trust- 0.84% 0.10% 0.94%
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers Management Trust- 0.65% 0.10% 0.75%
Limited Maturity Bond Portfolio
- ----------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers Management Trust- 0.85% 0.30% 1.15%
Partners Portfolio
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80%
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Global 0.74% 0.15% 0.89%
Securities Fund
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Multiple 0.74% 0.03% 0.77%
Strategies Fund
- ----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. -Discovery 1.00% 0.31% 1.31%
Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.97% 1.97%
Inc.-International Stock Fund II
- ----------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- ----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Gold and Natural 0.80% 0.16% 0.96%
Resources
- ----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Bond 0.79% 0.15% 0.94%
Fund
- ----------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.90% 2.90%
Trust-Real Estate Securities Fund
- ----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity Portfolio 1.00% 0.44% 1.44%
- ----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.35% 1.25%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the Underlying Mutual 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. None of the above
Underlying Mutual Funds are subject to 12b-1 fees.
7
<PAGE> 11
The following funds are subject to fee waivers or expense reimbursement
arrangements:
- --------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
- --------------------------------------------------------------------------------
Dreyfus Stock Index Fund In the event that aggregate expenses of the Fund
exceed .40 of 1% of the value of the Fund's
average net assets for the fiscal year, the Fund
may deduct from the payment to be made to
Dreyfus, or Dreyfus will bear, such excess
expense. In addition, the Fund may waive receipt
of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect
of lowering the overall expense ratio of the
Fund.
- --------------------------------------------------------------------------------
Dreyfus Socially Responsible In the event that aggregate expenses of the Fund
Growth Fund exceed .40 of 1% of the value of the Fund's
average net assets for the fiscal year, the Fund
may deduct from the payment to be made to
Dreyfus, or Dreyfus will bear, such excess
expense. In addition, the Fund may waive receipt
of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect
of lowering the overall expense ratio of the
Fund.
- --------------------------------------------------------------------------------
Fidelity VIP Fund - The Adviser has voluntarily agreed subject to
Equity-Income Portfolio revision or termination to reimburse a fund if,
and to the extent that, its aggregate operating
expenses, including management fees, exceed a
specified annual rate for the fund. The expense
cap is: 1.50% imposed on October 9, 1986. Since
the expense ratio is significantly below the
expense cap there is no reimbursement and none
anticipated during the current year. Since there
is no reimbursement the discontinuance of the
arrangement has no effect on total fund operating
expenses.
- --------------------------------------------------------------------------------
Fidelity VIP Fund - Growth The Adviser has voluntarily agreed subject to
Portfolio revision or termination to reimburse a fund if,
and to the extent that, its aggregate operating
expenses, including management fees, exceed a
specified annual rate for the fund. The expense
cap is: 1.50% imposed on October 9, 1986. Since
the expense ratio is significantly below the
expense cap there is no reimbursement and none
anticipated during the current year. Since there
is no reimbursement the discontinuance of the
arrangement has no effect on total fund operating
expenses.
- --------------------------------------------------------------------------------
Fidelity VIP Fund - The Adviser has voluntarily agreed subject to
High-Income Portfolio revision or termination to reimburse a fund if,
and to the extent that, its aggregate operating
expenses, including management fees, exceed a
specified annual rate for the fund. The expense
cap is: 1.00% imposed on September 19, 1985.
Since the expense ratio is significantly below
the expense cap there is no reimbursement and
none anticipated during the current year. Since
there is no reimbursement the discontinuance of
the arrangement has no effect on total fund
operating expenses.
- --------------------------------------------------------------------------------
Fidelity VIP Fund - Overseas The Adviser has voluntarily agreed subject to
Portfolio revision or termination to reimburse a fund if,
and to the extent that, its aggregate operating
expenses, including management fees, exceed a
specified annual rate for the fund. The expense
cap is: 1.50% imposed on January 28, 1986. Since
the expense ratio is significantly below the
expense cap there is no reimbursement and none
anticipated during the current year. Since there
is no reimbursement the discontinuance of the
arrangement has no effect on total fund operating
expenses.
- --------------------------------------------------------------------------------
Warburg Pincus Trust - The Management Fees, Other Expenses and Total
International Equity Portfolio Operating Expenses are net of any fee
Portfolio waivers or expense reimbursements. Without such
waivers or reimbursements, Management Fees would
have equaled 1.00%, Other Expenses would have
equaled 1.21% and total Portfolio Operating
Expenses would have equaled 2.21%. The Fund's
investment adviser had undertaken to reduce or
otherwise limit Total Portfolio Operating
Expenses; there is no assurance that these
undertakings will continue.
- --------------------------------------------------------------------------------
Warburg Pincus Trust - Small The Management Fees, Other Expenses and Total
Company Growth Portfolio Portfolio Operating Expenses are net of any fee
waivers or expense reimbursements. Without such
waivers or reimbursements, Management Fees would
have equaled .90%, Other Expenses would have
equaled .60% and total Portfolio Operating
Expenses would have equaled 1.50%. The Fund's
investment adviser had undertaken to reduce or
otherwise limit Total Portfolio Operating
Expenses; there is no assurance that these
undertakings will continue.
- --------------------------------------------------------------------------------
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
8
<PAGE> 12
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000 for issue ages
0-70 and $50,000 for issue ages 71-80. 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"), 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 of companies 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 and their
affiliated companies. 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
October 21, 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 changeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the 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 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 until expiration of
the period in which the Policy Owner may exercise his or her short-term right to
cancel the Policy. (See "Short-Term Right to Cancel Policy.") At the expiration
of this period, 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 Deposits, upon acceptance, will be allocated to the
Nationwide Separate Account Trust Money Market Fund unless the Policy Owner
specifies otherwise. (See "Premium Deposits.") Premium Deposits will be held
only while the Company obtains information necessary to evaluate the risk.
Following the underwriting process, the Company will either issue the policy or
refund deposits within 5 days from the date thereof.
9
<PAGE> 13
Each of the Underlying Mutual Fund options is a series of registered investment
companies which receive investment advice from a registered investment adviser:
1) American Century Variable Portfolios, Inc., managed by American Century
Investment Management, Inc., an affiliate of American Century Companies,
Inc.;
2) Dreyfus Stock Index Fund, managed by The Dreyfus Corporation;
3) Dreyfus Socially Responsible Growth Fund, Inc., managed by Dreyfus
Corporation;
4) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management & Research Company;
5) Fidelity Variable Insurance Products Fund II, managed by Fidelity
Management & Research Company;
6) The Nationwide Separate Account Trust, managed by Nationwide Advisory
Services, Inc.;
7) Neuberger & Berman Advisers Management Trust, managed by Neuberger &
Berman Management Incorporated;
8) Oppenheimer Variable Account Funds, managed by Oppenheimer Management
Corporation;
9) Strong Special Fund II, Inc., managed by Strong Capital Management,
Inc.;
10) Strong Variable Insurance Funds, Inc., managed by Strong Capital
Management, Inc.;
11) Van Eck Worldwide Insurance Trust, managed by Van Eck Associates
Corporation;
12) Van Kampen American Capital Life Investment Trust managed by Van Kampen
American Capital Asset Management, Inc.;
13) Warburg Pincus Trust, managed by Warburg Pincus Counsellors, Inc.;
A summary of investment objectives is contained in the description of each
Underlying Mutual Fund 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 Funds, 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.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF AMERICAN CENTURY(SM)
INVESTMENTS
American Century Variable Portfolios, Inc. (formerly TCI Portfolios, Inc.) was
organized as a Maryland corporation in 1987. It is a diversified, open-end
management company, designed only to provide investment vehicles for variable
annuity and variable life insurance products of insurance companies. A member of
American Century(SM) Investments, American Century Variable Portfolios, Inc. is
managed by American Century Investment Management, Inc.
- - AMERICAN CENTURY VP BALANCED
Investment Objective: Capital growth and current income. The fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. There can be no assurance
that the Fund will achieve its investment objective.
- - AMERICAN CENTURY VP CAPITAL APPRECIATION
Investment Objective: Capital growth. The fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the fund's investment manager, better than average potential for
appreciation. The fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least
three years continuous operation. There can be no assurance that the Fund
will achieve its investment objective.
10
<PAGE> 14
- - AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The fund will seek to
achieve its investment objective by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards
of selection and, in the opinion of the investment manager, have
potential for appreciation. Under normal conditions, the fund will invest
at least 65% of its assets in common stocks or other equity securities of
issuers from at least three countries outside the United States.
Securities of United States issuers may be included in the portfolio from
time to time. Although the primary investment of the fund will be common
stocks (defined to include depository receipts for common stocks), the
fund may also invest in other types of securities consistent with the
fund's objective. When the manager believes that the total return
potential of other securities equals or exceeds the potential return of
common stocks, the fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the fund will achieve its
objectives.
(Although the Statement of Additional Information concerning American
Century Variable Portfolios, Inc., refers to redemptions of securities in
kind under certain conditions, all surrendering or redeeming Contract
Owners will receive cash from the Company.)
DREYFUS
- - DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on
January 24, 1989, and commenced operations on September 29, 1989. The
Dreyfus Corporation ("Dreyfus") serves as the Fund's manager, while
Mellon Equity Associates, an affiliate of Dreyfus, serves as the Fund's
index manager.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in
the aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index. The Fund is neither sponsored by nor affiliated
with Standard & Poor's Corporation.
- - THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under
Maryland law on July 20, 1992, and commenced operations on October 7,
1993. The Dreyfus Corporation serves as the Fund's investment advisor.
Tiffany Capital Advisors, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of the
Fund's management, not only meet traditional investment standards, but
which also show evidence that they conduct their business in a manner
that contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fund is an open-end, diversified, management investment company organized as
a Massachusetts business trust on November 13, 1981. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. Fidelity Management & Research Company ('FMR') is the Fund's
manager.
- - HIGH INCOME PORTFOLIO
Investment Objective: To obtain a high level of current income by
investing primarily in high-risk, high-yielding, lower rated fixed-income
securities, while also considering growth of capital. The Fund's manager
will seek high current income normally by investing the Fund's assets as
follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities, zero coupon securities,
and mortgage-backed and asset-based securities;
- up to 20% in common stocks and other equity securities when
consistent with the Fund's primary objective or acquired as part
of a unit combining fixed-income and equity securities.
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower by
Moody's; BB or lower by Standard & Poor's and may be deemed to be of a
speculative nature. The Fund may also purchase lower-quality bonds such as those
rated Ca3 by Moody's or C- by Standard & Poor's which provide poor protection
for payment of principal and interest (commonly referred to as "junk bonds").
For a further discussion of lower-rated securities, please see the "Risks of
Lower-Rated Debt Securities" section of the Fund's prospectus.
11
<PAGE> 15
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
- - GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent in
other underlying mutual funds. It is also important to point out that the
Portfolio makes most sense for you if you can afford to ride out changes
in the stock market, because it invests primarily in common stocks. FMR
also can make temporary investments in securities such as
investment-grade bonds, high-quality preferred stocks and short-term
notes, for defensive purposes when it believes market conditions warrant.
- - OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fund is an open-end, diversified, management investment company organized as
a Massachusetts business trust on March 21, 1988. The fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. FMR is the Fund's manager.
- - ASSET MANAGER PORTFOLIO
Investment Objective: To seek to obtain high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed income instruments.
- - CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The fund primarily invests in common stock
and securities convertible into common stock, but it has the flexibility
to invest in any type of security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts. The Trust
offers shares in the five separate Mutual Funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide Advisory Services,
Inc., of One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary
of Nationwide Life Insurance Company.
- - CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long
term.
- - 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.
12
<PAGE> 16
- - 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.
- - SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less than $1 billion at the time
of purchase. Nationwide Advisory Services, Inc. ("NAS"), the Fund's
adviser, has employed a group of sub-advisers each of which will manage a
portion of the Fund's portfolio. These sub-advisers are the Dreyfus
Corporation, Neuberger & Berman, L.P., Pictet International Management
Limited, Van Eck Associates Corporation, Strong Capital Management, Inc.
and Warburg, Pincus Counsellors, Inc. These sub-advisers were chosen
because they utilize a number of different investment styles when
investing in small company stocks. By utilizing a number of different
investment styles, NAS hopes to increase prospects for investment return
and to reduce market risk and volatility.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds, with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
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.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity, and secondarily, its
total return. It seeks to achieve its objectives through investments in a
diversified portfolio of fixed and variable rate debt securities and
seeks to increase income and preserve or enhance total return by actively
managing average portfolio maturity in light of market conditions and
trends. The portfolio invests in securities which are at lease investment
grade and does not invest in junk bonds.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to
purchase such stocks.
13
<PAGE> 17
- - PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed
to be undervalued based on fundamentals such as low price-to-earnings
ratios, consistent cash flows, and support from asset values. The
objective of the Partners Portfolio is not fundamental and can be changed
by the Trustees of the Trust without shareholder approval. Shareholders
will, however, receive at least 30 days prior notice thereof. There is no
assurance the investment objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. Oppenheimer Management Corporation is
the Funds' investment advisor.
- - BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the fund seeks capital growth when consistent with its primary objective.
- - GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
- - MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. ("Special Fund II") is a diversified, open-end
management company commonly called a Mutual Fund. The Special Fund II was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life policies. Strong Capital Management, Inc. (the "Advisor") is the
investment advisor for the fund.
- - SPECIAL FUND II, INC.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
The Strong Variable Insurance Funds, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Strong Discovery Fund II, Inc.
("Discovery Fund II") and the Strong International Stock Fund II (the
"International Stock Fund II") were separately incorporated in Wisconsin and may
only be purchased by the separate accounts of insurance companies for the
purpose of funding variable annuity contracts and variable life insurance
policies. Strong Capital Management, Inc. is the investment advisor for each of
the Funds.
- - INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
14
<PAGE> 18
- - DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the fund has the flexibility to invest in any type of security that its
advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of the Trust are offered only to
separate accounts of various insurance companies to fund benefits of variable
insurance and annuity policies. The assets of the Trust are managed by Van Eck
Associates Corporation.
- - GOLD AND NATURAL RESOURCES FUND
Investment Objective: To seek long-term capital appreciation by investing
in equity and debt securities of companies engaged in the exploration,
development, production and distribution of gold and other natural
resources, such as strategic and other metals, minerals, forest products,
oil, natural gas and coal. Current income is not an objective.
- - WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities. The debt securities
in which the fund will invest will be primarily high grade; the fund will
not invest in junk bonds.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate funds which are sold
only to insurance companies to provide funding for variable life insurance
policies and variable annuity contracts. Van Kampen American Capital Asset
Management, Inc. serves as the Fund's investment adviser.
-REAL ESTATE SECURITIES FUND
Investment Objective: To seek long-term capital growth by investing in a
portfolio of securities of companies operating in the real estate
industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities,
including common stocks and convertible securities, as well as
non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to insurance companies for
allocation to separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by Warburg, Pincus
Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of "Counsellors" have
their principal business activities and interests outside the United
States. The Portfolio will ordinarily invest substantially all of its
assets, but no less than 65% of its total assets, in common stocks,
warrants and securities convertible into or exchangeable for common
stocks. The Portfolio intends to invest principally in the securities of
financially strong companies with opportunities for growth within growing
international economies and markets through increased earning power and
improved utilization or recognition of assets.
15
<PAGE> 19
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a portfolio
of equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
REINVESTMENT
The Funds described above have as a policy the distribution of dividends in the
form of additional shares (or fractions thereof) of the 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.
After the First Policy Anniversary, the Policy Owner may annually 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 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 among the sub-accounts 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" below) 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, Fixed Account, or the Limited Maturity Bond Portfolio
sub-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 purposes of Dollar
Cost Averaging can only be made from the Money Market sub-account, Fixed
Account, or the Limited Maturity Bond Portfolio sub-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,
16
<PAGE> 20
transfers from the Money Market sub-account, Fixed Account, or the Limited
Maturity Bond Portfolio sub-account will be processed monthly until either the
value in the Money Market sub-account, Fixed Account, or the Limited Maturity
Bond Portfolio sub-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 such discontinuation
would not affect Dollar Cost Averaging programs already commenced. The Company
also reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the Underlying Mutual Fund options described in this prospectus
should no longer be available for investment by the Variable Account or, if in
the judgment of the Company's management further investment in such Underlying
Mutual Funds should become inappropriate in view of the purposes of the Policy,
the Company may substitute shares of another Underlying Mutual Fund for 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 in
accordance with instructions received from Policy Owners. However, if the
Investment Company Act of 1940 or any regulation thereunder should be amended or
if the present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the Underlying Mutual
Funds in its own right, the Company 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 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 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, 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.
17
<PAGE> 21
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
Underwriting for these Policies is designed to group applicants into
classifications which can be expected to produce mortality experience consistent
with the actuarial structure for that class. The Company uses the following
methods of underwriting: (a) simplified underwriting not routinely requiring a
physical examination, and (b) medical or paramedical underwriting which requires
such an examination. (See "How the Death Benefit Varies.")
The Company reserves the right to request a medical examination on any applicant
where an affirmative response to one of the medical questions of the application
requires additional underwriting by the Company.
The minimum amount of initial premium that will be accepted by the Company is
$10,000 for issue ages 0-70 and $50,000 for issue ages 71-80. 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 Deposits
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
0-70 and $50,000 for issue ages 71-80. The Specified Amount of Death Benefit is
determined by treating the initial premium as equal to 100% of the Guideline
Single Premium. 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 is primarily intended to be a single premium policy 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.
Deposits 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 require that
any existing Policy indebtedness is repaid prior to accepting any additional
premium payments.
Additional Premium Deposits, upon acceptance, will be allocated to the
Nationwide Separate Account Trust Money Market Fund unless the Policy Owner
specifies otherwise.
The Company will not accept a subsequent premium deposit 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.
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 Underlying Mutual 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.")
18
<PAGE> 22
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.
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.
MONTHLY DEDUCTIONS
On the Policy Date and on each Monthly Anniversary Date, the Company will deduct
an amount to cover charges and expenses incurred in connection with the Policy.
Generally, this Monthly Deduction will be deducted on a pro-rata basis from the
Cash Value in each Sub-account and the Fixed Account. The amount of the Monthly
Deductions will vary from month to month. If the Cash Surrender Value is not
sufficient to cover the Monthly Deduction which is due, the Policy may lapse
(see "Grace Period"). The Monthly Deductions are comprised of the following
charges:
-Cost of Insurance Charge
Immediately after the Policy is issued, the Death Benefit will be
substantially greater than the initial premium payment. While the Policy
is in force, prior to the Maturity Date, the Death Benefit will always be
greater than the Cash Value. To enable the Company to pay this excess of
the Death Benefit over the Cash Value, a monthly cost of insurance charge
is deducted.
Currently, this charge is deducted monthly and is equal to an annual rate
of 0.65% multiplied by the Cash Value. On a current basis, for policy
years 11 and later, this monthly charge is anticipated to be reduced to
the Cash Value multiplied by an annual rate of 0.30% if the Cash
Surrender Value is $100,000 or more.
In no event will this current monthly deduction for the cost of insurance
exceed the guaranteed monthly cost of insurance charges. Guaranteed cost
of insurance charges will not exceed the cost based on the guaranteed
cost of insurance rate multiplied by the Policy's net amount at risk. The
net amount at risk is equal to the Death Benefit minus the Cash Value.
Guaranteed cost of insurance rates for standard 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.
-Administrative Expense Charge
The Company deducts a monthly Administrative Expense Charge to reimburse
it for expenses related to the 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 monthly charge is equal to an annual rate of 0.30% multiplied by the
Policy's Cash Value. On a current basis, for Policy Years 11 and later,
this monthly charge is anticipated to be reduced to an annual rate of
0.15% multiplied by the Cash Value, provided the Cash Surrender Value is
greater than or equal to $100,000. This Administrative Expense Charge is
subject to a $10 per month minimum.
19
<PAGE> 23
-Tax Expense Charge
During the first ten policy years, the Company makes a Monthly Deduction
to compensate for certain taxes which are incurred by the Company
including premium taxes imposed by various states and local jurisdictions
and for federal taxes imposed under Section 848 of the Internal Revenue
Code. This monthly charge is equal to an annual rate of 0.50% multiplied
by the Policy's Cash Value.
This charge is deducted monthly and includes a premium tax component
equal to an annual rate of 0.30% and a federal tax component equal to an
annual rate of 0.20%. The Company expects to pay an average state premium
tax of approximately 2.5% of premiums for all states, although such tax
rates can generally range from 0% to 4%. The Company does not anticipate
to make a profit from this monthly Tax Expense 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.
-Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing the 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 early policy years.
To compensate the Company for assuming these risks, a monthly charge for
mortality and expense risks is deducted on a pro-rata basis from the Cash
Value in each Variable Account Sub-account. This monthly charge is equal
to an annual rate of 0.90% multiplied by the Cash Value attributable to
the Variable Account. 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.
SURRENDER CHARGES
The Company will deduct a surrender charge from the Policy's Cash Value for any
Policy which is surrendered during the first nine policy years. The surrender
charge is comprised of two components: a sales surrender charge and a premium
tax surrender charge.
The Company incurs certain sales and other distribution expenses at the time the
Policies are issued. The majority of these expenses consist of commissions paid
for the sale or these policies. Premium taxes are generally incurred by the
Company at the time the Policies are issued. These surrender charges are
designed to recover a portion of these expenses. The Company does not expect to
profit from these surrender charges. Unrecovered expenses are borne by the
Company's general assets which may include profits, if any, from the monthly
mortality and expense risk charges (see "Monthly Deductions"). Certain
surrenders may result in adverse tax consequences (see "Tax Matters"). Maximum
surrender charges are shown in the following table:
<TABLE>
<CAPTION>
Surrender Charge
as a Percent of
Completed Policy Years Initial Premium Payment
<S> <C>
0 10.0%
1 10.0
2 9.0
3 8.0
4 7.0
5 6.0
6 5.0
7 4.0
8 3.0
9+ 0.0
</TABLE>
20
<PAGE> 24
Approximately 75% of the total surrender charges are for the recovery of sales
expenses and 25% for the recovery of premium taxes. In no event will the sales
surrender charge exceed 7.5% of the total premium payments.
The amount of the sales 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 Advisory Services, Inc., or 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 sales surrender charge will be permitted by the Company only in those
situations where the Company does not incur sales expenses normally associated
with sales of a Policy. In no event will the elimination of any sales surrender
charge be permitted where such elimination will be unfairly discriminatory to
any person.
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) where:
(a) is the net of:
(1) the Net Asset Value per share of the Underlying Mutual Fund option
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 option held in the sub-account
if the "ex-dividend" date occurs during the current Valuation
Period.
(b) is the net of:
(1) The Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus,
(2) the per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period. (See "Charge for
Tax Provisions.")
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 any charge or
credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
Net Asset Value.
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<PAGE> 25
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy, amounts credited to the Fixed Account, and any associated value in
the Policy Loan 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. In
the event part or all of the Cash Value is surrendered or charges or deductions
are made against the Cash Value, generally 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 credited to the Fixed Account will never be
less than 3%. The annual effective rate credited to the Policy Loan Account 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 and 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 of the Policy, minus any charges, indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
PARTIAL SURRENDERS
Partial surrenders are permitted after the fifth policy year. Partial surrenders
will be permitted only if they satisfy the following requirements:
1. The partial surrender request is in writing and the request is
signed by the Policy Owner or an authorized party of the Policy
Owner; and
2. The maximum partial surrender in any Policy Year, not subject to
Surrender Charges, is limited to the maximum of:
(i) 10% of the total premium payments; and
(ii) 100% of cumulative earnings (Cash Value less total premium
payments less any existing policy indebtedness);
3. Such partial surrenders must not result in a reduction of the Cash
Surrender Value below $10,000; and
4. After such partial surrender, the Policy continues to qualify as
life insurance.
All partial surrenders will be next computed after the date the Company receives
a proper written request. When a partial surrender is made, the Cash Value is
reduced by the amount of the partial surrender. Also, the
22
<PAGE> 26
Specified Amount is reduced by the amount of the partial surrender unless the
Death Benefit is based on the applicable percentage of the 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
the Specified Amount. Partial surrender amounts must be first deducted from the
values in the Variable sub-accounts. Partial surrenders will be deducted from
the Fixed Account only to the extent that insufficient values are available in
the Variable sub-accounts.
No Surrender Charges will be assessed against any such eligible partial
surrenders. Certain partial surrenders may result in currently taxable income
and tax penalties.
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
100th 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
Contract exceeds the employer's interest in the contract. 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 Value less any
Surrender Charge. Thereafter, maximum policy indebtedness is limited to 90% of
the Cash Value less any Surrender Charge. The Company will not grant a loan for
an amount less than $1,000 ($200 in Connecticut, $250 in Oregon, $500 in New
Jersey and $500 in New York). 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 Value less
any Surrender Charge in the sub-accounts and 100% of the Cash Value less any
Surrender Charge in the Fixed Account.
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. 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.
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<PAGE> 27
Total policy indebtedness is comprised of two components: (i) Preferred Loans
and (ii) Regular Loans. The amount of the loan account that is less than or
equal to the Cash Value less the total premium payments will be treated as a
Preferred Loan. Any additional loaned amounts will be treated as Regular Loans.
Preferred and Regular Loan amounts will be determined once a year, as well as at
any time a new loan is requested. On a current basis, preferred indebtedness
will be credited interest daily at an annual effective rate of 6%, and Regular
indebtedness will be credited interest daily at an annual effective rate of 4%.
The credited rate for all policy indebtedness is guaranteed never to be lower
than 4%. This earned interest is transferred from the Policy Loan Account to a
Variable Account or the Fixed Account on each Policy Anniversary as well as at
any time a new loan is requested. 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 indebtedness. Interest is
charged daily and is payable at the end of each Policy Year as well as at any
time a new loan is requested. 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.
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. 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. Guideline Single Premiums vary by
attained age, sex, underwriting classification, and total premium payments.
The following table illustrates representative initial Specified Amounts.
<TABLE>
<CAPTION>
$10,000 Single Premium $25,000 Single Premium $50,000 Single Premium
Issue
Age Male Female Male Female Male Female
--- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
35 $62,031 $76,231 $155,077 $190,577 $310,154 $381,154
40 49,883 61,337 124,707 153,343 249,413 306,685
45 40,437 49,825 101,903 124,562 202,186 249,124
50 33,079 40,742 82,698 101,854 165,397 203,708
55 27,358 33,531 68,396 83,828 136,791 167,655
60 22,964 27,734 57,410 69,335 114,821 138,671
65 19,579 23,052 48,948 57,631 97,895 115,261
</TABLE>
Generally, for a given premium payment, the initial Specified Amount is greater
for females than males. The Specified Amount is shown in the Policy.
24
<PAGE> 28
While the Policy is in force, the Death Benefit will never be less than the
Specified Amount or the Applicable Percentage of Cash Value. The Death Benefit
may vary with the Cash Value of the Policy, which depends on investment
performance. The amount of Death Benefit will ordinarily not change for several
years to reflect investment performance and may not change at all. If investment
performance is favorable, the amount of Death Benefit may increase. The
Applicable Percentage of Cash Value varies by attained age.
<TABLE>
<CAPTION>
Applicable Percentage of Cash Value Factors
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% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100 100%
</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
During the first twenty-four months following policy issue, there is an
unconditional right to irrevocably transfer all of the Cash Value in the
Variable Account to the Fixed Account.
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 holders or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects,
25
<PAGE> 29
there is an unconditional right to transfer all of the Cash Value in the
Variable Account to the Fixed Account. 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
transfer.
GRACE PERIOD
If the Cash Surrender Value in the Policy is insufficient to pay the monthly
deductions, 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 additional premiums at least equal to 3 times the guaranteed cost
of insurance charges; and
5. repaying 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 us.
If your 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 Nationwide'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 Nationwide
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 Nationwide's general assets (General Account).
Nationwide'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 less
than an effective annual rate of 3%. 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.
26
<PAGE> 30
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 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, sex, or both.
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.
27
<PAGE> 31
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 premiums 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 Advisory
Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43216.
NAS is a corporation which was organized under the laws of the State of Ohio on
April 8, 1965. NAS is both a broker-dealer and registered investment adviser. As
such, it is the principal underwriter for several open-end investment companies
and for a number of separate accounts issued by the Company and Nationwide Life
and Annuity Insurance Company ("NLAIC") to fund the benefits of variable
insurance and annuity polices. NAS also currently acts as the investment adviser
and/or administrator for the mutual fund portfolios sold through NAS's
registered representatives and for some of the mutual fund portfolios which act
as underlying investment options for the variable insurance and annuity policies
issued by the Company or NLAIC.
NAS acts as general distributor for the Nationwide Multi-Flex Variable
Account, Nationwide DC Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, NACo Variable Account and the Nationwide Variable
Account, all of which are separate investment accounts of the Company or its
affiliates.
NAS 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 are not more than 6.75% 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 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
28
<PAGE> 32
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 Sections 7702, Section 817(h) of
the Code requires that the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations issued by the Secretary of the
Treasury, set the standards for measuring the adequacy of this diversification.
To be adequately diversified, each sub-account of the Variable Account must meet
certain tests. The Company believes that the investments of the Variable Account
meet the applicable diversification standards. The regulations provide that a
variable life policy which does not satisfy the diversification standards will
not be treated as life insurance under Section 7702 of the Internal Revenue
Code, unless the failure to satisfy regulations was inadvertent, the failure 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 of the life policy will be
deemed the owner of the underlying securities and will be taxed on the earnings
of his or her account. The Company will monitor compliance with these
regulations and, to the extent necessary, will change the objectives or assets
of the sub-account investments to remain in compliance.
Representatives of the Internal Revenue Service have suggested, from time to
time, that the number of Underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in this area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of Underlying
Mutual Funds, transfers between Underlying Mutual Funds, exchanges of Underlying
Mutual Funds or changes in investment objectives of Underlying Mutual Funds such
that the 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.
Generally the taxable portion of any Distribution from a Contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
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.
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<PAGE> 33
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.
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 Company is a life insurance company writing life, accident and health
insurance, and annuities in all states and the District of Columbia. The Company
issues variable annuity contracts through other segregated investment accounts.
This 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, 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. In addition to its direct salaried employees,
the Company shares employees with Nationwide Mutual Insurance Company and
Nationwide Mutual Fire Insurance Company.
The Company serves as depositor for the Nationwide VL Separate Account-B,
Nationwide VA Separate Account-C, Nationwide VA Separate Account-B, Nationwide
VA Separate Account-A, and the Nationwide VL Separate Account-A, each of which
is a registered investment 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
Indemnity Company, Nationwide Life and Annuity Insurance Company, Nationwide
Property and Casualty Insurance Company, National Casualty Company, West Coast
Life Insurance Company, Scottsdale Indemnity Company and Nationwide General
Insurance Company and their affiliated companies comprise the Nationwide
Insurance Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation is the sole
shareholder of the Company.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
---- ----- --------------------
<S> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
</TABLE>
30
<PAGE> 34
<TABLE>
<S> <C> <C>
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 (1)
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 and Annuity
Insurance Company and Nationwide Life and Annuity Insurance Company (1)
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)
*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 insurance 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 Advisory Services, Inc., a registered broker-dealer.
Messrs. 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 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
</TABLE>
31
<PAGE> 35
<TABLE>
<S> <C>
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>
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Mr. Galloway is also an officer of Nationwide Mutual
Insurance Company and 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 in 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 current policy values, transactions since the last
statement, policy loan information, and any other information required by
federal or state laws or regulations.
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, 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.
32
<PAGE> 36
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Advisory Services, Inc., is not engaged in
any material litigation of any nature.
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.
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<PAGE> 37
APPENDIX
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 Cash Surrender Values falls to zero, 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 and no Cash Values are allocated to the Fixed Account.
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 deduction of Underlying Mutual Fund investment advisory fees and other
expenses which are equivalent to an annual effective rate of 1.00%. This
effective rate is based on the average of the fund expenses for the preceding
year for all underlying mutual fund options available under the policy as of
January 1, 1996.
Taking account of the Underlying Mutual Fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -0.90%, 5.1%, and 11.1% respectively.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection, recovering taxes, providing for
administrative expenses, and assuming mortality and expense risks. Current
values reflect current charges and guaranteed values reflect the maximum 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.
In addition, the illustrations 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, rating classification and Premium Payment
requested.
34
<PAGE> 38
$10,000 INITIAL PREMIUM: $19,579 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<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 9,582 8,582 19,579 10,160 9,160 19,579 10,738 9,738 19,579
2 11,025 9,176 8,176 19,579 10,324 9,324 19,579 11,540 10,540 19,579
3 11,576 8,782 7,882 19,579 10,493 9,593 19,579 12,411 11,511 19,579
4 12,155 8,401 7,601 19,579 10,667 9,867 19,579 13,358 12,558 19,579
5 12,763 8,030 7,330 19,579 10,846 10,146 19,579 14,386 13,686 19,579
6 13,401 7,671 7,071 19,579 11,030 10,430 19,579 15,503 14,903 19,579
7 14,071 7,323 6,823 19,579 11,218 10,718 19,579 16,717 16,217 19,579
8 14,775 6,985 6,585 19,579 11,413 11,013 19,579 18,041 17,641 20,025
9 15,513 6,657 6,357 19,579 11,612 11,312 19,579 19,501 19,201 21,256
10 16,289 6,339 6,339 19,579 11,818 11,818 19,579 21,104 21,104 22,582
15 20,789 5,018 5,018 19,579 13,271 13,271 19,579 32,367 32,367 33,986
20 26,533 3,854 3,854 19,579 14,983 14,983 19,579 49,517 49,517 51,993
25 33,864 2,830 2,830 19,579 17,000 17,000 19,579 75,690 75,690 79,475
30 43,219 1,928 1,928 19,579 19,380 19,380 19,579 116,668 116,668 117,834
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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
$10,000 INITIAL PREMIUM: $19,579 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<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 9,381 8,381 19,579 9,962 8,962 19,579 10,544 9,544 19,579
2 11,025 8,734 7,734 19,579 9,896 8,896 19,579 11,130 10,130 19,579
3 11,576 8,052 7,152 19,579 9,799 8,899 19,579 11,767 10,867 19,579
4 12,155 7,329 6,529 19,579 9,664 8,864 19,579 12,462 11,662 19,579
5 12,763 6,557 5,857 19,579 9,486 8,786 19,579 13,225 12,525 19,579
6 13,401 5,724 5,124 19,579 9,255 8,655 19,579 14,069 13,469 19,579
7 14,071 4,815 4,315 19,579 8,960 8,460 19,579 15,008 14,508 19,579
8 14,775 3,810 3,410 19,579 8,585 8,185 19,579 16,063 15,663 19,579
9 15,513 2,686 2,386 19,579 8,112 7,812 19,579 17,258 16,958 19,579
10 16,289 1,418 1,418 19,579 7,519 7,519 19,579 18,628 18,628 19,932
15 20,789 (*) (*) (*) 1,805 1,805 19,579 28,480 28,480 29,904
20 26,533 (*) (*) (*) (*) (*) (*) 43,419 43,419 45,590
25 33,864 (*) (*) (*) (*) (*) (*) 65,149 65,149 68,407
30 43,219 (*) (*) (*) (*) (*) (*) 98,541 98,541 99,527
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE
PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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
$10,000 INITIAL PREMIUM: $40,437 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<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 9,582 8,582 40,437 10,160 9,160 40,437 10,738 9,738 40,437
2 11,025 9,176 8,176 40,437 10,324 9,324 40,437 11,540 10,540 40,437
3 11,576 8,782 7,882 40,437 10,493 9,593 40,437 12,411 11,511 40,437
4 12,155 8,401 7,601 40,437 10,667 9,867 40,437 13,358 12,558 40,437
5 12,763 8,030 7,330 40,437 10,846 10,146 40,437 14,386 13,686 40,437
6 13,401 7,671 7,071 40,437 11,030 10,430 40,437 15,503 14,903 40,437
7 14,071 7,323 6,823 40,437 11,218 10,718 40,437 16,717 16,217 40,437
8 14,775 6,985 6,585 40,437 11,413 11,013 40,437 18,035 17,635 40,437
9 15,513 6,657 6,357 40,437 11,612 11,312 40,437 19,468 19,168 40,437
10 16,289 6,339 6,339 40,437 11,818 11,818 40,437 21,024 21,024 40,437
15 20,789 5,018 5,018 40,437 13,271 13,271 40,437 31,910 31,910 42,759
20 26,533 3,854 3,854 40,437 14,983 14,983 40,437 49,033 49,033 59,820
25 33,864 2,830 2,830 40,437 17,000 17,000 40,437 75,219 75,219 87,254
30 43,219 1,928 1,928 40,437 19,377 19,377 40,437 116,172 116,172 124,304
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
37
<PAGE> 41
$10,000 INITIAL PREMIUM: $40,437 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<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 9,501 8,501 40,437 10,080 9,080 40,437 10,658 9,658 40,437
2 11,025 8,999 7,999 40,437 10,150 9,150 40,437 11,370 10,370 40,437
3 11,576 8,494 7,594 40,437 10,211 9,311 40,437 12,139 11,239 40,437
4 12,155 7,984 7,184 40,437 10,260 9,460 40,437 12,972 12,172 40,437
5 12,763 7,467 6,767 40,437 10,297 9,597 40,437 13,874 13,174 40,437
6 13,401 6,941 6,341 40,437 10,318 9,718 40,437 14,852 14,252 40,437
7 14,071 6,402 5,902 40,437 10,320 9,820 40,437 15,911 15,411 40,437
8 14,775 5,849 5,449 40,437 10,301 9,901 40,437 17,062 16,662 40,437
9 15,513 5,276 4,976 40,437 10,256 9,956 40,437 18,310 18,010 40,437
10 16,289 4,680 4,680 40,437 10,181 10,181 40,437 19,668 19,668 40,437
15 20,789 1,317 1,317 40,437 9,512 9,512 40,437 29,386 29,386 40,437
20 26,533 (*) (*) (*) 7,315 7,315 40,437 45,090 45,090 55,010
25 33,864 (*) (*) (*) 1,889 1,889 40,437 69,171 69,171 80,238
30 43,219 (*) (*) (*) (*) (*) (*) 106,265 106,265 113,704
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE
PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
38
<PAGE> 42
$25,000 INITIAL PREMIUM: $101,093 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<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 24,132 21,632 101,093 25,583 23,083 101,093 27,034 24,534 101,093
2 27,562 23,289 20,789 101,093 26,182 23,682 101,093 29,244 26,744 101,093
3 28,941 22,472 20,222 101,093 26,798 24,548 101,093 31,645 29,395 101,093
4 30,388 21,679 19,679 101,093 27,432 25,432 101,093 34,253 32,253 101,093
5 31,907 20,911 19,161 101,093 28,083 26,333 101,093 37,086 35,336 101,093
6 33,502 20,165 18,665 101,093 28,753 27,253 101,093 40,164 38,664 101,093
7 35,178 19,442 18,192 101,093 29,441 28,191 101,093 43,503 42,253 101,093
8 36,936 18,740 17,740 101,093 30,149 29,149 101,093 47,120 46,120 101,093
9 38,783 18,059 17,309 101,093 30,877 30,127 101,093 51,037 50,287 101,093
10 40,722 17,399 17,399 101,093 31,626 31,626 101,093 55,280 55,280 101,093
15 51,973 14,756 14,756 101,093 36,610 36,610 101,093 84,709 84,709 113,510
20 66,332 12,428 12,428 101,093 42,475 42,475 101,093 131,806 131,806 160,803
25 84,659 10,379 10,379 101,093 49,301 49,301 101,093 206,582 206,582 239,635
30 108,049 8,575 8,575 101,093 57,224 57,224 101,093 323,780 323,780 346,445
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
39
<PAGE> 43
$100,000 INITIAL PREMIUM: $195,791 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<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 96,708 86,708 195,791 102,511 92,511 195,791 108,313 98,313 195,791
2 110,250 93,524 83,524 195,791 105,084 95,084 195,791 117,318 107,318 195,791
3 115,762 90,446 81,446 195,791 107,723 98,723 195,791 127,071 118,071 195,791
4 121,551 87,468 79,468 195,791 110,427 102,427 195,791 137,635 129,635 195,791
5 127,628 84,589 77,589 195,791 113,200 106,200 195,791 149,077 142,077 195,791
6 134,010 81,804 75,804 195,791 116,042 110,042 195,791 161,470 155,470 195,791
7 140,710 79,111 74,111 195,791 118,955 113,955 195,791 174,903 169,903 197,641
8 147,746 76,507 72,507 195,791 121,942 117,942 195,791 189,597 185,597 210,452
9 155,133 73,988 70,988 195,791 125,004 122,004 195,791 205,646 202,646 224,154
10 162,889 71,553 71,553 195,791 128,142 128,142 195,791 223,212 223,212 238,837
15 207,893 62,060 62,060 195,791 152,505 152,505 195,791 349,845 349,845 367,337
20 265,330 53,828 53,828 195,791 181,501 181,501 195,791 548,319 548,319 575,735
25 338,635 46,687 46,687 195,791 216,010 216,010 226,810 859,393 859,393 902,362
30 432,194 40,493 40,493 195,791 257,079 257,079 259,650 1,346,944 1,346,944 1,360,414
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE
PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
40
<PAGE> 44
$10,000 INITIAL PREMIUM: $19,579 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<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 9,582 8,582 19,579 10,160 9,160 19,579 10,738 9,738 19,579
2 11,025 9,176 8,176 19,579 10,324 9,324 19,579 11,540 10,540 19,579
3 11,576 8,782 7,882 19,579 10,493 9,593 19,579 12,411 11,511 19,579
4 12,155 8,401 7,601 19,579 10,667 9,867 19,579 13,358 12,558 19,579
5 12,763 8,030 7,330 19,579 10,846 10,146 19,579 14,386 13,686 19,579
6 13,401 7,671 7,071 19,579 11,030 10,430 19,579 15,503 14,903 19,579
7 14,071 7,323 6,823 19,579 11,218 10,718 19,579 16,717 16,217 19,579
8 14,775 6,985 6,585 19,579 11,413 11,013 19,579 18,041 17,641 20,025
9 15,513 6,657 6,357 19,579 11,612 11,312 19,579 19,501 19,201 21,256
10 16,289 6,339 6,339 19,579 11,818 11,818 19,579 21,104 21,104 22,582
15 20,789 5,018 5,018 19,579 13,271 13,271 19,579 32,367 32,367 33,986
20 26,533 3,854 3,854 19,579 14,983 14,983 19,579 49,517 49,517 51,993
25 33,864 2,830 2,830 19,579 17,000 17,000 19,579 75,690 75,690 79,475
30 43,219 1,928 1,928 19,579 19,380 19,380 19,579 116,668 116,668 117,834
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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 INVESTMEN RATES OF RETURN. ACTUAL RATES OF RETUR 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.
<PAGE> 45
$100,000 INITIAL PREMIUM: $195,791 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<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 94,724 84,724 195,791 100,554 90,554 195,791 106,387 96,387 195,791
2 110,250 89,180 79,180 195,791 100,888 90,888 195,791 113,303 103,303 195,791
3 115,762 83,324 74,324 195,791 100,974 91,974 195,791 120,837 111,837 195,791
4 121,551 77,095 69,095 195,791 100,776 92,776 195,791 129,095 121,095 195,791
5 127,628 70,416 63,416 195,791 100,242 93,242 195,791 138,201 131,201 195,791
6 134,010 63,182 57,182 195,791 99,301 93,301 195,791 148,306 142,306 195,791
7 140,710 55,257 50,257 195,791 97,861 92,861 195,791 159,604 154,604 195,791
8 147,746 46,469 42,469 195,791 95,804 91,804 195,791 172,343 168,343 195,791
9 155,133 36,605 33,605 195,791 92,985 89,985 195,791 186,774 183,774 203,583
10 162,889 25,406 25,406 195,791 89,242 89,242 195,791 202,728 202,728 216,919
15 207,893 (*) (*) (*) 50,882 50,882 195,791 313,490 313,490 329,165
20 265,330 (*) (*) (*) (*) (*) (*) 479,062 479,062 503,016
25 338,635 (*) (*) (*) (*) (*) (*) 718,814 718,814 754,755
30 432,194 (*) (*) (*) (*) (*) (*) 1,087,242 1,087,242 1,098,114
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE
PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
42
<PAGE> 46
$100,000 INITIAL PREMIUM: $273,583 SPECIFIED AMOUNT
MALE: REGULAR ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<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 96,708 86,708 273,583 102,511 92,511 273,583 108,313 98,313 273,583
2 110,250 93,524 83,524 273,583 105,084 95,084 273,583 117,318 107,318 273,583
3 115,762 90,446 81,446 273,583 107,723 98,723 273,583 127,071 118,071 273,583
4 121,551 87,468 79,468 273,583 110,427 102,427 273,583 137,635 129,635 273,583
5 127,628 84,589 77,589 273,583 113,200 106,200 273,583 149,077 142,077 273,583
6 134,010 81,804 75,804 273,583 116,042 110,042 273,583 161,470 155,470 273,583
7 140,710 79,111 74,111 273,583 118,955 113,955 273,583 174,893 169,893 273,583
8 147,746 76,507 72,507 273,583 121,942 117,942 273,583 189,433 185,433 273,583
9 155,133 73,988 70,988 273,583 125,004 122,004 273,583 205,181 202,181 273,583
10 162,889 71,553 71,553 273,583 128,142 128,142 273,583 222,260 222,260 273,583
15 207,893 62,060 62,060 273,583 152,505 152,505 273,583 348,353 348,353 404,090
20 265,330 53,828 53,828 273,583 181,501 181,501 273,583 545,981 545,981 584,200
25 338,635 46,687 46,687 273,583 216,010 216,010 273,583 855,728 855,728 898,515
30 432,194 40,493 40,493 273,583 257,079 257,079 273,583 1,341,201 1,341,201 1,408,261
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
43
<PAGE> 47
$100,000 INITIAL PREMIUM: $273,583 SPECIFIED AMOUNT
MALE: REGULAR ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<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 95,428 85,428 273,583 101,237 91,237 273,583 107,048 97,048 273,583
2 110,250 90,746 80,746 273,583 102,348 92,348 273,583 114,641 104,641 273,583
3 115,762 85,934 76,934 273,583 103,319 94,319 273,583 122,842 113,842 273,583
4 121,551 80,971 72,971 273,583 104,133 96,133 273,583 131,721 123,721 273,583
5 127,628 75,827 68,827 273,583 104,766 97,766 273,583 141,357 134,357 273,583
6 134,010 70,462 64,462 273,583 105,188 99,188 273,583 151,838 145,838 273,583
7 140,710 64,827 59,827 273,583 105,356 100,356 273,583 163,262 158,262 273,583
8 147,746 58,861 54,861 273,583 105,222 101,222 273,583 175,751 171,751 273,583
9 155,133 52,500 49,500 273,583 104,733 101,733 273,583 189,449 186,449 273,583
10 162,889 45,670 45,670 273,583 103,829 103,829 273,583 204,536 204,536 273,583
15 207,893 2,162 2,162 273,583 93,673 93,673 273,583 312,923 312,923 362,991
20 265,330 (*) (*) (*) 56,926 56,926 273,583 480,735 480,735 514,386
25 338,635 (*) (*) (*) (*) (*) (*) 743,388 743,388 780,557
30 432,194 (*) (*) (*) (*) (*) (*) 1,136,014 1,136,014 1,192,815
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTIONS" AND "SURRENDER CHARGES" SECTIONS OF THE
PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND EXPENSE DESCRIBED 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.
44
<PAGE> 48
<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> 49
<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> 50
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This 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 71 pages.
Representations and Undertakings.
Accountants' Consent
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C>
1. Power of Attorney dated August 9, 1996. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement
authorizing the establishment of the Registrant, adopted on Form N-8 B-2 for the Nationwide VL
Separate Account-A (File No. 811-6137),
and is hereby incorporated herein by
reference.
3. Distribution Contracts Underwriting or Distribution of
contracts between the Registrant and
Principal Underwriter - Filed previously
in connection with Registration
Statement (SEC File No. 33-86408) on
November 14, 1994 and hereby
incorporated by reference.
4. Form of Security Attached hereto.
5. Articles of Incorporation of Depositor Filed previously in connection with SEC
File No. 333-12333 (on September 19,
1996) and is hereby incorporated herein
by reference.
6. Application form of Security Attached hereto.
7. Opinion of Counsel Attached hereto.
</TABLE>
<PAGE> 51
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)(B) 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.
(f) The Company represents that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
the Company.
<PAGE> 52
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VL Separate Account-A:
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
February 28, 1997
<PAGE> 53
SIGNATURES
As required by the Securities Act of 1933, the Registrant, Nationwide VL
Separate Account-A, has caused this Registration Statement to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 28th day of February,
1997.
NATIONWIDE VL SEPARATE ACCOUNT-A
--------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
---------------------------------------------
(Sponsor)
(Seal)
Attest:
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 Registration
Statement has been signed below by the following persons in the capacities
indicated on the 28th day of February, 1997.
<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
- -------------------------------------------- Officer 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
D. Richard McFerson Enterprise and Director
DAVID O. MILLER Director
- --------------------------------------------
David O. Miller
C. RAY NOECKER Director
- --------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By: 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> 54
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 and Nationwide VL Separate
Account-B 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 9th day of August, 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>
<PAGE> 1
------------------------------------------------------------
[LOGO] NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Home Office: Two Nationwide Plaza
Columbus, Ohio 43218-2150
------------------------------------------------------------
PLEASE READ YOUR POLICY CAREFULLY
This Policy is a legal contract between you and us.
INSURING AGREEMENT:
We agree to pay the Death Proceeds to the Beneficiary upon receiving proof that
the Insured has died while this Policy is in force and before the Maturity Date.
We agree to pay the Maturity Proceeds to you if the Insured is living on the
Maturity Date.
You, the Owner, and we, the Company, are bound by the conditions and provisions
of this Policy.
- --------------------------------------------------------------------------------
THE CASH SURRENDER VALUE OF THIS POLICY WILL VARY FROM DAY TO DAY. IT MAY
INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE POLICY. REFER
TO THE NONFORFEITURE PROVISIONS ON PAGE 10 FOR DETAILS. THERE IS NO GUARANTEED
CASH SURRENDER VALUE.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT WILL BE VARIABLE AND DEPEND ON THE
INVESTMENT EXPERIENCE OF THE POLICY. THE DEATH BENEFIT WILL NEVER BE LESS THAN
THE SPECIFIED AMOUNT AS LONG AS YOUR POLICY IS IN FORCE. REFER TO THE DEATH
BENEFIT PROVISIONS ON PAGE 9 FOR DETAILS.
RIGHT TO EXAMINE POLICY
You may return this Policy to us within (1) 10 days after you receive it, or (2)
45 days after you sign the application, or (3) 10 days after we mail or deliver
the Notice of Withdrawal Right, whichever is latest. The Policy, with a written
request for cancellation, must be mailed or delivered to our Home Office or to
the agent who sold it to you. The returned Policy will be treated as if we never
issued it and, we will refund any premium paid.
If you have any questions about your Policy, contact your agent or write to our
Home Office.
Signed at our Home Office on the Policy Date.
/s/ Gordon E. McCutchan /s/ Joseph J. Shafer
----------------------- --------------------
Secretary President
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Limited premium flexibility
Death Proceeds payable at Insured's death prior
to the Maturity Date Maturity Proceeds
payable on the Maturity Date
Not eligible for dividends
Investment experience reflected in benefits
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PROVISIONS PAGE
<S> <C>
Annual Report........................................................... 7
Beneficiary............................................................. 7
Cash Surrender Value.................................................... 4
Cash Value.............................................................. 10
Death Benefit Provisions................................................ 9
Definitions............................................................. 4
Error in Age or Sex..................................................... 6
Fixed Account Provisions................................................ 15
Grace Period............................................................ 8
Incontestability........................................................ 6
Insured................................................................. 4
Insuring Agreement...................................................... 1
Loan Provisions......................................................... 12
Monthly Cost of Insurance............................................... 11
Nonforfeiture Provisions................................................ 10
Optional Modes of Settlement Provisions................................. 15
Ownership............................................................... 7
Partial Surrender....................................................... 11
Policy Data Page........................................................ 3
Premium Provisions...................................................... 8
Reinstatement........................................................... 8
Suicide................................................................. 6
Termination............................................................. 7
Transfers............................................................... 15
Valuation of Assets..................................................... 13
Variable Account Provisions............................................. 14
</TABLE>
2
<PAGE> 3
DEFINITlONS
ATTAINED AGE: Attained Age is the Issue Age plus the number of full years since
your Policy was issued.
ISSUE AGE: Issue Age is the Insured's age on the last birthday on or before the
Policy Date. It is shown on the Policy Data Page.
BENEFICIARY: The Beneficiary is the person to whom the Death Proceeds are paid
when the Insured dies. The Beneficiary is named in the application, unless
changed.
CASH SURRENDER VALUE: The Cash Surrender Value of your Policy on any date is
equal to (1), minus (2), minus (3), where:
1. is the Cash Value;
2. is any Indebtedness; and
3. is any Surrender Charge.
CASH VALUE: Your Policy's Cash Value is the sum of the associated values in any
Variable Account, the Fixed Account, and the Policy Loan Account. Refer to the
Nonforfeiture Provision for details.
COMPANY: The Company is the Nationwide Life and Annuity Insurance Company. "We",
"our", and "us" refer to the Company.
CONTINGENT BENEFICIARY: The Contingent Beneficiary will become the Beneficiary
if the named Beneficiary dies prior to the date of the death of the Insured.
This Beneficiary is named in the application, unless changed.
CONTINGENT OWNER: The Contingent Owner will become the Owner if the named Owner
dies prior to the date of the death of the Insured. The Contingent Owner is
named in the application, unless changed.
DEATH PROCEEDS: The Death Proceeds means the amount of money payable to the
Beneficiary if the Insured dies while your Policy is in force. Refer to the
Death Benefit Provisions for details.
FIXED ACCOUNT: A Fixed Account is an investment option funded by the General
Account of the Company.
FUND: A Fund means the underlying mutual fund in which Subaccount assets are
invested. There is a Fund that corresponds to each Subaccount in a Variable
Account. The Funds are listed on the Policy Data Page with the corresponding
Subaccounts.
GENERAL ACCOUNT: The General Account consists of all of our assets other than
those held in any separate investment account.
HOME OFFICE: The Home Office of the Company is at Two Nationwide Plaza,
Columbus, Ohio.
INDEBTEDNESS: Indebtedness is any amount you owe us resulting from a policy
loan; principal amount plus accrued interest.
INITIAL INVESTMENT DATE: The Initial Investment Date is the later of the Policy
Date or the date we receive the initial minimum premium at our Home Office.
4
<PAGE> 4
INSURED: The Insured is the person whose life is covered by this insurance
Policy and is named in the application.
INTEREST RATE GUARANTEED PERIOD: The Interest Rate Guaranteed Period for each
transfer to the Fixed Account is that period of time for which the current
interest crediting rate is guaranteed by the Company.
MATURITY DATE: The Maturity Date is the Policy Anniversary on or next following
the Insured's 100th birthday.
MATURITY PROCEEDS: Maturity Proceeds means the amount of money payable to you on
the Maturity Date if your Policy is still in force. The Maturity Proceeds will
be equal to the amount of the Cash Value, less any Indebtedness.
MONTHLY ANNIVERSARY DAY: The Monthly Anniversary Day is the same day as the
Policy Date for each succeeding month.
OWNER: The Owner has all rights under this Policy and is named in the
application unless later changed and endorsed on this Policy. "You" or "your"
refer to the Owner of this Policy.
POLICY ANNIVERSARY: The Policy Anniversary is the same day and month as the
Policy Date for each succeeding year.
POLICY DATE: The Policy Date is the date the provisions of this Policy take
effect. It is shown on the Policy Data Page. Policy years and policy months are
measured from the Policy Date.
POLICY LOAN ACCOUNT: The Policy Loan Account is that portion of the Cash Value
resulting from Policy Loans.
PROCEEDS: The Proceeds means the amount payable on the Maturity Date, on the
surrender of this Policy prior to the Maturity Date or on the death of the
Insured.
SEC: SEC means the Securities and Exchange Commission.
SPECIFIED AMOUNT: Specified Amount is a dollar amount used to determine the
death benefit of your Policy. It is shown on the Policy Data Page.
SUBACCOUNT: A Subaccount is a part of a Variable Account. The assets in each
Subaccount are invested exclusively in a specified Fund. The Subaccounts are
listed on the Policy Data Page.
SURRENDER CHARGE: The Surrender Charge varies by policy year as shown on the
Policy Data Page. This charge will never exceed 10% of the initial premium
payment.
VARIABLE ACCOUNT: One or more Variable Accounts are named on the Policy Data
Page. Each is a separate investment account of the Company.
VALUATION DAY: A Valuation Day is each day that the New York Stock Exchange is
open for trading except for customary holidays observed by us.
VALUATION PERIOD: A Valuation Period is the interval of time between a Valuation
Day and the next Valuation Day. It is measured from the closing of the New York
Stock Exchange.
5
<PAGE> 5
GENERAL POLICY PROVISIONS
ENTIRE CONTRACT: The entire contract consists of this Policy, any endorsements,
and the attached copy of any written application, including any written
supplemental applications. No agent, registered representative, or other person
may change this Policy or waive any of its provisions. Any agreement to alter
this Policy must be in writing, signed by our President or Secretary and
attached to or endorsed on your Policy.
APPLICATION: All statements made in an application are considered
representations and not warranties. In issuing this Policy, we have relied on
the statements made in any application to be true and complete. No such
statement will be used to void the Policy or to deny a claim unless that
statement is a material misrepresentation.
INCONTESTABILITY: We will not contest payment of the Death Proceeds based on the
initial Specified Amount after this Policy has been in force during the
Insured's lifetime for 2 years from the Policy Date.
For any increase in Specified Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for 2 years from its effective date.
SUICIDE: If the Insured commits suicide, while sane or insane, within 2 years
from the Policy Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will pay the Beneficiary an amount equal to all
premiums paid prior to the Insured's death, less any Indebtedness.
For any increase in Specified Amount requiring evidence of insurability, if the
Insured commits suicide, while sane or insane, within 2 years from the effective
date of any such increase, we will not pay the Death Proceeds associated with
such an increase. Instead, our liability with respect to such an increase will
be limited to its cost.
ERROR IN AGE OR SEX: If the age or sex of the Insured has been misstated, all
payments and benefits under the Policy will be those which the premium paid
would have purchased at the Insured's correct age and sex.
Where required, we have given the insurance regulator a detailed statement of
how we will make these adjustments.
PAYMENT OF PROCEEDS: Unless an optional mode of settlement is elected, the Death
Proceeds will be paid in one sum to the Beneficiary. Unless an optional mode of
settlement is elected, any Proceeds payable on the Maturity Date or upon
surrender of this Policy will be paid in one sum to you.
POSTPONEMENT OF PAYMENTS: We will pay any amount payable on surrender or policy
loan within seven days after we receive your written request. We will pay any
Death Proceeds within seven days after we receive proof of death and any other
information we may reasonably require to pay the claim.
However, such payments may be postponed if:
1. the New York Stock Exchange is closed (except for customary holiday
closings); or
2. the SEC requires trading be restricted or declares an emergency; or
3. The SEC lets us defer payments for the protection of our Policy Owners.
EFFECTIVE DATE OF COVERAGE: The effective date of coverage of any person insured
under your Policy is as follows:
1. the Policy Date is the effective date for all coverage provided in the
original application;
2. for any increase or addition to coverage, the effective date will be
the Monthly Anniversary Day on or next following the date we approve
the supplemental application; and
3. for any insurance that has been reinstated, the effective date is the
Monthly Anniversary Day on or next following the date we approve the
application for reinstatement.
6
<PAGE> 6
TERMINATION: All coverage under your Policy will terminate when any one of the
following events occurs:
1. you request in writing that the coverage terminate;
2. the Insured dies:
3. the Policy matures; or
4. the Grace Period ends.
ANNUAL REPORT: Once a year, we will send you a report showing current policy
values, transactions since the last report, policy loan information, and current
Fund allocation factors.
The report will also include any other information required by laws and
regulation, both federal and state. We will mail this report to you at your last
known address.
NONPARTICIPATION: This is a nonparticipating Policy; no dividends are payable.
Your Policy will not share in our profits or surplus earnings.
CURRENCY: Any money we pay, or that is paid to us, must be in United States
currency.
SIGNATURE GUARANTEE: For your protection, a request for a surrender, policy
loan, or a change in ownership must be signed. The Company may require the
signature to be guaranteed by a member firm of the New York, American, Boston,
Midwest, Philadelphia, or Pacific Stock Exchange, or by a commercial bank (not a
savings bank), which is a member of the Federal Deposit Insurance Corporation.
In some cases, the Company may require additional documentation of a customary
nature.
OWNER, BENEFICIARY AND ASSIGNMENT PROVISIONS
OWNERSHIP: While the Insured is living, all rights in your Policy belong to you.
Your rights in your Policy belong to your estate if you die before the Insured
dies and there is no Contingent Owner.
You may name a Contingent Owner or a new Owner at any time while the Insured is
living. If a new Owner is named, any earlier designation is automatically
revoked. Any change must be in a written form satisfactory to us and recorded at
our Home Office. Once recorded, the change will take effect as of the date you
signed it. It will not affect any payment made or any action taken by us before
it was recorded. We may require that you send us your Policy for endorsement
before making a change.
BENEFICIARY: The Beneficiary and Contingent Beneficiary on the Policy Date are
named in the application. More than one Beneficiary or Contingent Beneficiary
may be named. If more than one Beneficiary is alive when the Insured dies, we
will pay them in equal shares, unless you have provided otherwise. If any
Beneficiary dies before the Insured, that Beneficiary's interest will be paid to
any surviving Beneficiaries or Contingent Beneficiaries according to their
respective interests, unless you have provided otherwise. If no Beneficiary is
living at the Insured's death, we will consider you or your estate to be the
Beneficiary.
While the Insured is living, you may change any Beneficiary or Contingent
Beneficiary. Any change must be in a written form satisfactory to us and
recorded at our Home Office. Once recorded, the change will take effect as of
the date you signed it. It will not affect any payment made or action taken by
us before it was recorded. We may require that you send us your Policy for
endorsement before making a change.
ASSIGNMENT: While the Insured is living, you may assign any or all rights under
your Policy. We will not be bound by any assignment unless it is in a written
form acceptable to us and is recorded at our Home Office. Any assignment will
not affect any payments made or actions taken by us before we record it. We will
not be responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness owed to us before it was
recorded. The interest of any Beneficiary will be subject to the rights of any
assignee of record at our Home Office.
7
<PAGE> 7
PREMIUM PROVISIONS
PREMIUM PAYMENTS: The initial premium is due on the Policy Date. It will be
credited as of the Initial Investment Date. Insurance will not be effective
until the initial premium is paid. Other premiums may be paid at anytime while
your Policy is in force subject to the limits described below.
You may pay the initial premium to us at our Home Office or to an authorized
registered representative. All premiums after the first are payable at our Home
Office. A receipt, signed by our President or Secretary, will be furnished upon
request.
LIMITS: The initial premium may not be less than $10,000. Future premium
payments will be permitted only under the following circumstances:
1. An additional premium payment is required to keep the Policy in force
subject to the Grace Period provisions.
2. 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 may be made at any time, and if accepted may
increase the Specified Amount of insurance. However, we reserve 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. We may
also require that any existing Policy Indebtedness is repaid prior to accepting
any additional premium payments.
GRACE PERIOD: If the Cash Surrender Value on a Monthly Anniversary Day is not
sufficient to cover any contract charges which are due but unpaid, a grace
period of 61 days will be allowed for the payment of sufficient premium to keep
your policy in force. We will send you a notice at the start of the Grace Period
at your last known address. The Grace Period will end 61 days after we mail you
the notice.
If sufficient premium is not paid by the end of the Grace Period, the Policy
will terminate without value. A minimum of 3 times the guaranteed monthly cost
of insurance charges must be paid. If the Insured dies during the Grace Period,
we will pay the Death Proceeds.
REINSTATEMENT: If the Grace Period has ended and you have not paid the required
premium and have not surrendered your Policy for its Cash Surrender Value, you
may reinstate your Policy if you:
1. submit a written request at any time within 3 years after the end of
the Grace Period and prior to the Maturity Date;
2. provide evidence of insurability satisfactory to us;
3. pay sufficient premium to cover the cost of all policy charges that
were due and unpaid during the Grace Period;
4. pay additional premiums at least equal to 3 times the guaranteed cost
of insurance charges; and
5. repay 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 us.
If your Policy is reinstated, the Cash Value on the date of reinstatement, but
prior to applying any premiums received or loan repayments, will be set equal to
the appropriate Surrender Charge. Such Surrender Charge will be based on the
length of time from the Policy Date to the effective date of the reinstatement.
Unless you have provided otherwise, the allocation of the amount of the
Surrender Charge, additional premiums, and loan repayments will be based on the
Fund Allocation factors in effect at the start of the Grace Period.
8
<PAGE> 8
DEATH BENEFIT PROVISIONS
DEATH BENEFIT: If the Insured dies while the Policy is in force, your Policy
will provide a death benefit.
The death benefit will be the greater of:
1. the Specified Amount on the date of death; or
2. the applicable percentage of the Cash Value on the date of death.
The table below gives the "Applicable Percentage" for each Attained Age.
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Attained Percentage of Cash Attained Percentage of Cash Attained Percentage of Cash
Age Value Age Value Age 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% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100 100%
- -------------------------------------------------------------------------------------------------------
</TABLE>
DEATH PROCEEDS: The actual amount of money payable to the Beneficiary if the
Insured dies while your Policy is in force is called the Death Proceeds. The
Death Proceeds equals (1), plus (2), minus (3), minus (4), where:
1. is the death benefit provided by your Policy;
2. is any insurance on the Insured's life that may be provided by riders
to your Policy;
3. is any Indebtedness; and
4. is any due and unpaid contract charges accruing during a grace period.
We will pay the Death Proceeds to the Beneficiary after we receive at our Home
Office proof of death satisfactory to us and such other information as we may
reasonably require. The Death Proceeds will be adjusted under certain
conditions. Refer to the Incontestability, Suicide, and Error in Age or Sex
Provisions.
SPECIFIED AMOUNT INCREASES: Payment of additional premiums may require an
increase to the Specified Amount. We reserve the right to require satisfactory
evidence of insurability for any increase in the Specified Amount. In addition,
the rate class and rate class multiple for the increase in Specified Amount must
be identical to those on the Policy Date.
9
<PAGE> 9
NONFORFEITURE PROVISIONS
CASH VALUE: The Cash Value of your Policy is the sum of the Cash Value in each
Subaccount, the Fixed Account and the Policy Loan Account. The Cash Value in
each Subaccount on the Initial Investment Date is equal to the portion of the
initial premium allocated to the Subaccount.
The Cash Value in each Subaccount on each subsequent Valuation Day is equal to
(1), plus (2), plus (3), minus (4), minus (5), minus (6), where:
1. is the Cash Value in the Subaccount on the preceding Valuation Day
multiplied by its net investment factor for the current Valuation
Period;
2. is any amounts allocated to the Subaccount during the current Valuation
Period;
3. is any amounts transferred to the Subaccount during the current
Valuation Period:
4. is any amounts transferred from the Subaccount during the current
Valuation Period;
5. is the portion of any contract charges which are due and charged to the
Subaccount during the current Valuation Period; and
6. is any partial surrender amounts allocated to the Subaccount during the
current Valuation Period.
The Cash Value in the Policy Loan Account is zero, unless you take a Policy
loan. If you take a Policy loan, then the Cash Value in the Policy Loan Account
on the loan date is equal to the amount of the loan. The loan amount is
transferred from a Variable Account in proportion to the Cash Value in each
Subaccount on the date of the loan. Loan amounts will be transferred from the
Fixed Account only when insufficient amounts are available in the Variable
Subaccounts.
The Cash Value in the Policy Loan Account on each subsequent Valuation Day is
equal to (1), plus (2), plus (3), minus (4), minus (5), where:
1. is the Cash Value in the Policy Loan Account on the preceding Valuation
Day;
2. is an amount of interest earned on item (1) during the current
Valuation Period;
3. is any amounts transferred to the Policy Loan Account because of
additional policy loans and any due and unpaid loan interest during the
current Valuation Period;
4. is the amount of any loan repayments you make during the current
Valuation Period; and
5. is any amount of interest transferred from the Policy Loan Account to a
Variable Account or the Fixed Account during the current Valuation
Period.
The Cash Value in the Fixed Account is zero unless some or all of the Cash Value
is allocated to the Fixed Account. At the time of this initial allocation, the
Cash Value in the Fixed Account is equal to the amount of Cash Value allocated
to the Fixed Account. The Cash Value in the Fixed Account on each subsequent
Valuation Day is equal to (1) plus (2) plus (3) plus (4) minus (5) minus (6),
minus (7), where:
1. is the Cash Value in the Fixed Account on the preceding Valuation Day;
2. is guaranteed interest credited at an annual effective rate of 3%
during the current Valuation Period;
3. is any excess interest that is credited during the current Valuation
Period;
4. is any amounts allocated to the Fixed Account during the current
Valuation Period;
5. is any amounts transferred from the Fixed Account during the current
Valuation Period;
6. is the portion of any Policy charges which are due and charged to the
Fixed Account during the current Valuation Period; and
7. is any partial surrender amounts allocated to the Fixed Account during
the current Valuation Period.
MORTALITY AND EXPENSE RISK CHARGE: The mortality and expense risk charge is
shown on the Policy Data Pages. It will be deducted on the Policy Date and each
Monthly Anniversary Day. It will be charged proportionately to the Cash Values
in each Subaccount.
ADMINISTRATIVE CHARGE: The administrative charge is shown on the Policy Data
Pages. It will be deducted on the Policy Date and each Monthly Anniversary Day.
It will be charged proportionately to the Cash Values in each Subaccount and the
Fixed Account.
10
<PAGE> 10
TAX EXPENSE CHARGE: The tax expense charge is shown on the Policy Data Pages. It
will be deducted on the Policy Date and each Monthly Anniversary Day. It will be
charged proportionately to the Cash Values in each Subaccount and the Fixed
Account.
MONTHLY COST OF INSURANCE CHARGE: A deduction may be made on the Policy Date and
each Monthly Anniversary Day for the cost of insurance. This monthly deduction
will be charged proportionately to the Cash Values in each Subaccount and the
Fixed Account. Monthly cost of insurance charges will be determined by us from
time to time, based on our expectations as to future experience. Any change in
cost of insurance charges will be on a uniform basis for insureds of the same
sex, Attained Age, rate class, and rate class multiple whose policies have been
inforce for the same length of time. These charges will never be greater than
the guaranteed maximum monthly cost of insurance charges.
The guaranteed maximum monthly cost of insurance charge for each policy month is
determined by multiplying the guaranteed maximum monthly cost of insurance rate
by the net amount at risk. Net amount at risk is the difference between the
death benefit and the Cash Value, each calculated at the beginning of the Policy
month. The guaranteed maximum monthly cost of insurance rates are shown on the
Policy Data Pages. The basis for these guaranteed maximum cost of insurance
rates is shown in the Basis of Computation on the Policy Data Pages.
INTEREST CREDITING: Any Cash Value allocated to the Policy Loan Account will be
credited interest daily. The guaranteed minimum annual effective rate is 4%.
Interest in excess of the minimum guaranteed rate may be used.
Any Contract Value allocated to the Fixed Account will be credited interest
daily. The guaranteed minimum annual effective rate is 3%. Interest in excess of
the minimum guaranteed rate may be used. The current interest rate in effect at
the time of transfer to the Fixed Account will be guaranteed through the end of
the calendar quarter following the transfer in the next year. Annually
thereafter, any excess interest rates will be guaranteed for the following
twelve months. Different current interest rates may apply to the Cash Values
associated with each transfer to the Fixed Account. Where required, we have
filed our method for determining current interest rates with the Insurance
Department of the state in which this Policy was delivered.
MINIMUM LEGAL VALUES: The cash surrender, loan and other values in your Policy
are at least as large as those set by law in the state where it is delivered.
Where required, we have given the insurance regulator a detailed statement of
how we compute values and benefits.
CONTINUATION OF INSURANCE: If premium payments are not made, insurance coverage
under your Policy will be continued in force until the Cash Surrender Value is
insufficient to cover any policy charges which are due but unpaid, as provided
in the Grace Period Provision. This provision will not continue your Policy
beyond its Maturity Date.
COMPLETE SURRENDER: Your Policy may be surrendered for its Cash Surrender
Value at any time while it is in force. You must submit a written request on a
form acceptable to us. We may also require the return of your Policy.
The date of surrender will be the date we receive your written request at our
Home Office. The Cash Surrender Value will be determined as of the end of the
Valuation Period during which your request is received. All coverage will end on
the date of surrender.
PARTIAL SURRENDER: A partial surrender may be made at any time after the fifth
Policy Anniversary. You must submit a written request. We may also request that
this Policy be sent to us.
When a partial surrender is made, we will reduce the Cash Value by the partial
surrender amount. We will also generally reduce the Specified Amount by the
amount of the partial surrender.
The minimum amount of a partial surrender is $500 and a partial surrender may
not reduce the Cash Surrender Value to less than $10,000. We reserve the right
to require that any partial surrender amounts are first deducted from the Cash
Values in the Subaccounts.
11
<PAGE> 11
In addition, the partial surrender will be allowed only if after the surrender,
this Policy continues to qualify as a contract for life insurance. We reserve
the right to limit the number of partial surrenders in a Policy year. Also we
reserve the right to limit the maximum amount of all partial surrenders in each
policy year to the maximum of:
1. 10% of the total premium payments, or
2. Cash Value less total premiums paid less any Policy Indebtedness.
No surrender charges will be applied to partial surrenders which meet the above
requirements.
CHANGES IN POLICY COST FACTORS: Changes in cost of insurance rates, credited
interest rates, mortality and expense risk charges or other Policy expense
charges will be by class and will be based on changes in future expectations for
factors such as:
1. investment earnings;
2. mortality;
3. persistency;
4. expenses; and
5. taxes
Any changes will be determined in accordance with the procedures on file, if
required, with the insurance regulator in the state in which this Policy was
delivered.
LOAN PROVISIONS
MAXIMUM LOAN VALUE: The maximum loan value is determined by multiplying (1) by
(2), where:
1. is 50% in the first Policy year and 90% in all Policy years thereafter;
and
2. is Cash Value less Surrender Charge.
POLICY LOAN: You may request a loan at any time while your Policy is in force.
The loan must be requested in writing on a form acceptable to us. The amount of
the loan and all existing loans may not be more than the maximum loan value as
of the loan date. The loan date is the date we process the loan. The minimum
loan amount is $1,000. The loan will be made upon the sole security of the
Policy and proper assignment of your Policy to us.
LOAN INTEREST: The loan interest rate is 6% per year. Interest is charged daily
and payable at the end of each Policy year. Unpaid interest will be added to the
existing Indebtedness as of the due date and will be charged interest at the
same rate as the rest of the loan.
LOAN REPAYMENT: All or part of a loan may be repaid to us at any time while your
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.
Any Indebtedness that exists at the end of the Grace Period may not be repaid
unless this Policy is reinstated.
TERMINATION Of POLICY: If the total Indebtedness ever equals or exceeds the Cash
Value less the Surrender Charge, your Policy will terminate without value, as
described in the Grace Period Provision.
EFFECT OF LOAN: When you take a loan, we will transfer an amount equal to the
Policy loan from a Variable Subaccount or the Fixed Account to the Policy Loan
Account. Any loan interest that becomes due and unpaid will also be so
transferred. Amounts transferred to the Policy Loan Account will earn interest
daily from the date of transfer. When you repay part or all of a loan, we will
transfer an amount equal to the amount you repay from the Policy Loan Account to
a Subaccount or the Fixed Account. We reserve the right to require that any loan
repayments resulting from loans transferred from the Fixed Account must be
allocated to the Fixed Account.
12
<PAGE> 12
Unless otherwise specified, transfers from the Subaccounts to the Policy Loan
Account will be in proportion to the Cash Value in each Subaccount as of the
loan date. Loan amounts will be transferred from the Fixed Account only when
insufficient amounts are available in the Variable Subaccounts. Any loan
interest which becomes due and is unpaid will be transferred to the Policy Loan
Account in proportion to the Cash Values in each Subaccount and the Fixed
Account. Unless specified, loan repayments will be allocated among the
Subaccounts using the Fund allocation factors in effect on the date of the
repayment subject to any other restrictions the Company may impose.
Since the amount you borrow is removed from a Variable Subaccount or the Fixed
Account, a loan will have a permanent effect on any death benefit and Cash
Surrender Value of this Policy. The effect may be favorable or unfavorable. This
is true whether you repay the loan or not. If not repaid, Indebtedness will
reduce the amount of any Death Proceeds or Maturity Proceeds.
EXCHANGE OF POLICY PROVISIONS
RIGHT OF EXCHANGE: During the first 24 months from the Policy Date, you have an
unconditional right to move all of the Cash Value in the Variable Subaccounts to
the Fixed Account. Once all of the Cash Value is in the Fixed Account, the
Policy will not be affected by the investment experience of any separate
account.
EXCHANGE AT OTHER TIMES: After 24 months from the Policy Date, you may exchange
this Policy for a new Policy, subject to our approval. You must furnish any
evidence of insurability we require and pay all costs associated with the
exchange.
VALUATION OF ASSETS IN A VARIABLE ACCOUNT
DETERMINING INVESTMENT RESULTS: The Cash Value will change with a change in the
investment results of the Subaccounts. We use an index to measure changes in a
Subaccount's investment experience. This index is called an accumulation unit
value. Each Subaccount has its own accumulation unit value.
For each Subaccount, the accumulation unit value was initially set at $10.00.
The accumulation unit value for a Subaccount in each subsequent Valuation Period
is equal to (1), multiplied by (2), where:
1. is the Subaccount's accumulation unit value for the preceding Valuation
Period; and
2. is the Subaccount's net investment factor for the subsequent Valuation
Period.
A net investment factor is defined below.
Because the net investment factor may be greater than or less than one, the
accumulation unit value may increase or decrease from one Valuation Period to
the next; however, the accumulation unit value remains constant throughout a
Valuation Period.
NET INVESTMENT FACTOR: The net investment factor for a Subaccount for a
Valuation Period is obtained by dividing (1) by (2), where:
1. is the net of:
(a) the net asset value per share of the Fund held in the
Subaccount at the end of the current Valuation Period; plus
(b) the per share amount of any dividend and capital gains
distributions made by the Fund held in the Subaccount if the
"ex-dividend" date occurs during the current Valuation Period;
plus or minus
(c) a per share charge or credit for taxes reserved for, if any,
which is determined by the Company to have resulted from the
investment operations of the Subaccount.
2. is the net of:
(a) the net asset value per share of the Fund held in the Subaccount
determined as of the end of the immediately preceding Valuation
Period; plus or minus
(b) the per share charge or credit for taxes reserved for in the
immediately preceding Valuation Period.
13
<PAGE> 13
VARIABLE ACCOUNT PROVISIONS
VARIABLE ACCOUNT: A Variable Account is a separate investment account of the
Company. One or more are named on the Policy Data Page. A Variable Account is
also subject to the laws of Ohio.
We own the assets of any Variable Account; we keep them separate from the assets
of our General Account. We maintain assets which are at least equal to the
reserves and other liabilities of a Variable Account. Such assets will not be
charged with liabilities that arise from any other business we conduct. We may
transfer to our General Account assets which exceed the reserves and other
liabilities of a Variable Account.
We will determine the value of the assets in a Variable Account at the end of
each Valuation Day.
SUBACCOUNTS: A Variable Account may have several Subaccounts. We list them on
the Policy Data Page. You determine, using Fund allocation factors, how premiums
paid will be allocated among the Subaccounts. You may choose to allocate nothing
to a particular Subaccount. But any allocation you make must be at least 5%; you
may not choose a fractional percent. The sum of the Fund allocation factors must
equal 100%.
During the "Right to Examine Policy" period, premiums will be allocated to the
Subaccount that invests in a money market Fund or to the Fixed Account. At the
end of this period, the Cash Value in that Subaccount will be transferred to the
Variable Subaccounts according to your chosen fund allocation factors. Also, any
subsequent premium will be allocated according to your chosen factors. Fund
allocation factors during and immediately after the "Right to Examine Policy"
period, are shown on the Policy Data Page. After the "Right to Examine Policy"
period has expired, you may transfer amounts among the Subaccounts. Transfers
will take effect on the date your written request is received at our Home
Office, subject to any restrictions imposed by a Fund.
You may change the allocation for future premiums at any time while your Policy
is in force. To do so, you must notify us in writing in a form that meets our
approval. The change will take effect on the date we receive your written
request at our Home Office.
Income and realized and unrealized gains and losses from assets in each
Subaccount are credited to, or charged against, the Subaccount. This is without
regard to income, gains, or losses in our other Subaccounts, separate investment
accounts, or our General Account.
CHANGES OF FUND: A Fund might, in our judgment, become unsuitable for investment
by a Subaccount. This might happen because of a change in investment Policy, a
change in the laws or regulations, the shares are no longer available for
investment, or for some other reason. If that occurs, we have the right to
substitute another Fund. But we would first notify you and seek approval from
the SEC and the Superintendent of Insurance of the State of Ohio. We would also
get any other required approvals.
OTHER CHANGES: To the extent permitted by applicable laws and regulations
(including any order of the SEC), we may make changes as follows:
1. A Variable Account may be operated as a management company under the
Investment Company Act of 1940, or in any other form permitted by law,
if we deem it to be in the best interest of the Policy Owners.
2. A Variable Account may be deregistered under the Investment Company Act
of 1940 in the event registration is no longer required.
3. A Variable Account may be combined with other separate investment
accounts.
4. The provisions of this and other policies may be modified to comply
with any other applicable federal or state laws.
In the event of such changes, we may make appropriate endorsement on this and
other policies having an interest in a Variable Account and take other actions
as may be necessary to effect such a change.
14
<PAGE> 14
FIXED ACCOUNT PROVISIONS
FIXED ACCOUNT: The Fixed Account is funded by the General Account of the
Company. The Fixed Account is credited with interest as described under the
Nonforfeiture Provisions. In addition to allocating your premiums to one or more
of the Subaccounts described above, you may direct all or part of your premium
payments into the Fixed Account.
RIGHT TO TRANSFER: You may annually transfer a portion the Cash Value between
the Fixed Account and the Subaccounts without penalty or adjustment. We reserve
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
following the termination date of the Interest Rate Guaranteed Period.
You may request a transfer of up to 100% of the Cash Value from the Subaccounts
to the Fixed Account. Transfers to the Fixed Account may not be made prior to
the first Policy Anniversary or within 12 months of any prior transfer. The Cash
Value in each Subaccount will be determined as of the date the transfer request
is received in our Home Office in good order. We reserve the right to restrict
transfers to the Fixed Account to 25% of the Cash Value.
OPTIONAL MODES OF SETTLEMENT PROVISIONS
Proceeds may be paid in a lump sum. Optional modes of settlement are also
available. After the proceeds are applied under such optional modes, any amounts
payable are paid from our General Account and will not be affected by the
investment experience of any separate investment account.
One or a combination of settlement options may be chosen. A settlement option
may be chosen only if the total amount placed under the option is at least
$2,000.00 and each payment is at least $20.00.
A settlement option election may be changed at any time by proper written
request to our Home Office. Once recorded, it will become effective on the date
it was requested. We may require proof of the age and sex of any person to be
paid under a settlement option. While this Policy is in force, you may choose or
change settlement options at any time. If no settlement option has been chosen
prior to the Insured's death, the Beneficiary may choose one. A change of
Beneficiary automatically revokes any option in effect.
When Proceeds become payable under any option, a Settlement Contract is issued
in exchange for this Policy. The new contract's effective date is the date of
the Insured's death or the date this Policy is surrendered.
Settlement option payments are not assignable. To the extent allowed by law,
settlement option payments are not subject to the claims of creditors or to
legal process.
Under Options 2, 3, 4, and 5, payments will be made at the beginning of each 12,
6, 3, or 1 month interval beginning on the effective date of the Settlement
Contract. Under Option 1 and 6, payments will be made at the end of every 12, 6,
3, or 1 month interval from the Settlement Contract's effective date.
Under Options 1, 2, and 4, withdrawal of any outstanding balance may be made by
written request to our Home Office. No amount left with us under Options 3, 5,
or 6 may be withdrawn.
Options 1, 2, 4, and the guaranteed period of Option 3, provide for payment of
interest at a guaranteed minimum interest rate of 2 1/2% per year, compounded
annually. Any interest to be paid in excess of this rate will be determined once
a year.
1. INTEREST INCOME: The Proceeds remain with us to earn interest. This interest
may be left to accumulate or be paid periodically as stated above.
2. INCOME FOR A FIXED PERIOD: Proceeds remaining with us will be paid over a
specified number of years (not exceeding 30 years). Each payment consists of a
portion of the Proceeds plus a portion of the interest credited on the
outstanding balance. The amount payable monthly for each $1,000 left with us
will be at least the amount shown in the Option 2 Table.
15
<PAGE> 15
3. LIFE INCOME WITH PAYMENTS GUARANTEED: Payments are made for a guaranteed
period of 10, 15, or 20 years, and thereafter for the remainder of a payee's
lifetime. The amount payable monthly for each $1,000 left with us is shown in
the Option 3 Table, according to the payee's sex and age on the effective date
of the option.
4. FIXED INCOME FOR VARYING PERIODS: The Proceeds may be left on deposit with us
at interest with payments of a fixed amount being paid at specified intervals
until principal and interest have been exhausted. The last payment will be for
the balance only. The total amount payable each year may not be less than 5% of
the original proceeds. (i.e., not less than $50 per annum of each $1,000 of
original proceeds.)
5. JOINT AND SURVIVOR LIFE INCOME: Equal payments will be made for the longer of
the lives of two named payees. In other words, when one payee dies, the same
payment continues to be paid for the remainder of the surviving payee's life. We
will furnish values for other age combinations (than those shown in Option 5
Table) upon request.
6. ALTERNATE LIFE INCOME: We will use Policy Proceeds to purchase an annuity.
The amount payable will be 102% of our current individual immediate annuity
purchase rate on the effective date of the Settlement Contract. We reserve the
right to change our current annuity rates at any time. However, once this option
has been selected and the Settlement Contract issued, any revision in rates will
not affect payment to a payee or payees. Upon request, we will quote the amount
currently payable under this settlement option.
16
<PAGE> 16
TABLES FOR SETTLEMENT OPTIONS
Monthly Installments for each $1,000 of Proceeds
OPTION 2 Option 2 - Income for a Fixed Period
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Number of Years Specified Amount of Each Installment Number of Years Specified Amount of Each Installment
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $84.28 16 $6.30
2 42.66 17 6.00
3 28.79 18 5.73
4 21.86 19 5.49
5 17.70 20 5.27
6 14.93 21 5.08
7 12.95 22 4.90
8 11.47 23 4.74
9 10.32 24 4.60
10 9.39 25 4.46
11 8.64 26 4.34
12 8.02 27 4.22
13 7.49 28 4.12
14 7.03 29 4.02
15 6.64 30 3.93
-------------------------------------------------------------------------------------------------------------
</TABLE>
Annual, semi-annual or quarterly payments are 11.865, 5.969
and 2.994 respectively times the monthly installments.
Monthly Installments for each $1,000 of Proceeds
OPTION 3 Option 3 - Life Income with Payments Guaranteed
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
GUARANTEED PERIOD GUARANTEED PERIOD GUARANTEED PERIOD
AGE OF PAYEE ----------------- AGE OF PAYEE ----------------- AGE OF PAYEE -----------------
LAST BIRTHDAY YEARS LAST BIRTHDAY YEARS LAST BIRTHDAY YEARS
---------------------------------------------------------------------------------------------------------------
MALE FEMALE 10 15 20 MALE FEMALE 10 15 20 MALE FEMALE 10 15 20
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 & 10 &
Under Under 2.54 2.54 2.53 30 35 3.11 3.10 3.09 55 60 4.78 4.62 4.39
6 11 2.55 2.55 2.55 31 36 3.15 3.14 3.12 56 61 4.90 4.71 4.45
7 12 2.57 2.56 2.56 32 37 3.18 3.18 3.16 57 62 5.01 4.80 4.52
8 13 2.58 2.58 2.58 33 38 3.23 3.22 3.20 58 63 5.14 4.90 4.59
9 14 2.60 2.59 2.59 34 39 3.27 3.26 3.24 59 64 5.26 5.00 4.65
10 15 2.61 2.61 2.61 35 40 3.31 3.30 3.28 60 65 5.40 5.10 4.71
11 16 2.63 2.63 2.62 36 41 3.36 3.35 3.32 61 66 5.54 5.20 4.77
12 17 2.65 2.64 2.64 37 42 3.41 3.39 3.36 62 67 5.68 5.30 4.83
13 18 2.66 2.66 2.66 38 43 3.46 3.44 3.41 63 68 5.83 5.40 4.89
14 19 2.68 2.68 2.68 39 44 3.51 3.49 3.46 64 69 5.99 5.50 4.94
15 20 2.70 2.70 2.70 40 45 3.57 3.54 3.50 65 70 6.16 5.61 4.99
16 21 2.72 2.72 2.72 41 46 3.63 3.60 3.55 66 71 6.33 5.71 5.03
17 22 2.74 2.74 2.74 42 47 3.69 3.66 3.60 67 72 6.50 5.81 5.07
18 23 2.77 2.76 2.76 43 48 3.76 3.72 3.66 68 73 6.68 5.90 5.11
19 24 2.79 2.79 2.78 44 49 3.82 3.78 3.71 69 74 6.86 5.99 5.14
20 25 2.81 2.81 2.80 45 50 3.89 3.84 3.77 70 75 7.05 6.08 5.17
21 26 2.84 2.83 2.83 46 51 3.97 3.91 3.82 71 76 7.23 6.16 5.19
22 27 2.86 2.86 2.85 47 52 4.04 3.98 3.88 72 77 7.42 6.24 5.21
23 28 2.89 2.88 2.88 48 53 4.12 4.05 3.94 73 78 7.61 6.30 5.23
24 29 2.92 2.91 2.91 49 54 4.21 4.12 4.00 74 79 7.79 6.37 5.24
25 30 2.94 2.94 2.93 50 55 4.29 4.20 4.07 75 80 7.97 6.42 5.25
26 31 2.97 2.97 2.96 51 56 4.38 4.28 4.13 76 81 8.14 6.47 5.26
27 32 3.01 3.00 2.99 52 57 4.48 4.36 4.19 77 82 8.31 6.51 5.26
28 33 3.04 3.03 3.02 53 58 4.57 4.44 4.26 78 83 8.46 6.54 5.27
29 34 3.07 3.07 3.06 54 59 4.68 4.53 4.32 79 84 8.61 6.57 5.27
80 & 85 &
Over Over 8.74 6.59 5.27
---------------------------------------------------------------------------------------------------------------
</TABLE>
If the income payable for a specific guaranteed period is
equal to that for other guarantee periods the longer period
will be deemed to have been elected.
Monthly Installments for each $1,000 of Proceeds
OPTION 5 Option 5 - Joint & Survivor Life Income
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Female 50 55 60 65 70
Male
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 3.53 3.71 3.86 4.00 4.11
55 3.62 3.86 4.09 4.30 4.48
60 3.70 4.00 4.30 4.60 4.89
65 3.77 4.11 4.48 4.89 5.30
70 3.83 4.20 4.63 5.13 5.70
---------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ENDORSEMENTS (Endorsements may be made only by the Company at the Home Office)
<PAGE> 18
[LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Limited premium flexibility
Death Proceeds payable at Insured's death prior to the Maturity Date
Maturity Proceeds payable on the Maturity Date
Not eligible for dividends
Investment experience reflected in benefits
<PAGE> 1
================================================================================
WELCOME TO
NATIONWIDE LIFE
AND ANNUITY
INSURANCE COMPANY
SPECIMEN COPY
NWLA-101 (09/96)
================================================================================
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
P.O. Box 182150, Columbus, OH 43218-2150
================================================================================
1. PRIMARY INSURED
================================================================================
Name of Insured JOHN DOE Sex M Age 35 Date of Birth 11/2/60
------------------ --- ---- --------
Birth Drivers Social
Place ANY STATE License # Security Number 000-00-0000
------------------ -------- ---------------
Address 1 FIRST STREET ANY CITY ANY STATE 00000
----------------------------------------------------------------------
Occupation TEACHER Former Name (if applicable)
---------------------------- ---------
Telephone - Home ( 000 ) 000-0000 Best Time To Call: A.M. X P.M.
------------------ --- ---
Telephone - Business ( 000 ) 000-0000 Best Time To Call: X A.M. P.M.
------------------ --- ---
================================================================================
2. OWNER / PRIMARY BENEFICIARY / CONTINGENT BENEFICIARY
================================================================================
Policyowner Name Address
----------------- --------------------------------
Date Social Relationship
of Birth / / Security Number - - to Insured
---------- ------------ -------------
<TABLE>
<CAPTION>
DATE OF RELATIONSHIP SOCIAL
BENEFICIARY ADDRESS BIRTH TO INSURED SECURITY #
<S> <C> <C> <C> <C>
PRIMARY:
/ / - -
---------------------------- --------------------------------- -------------------- --------------- ----------------------
CONTINGENT:
/ / - -
---------------------------- --------------------------------- -------------------- --------------- ----------------------
</TABLE>
================================================================================
3. PLAN
================================================================================
PLAN SPECIFIED AMOUNT SINGLE PREMIUM $
----------- ------------ ----------
================================================================================
4. REPLACEMENT
================================================================================
YES NO
Will the insurance applied for replace existing Life Insurance
or Annuities on any person here proposed for insurance? If
Yes, Company ..................... / / / /
------------------------------
(Complete and send replacement forms and/or 1035 Exchange forms
where applicable.)
================================================================================
5. ALLOCATIONS
================================================================================
ON ISSUED CONTRACTS, YOUR FULL NET PREMIUM WILL BE ALLOCATED TO THE NATIONWIDE
SEPARATE ACCOUNT TRUST MONEY MARKET FUND OR FIXED ACCOUNT AS INDICATED BELOW
UNTIL THE END OF THE RIGHT TO CANCEL PERIOD. WHEN THIS PERIOD ENDS, YOUR
CONTRACT VALUE WILL BE ALLOCATED TO THE SUBACCOUNT(S) INDICATED BELOW.
SELECTIONS MUST TOTAL 100%. MINIMUM INITIAL ALLOCATION TO ANY SINGLE SUBACCOUNT
IS 5%. NO FRACTIONAL PERCENTAGES. THESE PERCENTAGES WILL APPLY IN FUTURE YEARS
BUT MAY BE CHANGED AT ANY TIME BY THE POLICY OWNER. (IF NO ALLOCATION IS
INDICATED, MONEY MARKET WILL BE AUTOMATICALLY SELECTED.)
NATIONWIDE SEPARATE ACCOUNT TRUST
75% % Money Market Fund
- -----
% Government Bond Fund
- -----
% Total Return Fund
- -----
% Capital Appreciation Fund
- -----
% Small Company Fund
- -----
AMERICAN CAPITAL LIFE
INVESTMENT TRUST
% Real Estate Securities
- ----- Portfolio
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II
% Asset Manager Portfolio
- -----
% Contrafund Portfolio
- -----
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND
% High Income Portfolio
- -----
% Equity Income Portfolio
- -----
% Growth Portfolio
- -----
% Overseas Portfolio
- -----
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
% Limited Maturity Bond
- ----- Portfolio
% Growth Portfolio
- -----
% Partners Portfolio
OTHER AVAILABLE FUNDS
%
- ----- -------------------------
%
- ----- -------------------------
WARBURG PINCUS TRUST
% International Equity
- ----- Portfolio
% Small Company
- ----- Growth Portfolio
STRONG VARIABLE
INS. PRODUCTS FUND
% Discovery Fund II
- -----
% Special Fund II
- -----
% International Stock Fund II
- -----
OPPENHEIMER VARIABLE
ACCOUNT FUND
% Bond Fund
- -----
% Multiple Strategies Fund
- -----
% Global Securities Fund
- -----
TCI PORTFOLIOS, INC.
% Growth Fund
- -----
% Balanced Fund
- -----
% International
- -----
DREYFUS, INC.
% Stock Index Fund
- -----
% Socially Responsible
- ----- Growth Fund
NATIONWIDE LIFE AND
ANNUITY INSURANCE CO.
25 % Fixed Account
- -----
VAN ECK INVESTMENT TRUST
% Gold and Natural
- ----- Resources Fund
% Worldwide Bond Fund
- -----
================================================================================
6. SUITABILITY (Variable Products Only)
================================================================================
YES NO
A. DO YOU UNDERSTAND THAT THE DEATH BENEFIT AND SURRENDER VALUE
MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT? ......................... /X/ / /
B. DO YOU BELIEVE THAT THIS POLICY WILL MEET YOUR INSURANCE
NEEDS AND FINANCIAL OBJECTIVES? ............................. /X/ / /
C. HAVE YOU RECEIVED A CURRENT COPY OF THE PROSPECTUS? ......... /X/ / /
================================================================================
<PAGE> 3
================================================================================
7. SIMPLIFIED UNDERWRITING (Questions 7 & 12)
================================================================================
If answers to Question 7 are "No", proceed to Question 12. If
any answers are "Yes", circle the appropriate item and provide
details in #10, then proceed with Question 12. YES NO
a. Have you ever been declined for Life Insurance? ............. / / /X/
b. Within the past five years, have you had or been treated
for:
Alcoholism, drug use other than as prescribed by a
physician, nervous or mental disorder, Alzheimer's disease,
epilepsy, emphysema, kidney or liver disorder? .............. / / /X/
To the best of your knowledge and belief have you ever had or
been treated by a member of the medical profession for:
c. Chest pains, heart attack, stroke, insulin dependent
diabetes, respiratory disorder, central nervous system or
muscular disorder or disease, or any cancer? ................ / / /X/
d. AIDS (acquired immune deficiency syndrome), ARC
(AIDS-related complex), or any other AIDS-related condition,
or received a positive result of an HIV test? ............... / / /X/
================================================================================
8. REGULAR UNDERWRITING (Questions 8 thru 12)
================================================================================
For each "Yes" answer, circle the appropriate item and provide
details in #10 below. YES NO
To the best of your knowledge and belief have you ever been
treated for or diagnosed by a member of the medical profession
as having:
a. High blood pressure, heart murmur, any other circulatory
disorder, any blood disorder or non-insulin dependent
diabetes? ................................................... / / /X/
b. Convulsions, brain disease or disorder, spinal injuries or
paralysis? .................................................. / / /X/
c. Any diseases of the stomach or intestines, lymph glands,
musculoskeletal disease or disorder, or immune disorder? .... / / /X/
Within the past five years, have you:
d. Consulted, or been examined or treated by any physician,
chiropractor, or other medical practitioner, or by any
hospital, clinic, or other medical facility not previously
mentioned? .................................................. / / /X/
e. Had any disease, disorder, injury or operation which has not
been previously mentioned? .................................. / / /X/
================================================================================
9. SUPPLEMENTAL INFORMATION
================================================================================
YES NO
a. Have you ever had Life or Health Insurance rated-up or
limited? .................................................... / / /X/
b. In the past 3 years have you engaged in, or do you intend to
engage in:
flying as a pilot, student pilot, or crew member; racing of
an automobile, motorcycle, or any type of motor-powered
vehicle; scuba diving, mountain climbing, hang gliding, or
sky diving? ................................................. / / /X/
c. Have you ever had your driver's license suspended or
revoked; or been convicted of driving while impaired or
intoxicated; or been convicted in the past three years of
more than one moving violation? (If "Yes", give full details
below.) ..................................................... / / /X/
d. Have you ever been convicted of a felony, misdemeanor, or
any other crime? (If "Yes", provide details below.) ......... / / /X/
e. Have you used tobacco in any form in the past 12 months? .... / / /X/
f. If "Yes", specify the kind of tobacco use? (cigarettes, pipe, cigars,
chewing, etc.)
----------------------------------------------------------
g. Proposed Insured's Height: Weight:
------------------ ------------------
================================================================================
10. DETAILS
================================================================================
<TABLE>
<CAPTION>
Question # DETAILS (Be specific. Give full names, addresses and telephone numbers (if available) of
and Letter Dates physicians, hospitals, etc.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
11. INSURANCE INFORMATION (List all Life Insurance now in force on Proposed
Insured. If none, write "NONE".)
================================================================================
<TABLE>
<CAPTION>
YEAR ACCIDENTAL TO BE
INSURANCE COMPANY POLICY NUMBER AMOUNT ISSUED DEATH REPLACED?
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Are you now applying for Life Insurance with any other company. YES NO
If "Yes", state the company, kind of policy and face amount
being applied for. .............. / / /X/
-------------------------------
================================================================================
<PAGE> 4
================================================================================
12. QUESTION OF APPLICANT
================================================================================
YES NO
If a Life Insurance policy cannot be issued, do you wish to
apply for an annuity? ........................................... /X/ / /
================================================================================
13. TAXPAYER IDENTIFICATION NUMBER
================================================================================
Under the Interest and Dividend Compliance Act of 1983, persons owning insurance
policies are required to provide the Company with certification that their
taxpayer identification number is correct. (For most individuals, this is their
Social Security Number.) If you do not provide us with certification of this
number, you may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, we will be forced to withhold 31% from interest and other
payments we make to you (known as backup withholding). It is not an additional
tax, since the amount withheld will be applied against the tax you owe. If
withholding results in an overpayment of taxes, a refund may be obtained.
/ / Check this box if the Internal Revenue Service has notified you that you are
not subject to the provisions of this law.
OTHERWISE, YOUR SIGNATURE ON THIS APPLICATION IS CERTIFICATION THAT THE TAXPAYER
IDENTIFICATION NUMBER ON THIS APPLICATION IS TRUE, CORRECT, AND COMPLETE.
================================================================================
14. IMPORTANT NOTICE
================================================================================
I UNDERSTAND THAT THE DEATH BENEFIT UNDER A VARIABLE LIFE INSURANCE POLICY MAY
INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT RETURN ON THE SUBACCOUNT(S) I
SELECT. REGARDLESS OF INVESTMENT RETURN, THE DEATH BENEFIT CAN NEVER BE LESS
THAN THE SPECIFIED AMOUNT, AS LONG AS THE POLICY IS IN FORCE. THE CONTRACT VALUE
MAY INCREASE OR DECREASE ON ANY DAY, DEPENDING ON THE INVESTMENT RETURN FOR THE
POLICY. NO MINIMUM CONTRACT VALUE IS GUARANTEED. ON REQUEST, WE WILL FURNISH
ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS AND CONTRACT VALUES FOR A
VARIABLE LIFE INSURANCE POLICY AND A FIXED LIFE INSURANCE POLICY FOR THE SAME
PREMIUM.
================================================================================
15. SPECIAL INSTRUCTIONS
================================================================================
================================================================================
AGREEMENT, AUTHORIZATION AND SIGNATURES
I have read this application. I understand each of the questions. All of the
answers and statements on this form are complete and true to the best of my
knowledge and belief. I understand and agree that:
1. This application, any amendments to it, and any related medical examinations
will become a part of the Policy and are the basis of any insurance issued
upon this application.
2. Any person who submits an application or a claim containing a false or
deceptive statement, and does so with intent to defraud or knowing that
he/she is facilitating a fraud against an insurer, is guilty of insurance
fraud.
3. No medical examiner and no agent or other representative of Nationwide may
accept risks or make or change any contract, or waive or change any of the
Company's rights or requirements.
4. If the full first premium payment is made in exchange for a Temporary
Insurance Receipt (with the same date and number as this form), Nationwide
will only be liable to the extent set forth in that receipt.
5. IF THE FULL FIRST PREMIUM IS NOT PAID WITH THIS APPLICATION, THEN INSURANCE
WILL ONLY TAKE EFFECT WHEN ALL OF THE FOLLOWING CONDITIONS ARE MET:
A. IF A POLICY IS ISSUED BY NATIONWIDE AND IS ACCEPTED BY ME; AND
B. IF THE FULL FIRST PREMIUM IS PAID; AND
C. IF ALL THE ANSWERS AND STATEMENTS MADE ON THE APPLICATION, MEDICAL
EXAMINATION(S) AND AMENDMENTS CONTINUE TO BE TRUE TO THE BEST OF MY
KNOWLEDGE AND BELIEF.
I have received the pre-notice form of the Fair Credit Reporting Act of 1970 and
the Medical Information Bureau disclosure form. I certify that the Social
Security Number given is correct and complete.
I authorize: any licensed physician or medical practitioner; any hospital,
clinic or other medical or medically related facility; any insurance company;
the Medical Information Bureau; or any other organization, institution or person
who has knowledge of me; to give that information to the Medical Director of the
Nationwide Life and Annuity Insurance Company, or its reinsurers. This
authorization, or a copy of it, will be valid for a period of not more than one
year from the date it was signed.
Signed at ANY CITY ANY STATE , on DECEMBER 01 , 19 95 .
------------------------------- --------------------- -------
================================================================================
- --------------------------------------------------------------------------------
I have truly and accurately recorded all Proposed Insured's answers on this
application and have witnessed his/her/their signature(s) hereon.
To the best of my knowledge, the insurance applied for / / will /X/ will not
(CHECK ONE) replace any life insurance or annuity.
------------------------------------------------------------------------------
Licensed Resident Agent Signature Firm
ED AGENT
------------------------------------------------------------------------------
Agent's Name (Print) License ID Number
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JOHN DOE
- --------------------------------------------------------------------------------
Signature of Primary Insured (if over age 14)
- --------------------------------------------------------------------------------
Signature of Owner
(If different from Primary Insured)
NO.
================================================================================
<PAGE> 5
This receipt must not be detached and in no event will there be any temporary
insurance unless the full first premium required by the Company has been paid at
the time of this application.
TEMPORARY INSURANCE RECEIPT No.
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY, COLUMBUS, OHIO
Received from JOHN DOE this 01 day of DECEMBER 1995 the sum of THREE HUNDRED
EIGHTY NINE AND 50/100 dollars ($389.50).
The temporary insurance that is provided by this receipt is for the coverage
afforded by the initial premium deposit that is shown in question 3 on page 1 of
the application which has the same date and number as this receipt; except that
the total coverage with this Company under this and all other receipts will not
exceed $500,000 on the person who is proposed for insurance, regardless of the
total amount(s) or number of receipts or applications.
If coverage afforded by the premium shown in question 3 on page 1 is more than
$500,000 of insurance under this and/or any other application, the company's
liability will be no more than $500,000 plus a prorated return of premium
submitted in excess of the premium required to afford the $500,000 of
insurance coverage.
Temporary insurance for the person who is proposed for coverage will be in force
on the date of this receipt, subject to the terms of the policy applied for in
this application. Coverage will end on the earliest of:
1. The date the policy is issued. (The policy will replace the temporary
insurance.)
2. The date the Company returns the premium deposit and mails a written
notice to the Applicant that said insurance has ended for each person
who is proposed for insurance.
3. The 45th day after the date of this receipt (unless the receipt has
been replaced earlier or has ended as noted in 1 or 2).
Fraud or material misrepresentation in this application voids the agreement. In
such cases, the Company's only liability is for a refund of the payment made.
If any person who is proposed for coverage dies by suicide, the Company's only
liability with respect to that person under this receipt is for a refund of
payment made for that person's portion of the insurance applied for.
I have read and agree to the terms of this receipt.
JOHN DOE
- --------------------------------------------------------------------------------
Signature of Proposed Insured (if over age 14)
- --------------------------------------------------------------------------------
Signature of Applicant if other than Insured
ED AGENT
- --------------------------------------------------------------------------------
Licensed Resident Agent Signature
DECEMBER 01, 1995
- --------------------------------------------------------------------------------
Date
IMPORTANT NOTICE
DETACH AND GIVE TO PROPOSED INSURED
PRE-NOTICE OF PROCEDURES AS REQUIRED BY THE FAIR CREDIT REPORTING ACT OF 1970
This notice is to inform you that as part of our normal underwriting procedures
in connection with an application for insurance:
1. An investigative consumer report may be made whereby information is obtained
through personal interviews with your neighbors, friends or others with whom
you are acquainted. This inquiry will include information as to character,
general reputation, personal characteristics and mode of living, except as
may be related directly or indirectly to your sexual orientation, with
respect to you, members of your family, and others having an interest in or
closely connected with the insurance transaction; and
2. Upon your written request, made within a reasonable time after you receive
this notice, additional information as to the nature and scope of the
investigation, if one is made, will be provided. Requests for additional
information should be addressed to Nationwide Life and Annuity Insurance
Company, Box 182150, Columbus, Ohio 43218-2150.
MEDICAL INFORMATION BUREAU DISCLOSURE NOTICE
Information regarding your insurability will be treated as confidential.
Nationwide Life and Annuity Insurance Company, or its reinsurer(s) may, however,
make a brief report thereon to the Medical Information Bureau, a non-profit
membership organization of life insurance companies, which operates an
information exchange on behalf of its members. If you apply to another Bureau
member company for life or health insurance coverage or a claim for benefits is
submitted to such a company, the Bureau, upon request, will supply such company
with the information in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. (Medical information will be disclosed
only to your attending physician.) If you question the accuracy of information
in the Bureau's file, you may contact the Bureau and seek a correction in
accordance with the procedures set forth in the Federal Fair Credit Reporting
Act. The address of the Bureau's information office is Post Office Box 105,
Essex Station, Boston, Massachusetts 02112, telephone number (617) 426-3660.
Nationwide Life and Annuity Insurance Company or its reinsurer(s) may also
release information in its file to other life insurance companies to whom you
may apply for life or health insurance, or to whom a claim for benefits may be
submitted.
<PAGE> 6
[INTENTIONALLY LEFT BLANK]
<PAGE> 7
================================================================================
AGENT'S CERTIFICATE
These questions must be answered by the Agent who solicited this application.
1. Who began negotiations for this application? / /Agent
/ /Primary Insured / /Owner / /Other
--------------------------------
2. How well do you know the Primary Insured?
/ / Met very recently / / Known well for years
------
/ / Know slightly for years
------
Relative - State relationship
---------------------------------------------
3. Purpose of Insurance:
-----------------------------------------------------
---------------------------------------------------------------------------
4. Primary Insured's Marital Status: / / Married / / Single
/ / Divorced / / Separated / / Widow / Widower
5. Payor - If someone other than the Primary Insured (listed in Part 1) or the
Owner (listed in Part 4) is to be billed for the premium on this policy,
list here:
Payor's Name
--------------------------------------------------------------
Address
-------------------------------------------------------------------
---------------------------------------------------------------------------
Relationship to Primary Insured
-------------------------------------------
6. Primary Insured's Annual Income $
------------------------------------------
Net Worth $
-------------------------------------------------
Spouse's Annual Income $
------------------------------------------
Net Worth $
-------------------------------------------------
7. Lived at present address years
-----
Tax municipality
----------------------------------------------------------
Previous address (if at current address less than 2 years)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
8. Primary Insured employed by
-----------------------------------------------
---------------------------------------------------------------------------
Kind of business
---------------------------------------------------------
Address
------------------------------------------------------------------
---------------------------------------------------------------------------
Length of time Primary Insured in this occupation Yrs.
-------------------
9. Spouse (if to be insured) employed by
-------------------------------------
Kind of business
----------------------------------------------------------
Address
-------------------------------------------------------------------
Length of time Spouse in this occupation Yrs.
-------------
10. If anyone proposed for insurance is between ages 0 - 14:
a. Did you see each child at the time of application?
/ / Yes / / No If "no", explain:
--------------------------
---------------------------------------------------------------------------
b. How much insurance is in force with all companies:
On the Owner: $
------------------------------------------------------
On the Parent or Guardian: $
-----------------------------------------
<TABLE>
<CAPTION>
On Primary Insured's On Primary Insured's
Brothers Sisters
-------------------- --------------------
Age Amount Age Amount
<S> <C> <C> <C>
$ $
--------- --------- --------- ---------
$ $
--------- --------- --------- ---------
$ $
--------- --------- --------- ---------
$ $
--------- --------- --------- ---------
</TABLE>
REMARKS:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
--------------------------------------- ----------
Licensed Resident Agent Signature Date
--------------------------------------- ----------
Print Agent Name and Number
--------------------------------------- ----------
Name of Firm Telephone
--------------------------------------- ----------
Branch Name and Address
================================================================================
<PAGE> 1
[DRUEN, RATH & DIETRICH LETTERHEAD]
February 28, 1997
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Ladies and Gentlemen:
We have prepared the Registration Statement filed with the U.S. Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, Modified Single Premium Variable Life Insurance Policies on
Form S-6 to be offered by Nationwide Life and Annuity Insurance Company
("Nationwide") and to be issued and administered through Nationwide VL Separate
Account-A. In connection therewith, we have examined the Articles of
Incorporation, Code of Regulations, and Bylaws of Nationwide, minutes of
meetings of the Board of Directors, pertinent provisions of federal and Ohio
laws, together with such other documents as we have deemed relevant for the
purposes of this opinion. Based on the foregoing, it is our opinion that:
1. Nationwide is a stock life insurance corporation duly organized
and validly existing under the laws of the State of Ohio and duly
authorized to issue and sell life insurance and annuity contracts.
2. Nationwide VL Separate Account-A has been properly created and is
a validly existing separate account pursuant to the laws of the State
of Ohio.
3. The issuance and sale of the Modified Single Premium Variable Life
Insurance Policies have been duly authorized by Nationwide. As issued
and sold in the manner stated in the prospectus constituting a part of
the Registration Statement, the Policies will be legal and binding
obligations of Nationwide in accordance with their terms, except that
clearance must be obtained or the contract form must be approved, prior
to the issuance thereof in certain jurisdictions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our
<PAGE> 2
Nationwide Life and Annuity
Insurance Company
February 28, 1997
Page 2
name under the Caption "Legal Opinions" in the prospectus contained in the
Registration Statement.
Very truly yours,
DRUEN, RATH & DIETRICH
