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As filed with the Securities and Exchange Commission.
Securities Act File No. 333-11415
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
and
PRE-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VA SEPARATE ACCOUNT - B
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
The Registrant has elected to register an indefinite number of securities in
accordance with Rule 24f-2 under the Investment Company Act of 1940. Pursuant
to Paragraph (a)(3) thereof, a non-refundable fee in the amount of $500 has
been paid.
Approximate date of proposed public offering: December 27, 1996.
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 thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NATIONWIDE VA SEPARATE ACCOUNT - B
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
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<CAPTION>
N-4 ITEM PAGE
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Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Synopsis or Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
Item 5. General Description of Registrant, Depositor, and
Portfolio Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 7. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . . . . . 17
Item 8. Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 9. Death Benefit and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 10. Purchases and Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Item 11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Item 14. Table of Contents of the Statement of Additional Information . . . . . . . . . . . . . 34
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 17. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 21. Calculation of Performance Information . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Item 25. Directors and Officers of the Depositor . . . . . . . . . . . . . . . . . . . . . . . 68
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Item 27. Number of Contract Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 28. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 29. Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 30. Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Item 31. Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Item 32. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE
P.O. BOX 16609
COLUMBUS, OHIO 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VA SEPARATE ACCOUNT - B
OF NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Individual Modified Single Premium Deferred Variable Annuity
Contracts described in this prospectus are modified single Purchase Payment
Contracts (collectively referred to as the "Contracts"). The Contracts are sold
either as Non-Qualified Contracts; as Individual Retirement Annuities with
contributions rolled-over from certain tax-qualified plans such as Tax
Sheltered Annuity plans, Qualified Plans or IRAs; or as Tax Sheltered Annuities
with contributions rolled over or transferred from other Tax Sheltered Annuity
Plans. Annuity payments under the Contracts are deferred until a selected
later date.
Purchase Payments are allocated to the Nationwide VA Separate Account-B
("Variable Account"), a separate account of Nationwide Life and Annuity
Insurance Company (the "Company"). The Variable Account is divided into
Sub-Accounts, each of which invests in shares of one of the underlying Mutual
Fund options described below:
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND
Equity-Income Portfolio Growth Portfolio High Income Portfolio*
Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT)
Capital Appreciation Fund Government Bond Fund
Money Market Fund
Small Company Fund Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Growth Portfolio Limited Maturity Bond Portfolio
Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG SPECIAL FUND II, INC.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. Strong International Stock Fund II
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund Gold and Natural Resources Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
This prospectus provides you with the basic information you should know
about the Individual Modified Single Premium Deferred Variable Annuity
Contracts issued by the Nationwide VA Separate Account - B before investing.
You should read it and keep it for future reference. A Statement of Additional
Information dated December 27, 1996 containing further information about the
Contracts and the Nationwide VA Separate Account - B has been filed with the
Securities and Exchange Commission. You can obtain a copy without charge from
Nationwide Life and Annuity Insurance Company by calling 1-800-848-6331, or
writing P.O. Box 16609, Columbus, Ohio 43216-6609.
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INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED DECEMBER 27, 1996, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 32 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS DECEMBER 27, 1996.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person designated to receive annuity payments and upon whose
continuation of life any annuity payments involving life contingencies depends.
This person must be age 85 or younger at the time of Contract issuance unless
the Company has approved a request for an Annuitant of greater age. The
Annuitant may be changed prior to the Annuitization Date with the consent of
the Company.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options
are available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Contract Owner
as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life and Annuity Insurance Company.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named on the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of
the last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. A Contingent Designated Annuitant may not be named for Contracts
issued as IRAs or Tax Sheltered Annuities.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. A Contingent Owner
may not be named for Contracts issued as IRAs or Tax Sheltered Annuities.
CONTRACT- The Individual Modified Single Premium Deferred Variable Annuity
Contract described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date.
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant
(or the Contingent Designated Annuitant, if applicable). This benefit does not
apply upon the death of the Contract Owner when the Owner and Designated
Annuitant are not the same person. If the Annuitant dies after the
Annuitization Date, any benefit that may be payable shall be as specified in
the Annuity Payment Option elected.
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DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made
without the prior consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or any other segregated asset account of the
Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account is
guaranteed to remain the same. For new Purchase Payments allocated to the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter at
least one year (but not more than 15 months) from deposit or transfer. At the
end of an Interest Rate Guarantee Period, a new interest rate is declared with
an Interest Rate Guarantee Period starting at the end of the prior period and
ending at the end of the calendar quarter one year later.
JOINT OWNER- The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Owner. IF A JOINT OWNER IS NAMED,
REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS PROSPECTUS WILL APPLY TO BOTH
THE OWNER AND JOINT OWNER. JOINT OWNERS MUST BE SPOUSES AT THE TIME JOINT
OWNERSHIP IS REQUESTED.
MUTUAL FUND (FUND)- A registered management investment company in which the
assets of the Sub-Accounts of the Variable Account will be invested.
NET ASSET VALUE- The worth of one share at the end of a market day or at the
close of the New York Stock Exchange. Net Asset Value is computed by adding
the value of all portfolio holdings plus other assets, deducting liabilities
and then dividing the results by the number of shares outstanding.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 or 403(a) (Qualified Plans), 408
(IRAs) or 403(b) (Tax-Sheltered Annuities) of the Code.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a
sufficient degree of trading of the Variable Account's underlying Mutual Fund
shares that the current Net Asset Value of its Accumulation Units might be
materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide VA Separate Account - B, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in the shares of a separate underlying Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
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TABLE OF CONTENTS
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GLOSSARY OF SPECIAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY OF CONTRACT EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
CONDENSED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Underlying Mutual Fund Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . 13
Mortality Risk Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Expense Risk Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Elimination of Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Administration Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Expenses of Variable Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Investments of the Variable Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Right to Revoke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Loan Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Ownership Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Contingent Owner and Beneficiary Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Substitution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Contract Owner Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Value of an Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Frequency and Amount of Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Annuity Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Change in Annuity Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Change in Form of Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Annuity Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Death of Contract Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Death of Designated Annuitant Prior to the Annuitization Date . . . . . . . . . . . . . . . . . . . . 21
Death of Annuitant After the Annuitization Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Required Distribution for Tax Sheltered Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Required Distributions for Individual Retirement Annuities . . . . . . . . . . . . . . . . . . . . . . 23
Generation-Skipping Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Contract Owner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Allocation of Purchase Payments and Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Value of a Variable Account Accumulation Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Determining the Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Surrender (Redemption) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surrenders Under a Tax Sheltered Annuity Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Non-Qualified Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Individual Retirement Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Charge for Tax Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<TABLE>
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Individual Retirement Annuities, Individual Retirement Accounts and Tax Sheltered
Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<PAGE> 9
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1) . . . . . . . . . . . . . . . . . . . . . . 7 %
</TABLE>
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
<TABLE>
<CAPTION>
Number of Completed Years from Contingent Deferred Sales Load
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
VARIABLE ACCOUNT ANNUAL EXPENSES
<TABLE>
<S> <C>
Mortality and Expense Risk Charges . . . . . . . . . . . . . . . . . . . . . . . . . 1.25 %
Administration Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.15 %
Total Variable Account Annual Expenses . . . . . . . . . . . . . . . . . . . . . . . 1.40 %
</TABLE>
1 Each Contract Year, the Contract Owner may withdraw without a Contingent
Deferred Sales Charge (CDSC) an amount equal to 10% of the total sum of all
Purchase Payments made to the Contract at the time of withdrawal. In
addition, any amount withdrawn in order for the Contract to meet minimum
Distribution requirements under the Code shall be free of CDSC.
Withdrawals may be restricted for Contracts issued pursuant to the terms of
a Tax Sheltered Annuity. This CDSC-free withdrawal privilege is
non-cumulative, that is, free amounts not taken during any given Contract
Year cannot be taken as free amounts in a subsequent Contract Year (see
"Contingent Deferred Sales Charge").
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<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (AFTER ANY APPLICABLE EXPENSE
REIMBURSEMENTS) 2
<TABLE>
<CAPTION>
Management Total Mutual
Fees Other Expenses Fund Expenses
-------------- -------------- ------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund 0.27% 0.12% 0.39%*
-
The Dreyfus Socially Responsible Growth Fund, Inc. 0.69% 0.58% 1.27%*
-
Fidelity VIP Fund-Equity Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71%
Fidelity VIP Fund-Overseas Portfolio 0.76% 0.15% 0.91%
Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79%*
-
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
NSAT-Money Market Fund 0.50% 0.02% 0.52%
NSAT-Small Company Fund 1.00% 0.25% 1.25%
NSAT-Total Return Fund 0.50% 0.01% 0.51%
Neuberger & Berman Advisers 0.84% 0.10% 0.94%
Management Trust-Growth Portfolio
Neuberger & Berman Advisers 0.65% 0.10% 0.75%
Management Trust-Limited Maturity Bond Portfolio
Neuberger & Berman Advisers 0.85% 0.30% 1.15%
Management Trust-Partners Portfolio
Oppenheimer- Oppenheimer Bond Fund 0.75% 0.05% 0.80%
Oppenheimer- Oppenheimer Global Securities Fund 0.74% 0.15% 0.89%
Oppenheimer- Oppenheimer Multiple Strategies Fund 0.74% 0.03% 0.77%
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
Strong Variable Insurance Funds, Inc.- Strong Discovery 1.00% 0.31% 1.31%
Fund II, Inc.
Strong Variable Insurance Funds, Inc.- Strong 1.00% 0.97% 1.97%
International Stock Fund II
TCI Portfolios, Inc. -TCI Balanced 1.00% 0.00% 1.00%
TCI Portfolios, Inc. -TCI Growth 1.00% 0.00% 1.00%
TCI Portfolios, Inc. -TCI International 1.50% 0.00% 1.50%
Van Eck Worldwide Insurance Trust -Gold and Natural 0.79% 0.15% 0.94%*
Resources Fund
Van Eck Worldwide Insurance Trust-Worldwide Bond Fund 0.80% 0.16% 0.96%*
Van Kampen American Capital Life Investment Trust- Real 1.00% 1.50% 2.50%*
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>
2 The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against separate account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's Net
Asset Value, which is the share price used to calculate the unit values of
the Variable Account. The management fees and other expenses are more
fully described in the prospectuses for each individual underlying Mutual
Fund. The information relating to the underlying Mutual Fund expenses was
provided by the underlying Mutual Fund and was not independently verified
by the Company.
* The investment advisers for the indicated underlying mutual funds have
voluntarily agreed to reimburse a portion of the management fees and/or
operating expenses resulting in a reduction of the total expenses. Absent
any such partial reimbursement, "Management Fees" and "Other Expenses"
would have been 0.27% and 0.15% for the Dreyfus Stock Index Fund; 0.69% and
0.64% for the Dreyfus Socially Responsible Growth Fund, Inc.; 0.71% and
0.10% for the Fidelity VIP Fund II-Asset Manager Portfolio; 1.00% and 0.16%
for the Van Eck Worldwide Insurance Trust-Gold and Natural Resources Fund;
1.00% and 0.15% for the Van Eck Worldwide Insurance Trust-Worldwide Bond
Fund; 1.00% and 1.90% for the Van Kampen American Capital Life Investment
Trust-Real Estate Securities Fund; 1.00% and 1.21% for the Warburg Pincus
Trust- International Equity Portfolio; and 0.90% and 0.60% for the Warburg
Pincus Trust-Small Company Growth Portfolio.
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<PAGE> 11
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 investment and 5% annual return.
These dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below.
<TABLE>
<CAPTION>
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
-------------------------------- -------------------------------- ---------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-------------------------------- -------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index 82 103 127 217 19 58 100 217 * 58 100 217
Fund
The Dreyfus Socially 91 131 173 310 28 86 146 310 * 86 146 310
Responsible Growth
Fund, Inc.
Fidelity VIP Fund- 84 110 139 241 21 65 112 241 * 65 112 241
Equity Income Portfolio
Fidelity VIP Fund- 85 113 144 250 22 68 117 250 * 68 117 250
Growth Portfolio
Fidelity VIP Fund -High 87 120 155 273 24 75 128 273 * 75 128 273
Income Portfolio
Fidelity VIP Fund - 85 113 144 251 22 68 117 251 * 68 117 251
Overseas Portfolio
Fidelity VIP Fund II 86 116 148 260 23 71 121 260 * 71 121 260
Asset Manager Portfolio
Fidelity VIP Fund II - 85 114 145 253 22 69 118 253 * 69 118 253
Contrafund Portfolio
NSAT-Capital 83 108 135 233 20 63 108 233 * 63 108 233
Appreciation Fund
NSAT-Government Bond 83 107 133 230 20 62 106 230 * 62 106 230
Fund
NSAT-Money Market Fund 83 107 134 231 20 62 107 231 * 62 107 231
NSAT-Small Company Fund 91 130 172 308 28 85 145 308 * 85 145 308
NSAT-Total Return Fund 83 107 133 230 20 62 106 230 * 62 106 230
Neuberger & Berman 88 121 156 276 25 76 129 276 * 76 129 276
Advisers Management
Trust-Growth Portfolio
Neuberger & Berman 86 115 146 256 23 70 119 256 * 70 119 256
Advisers Management
Trust-Limited Maturity
Bond Portfolio
Neuberger & Berman 90 127 167 298 27 82 140 298 * 82 140 298
Advisers Management
Trust-Partners
Portfolio
Oppenheimer- 86 116 149 261 23 71 122 261 * 71 122 261
Oppenheimer Bond Fund
Oppenheimer- 87 119 154 271 24 74 127 271 * 74 127 271
Oppenheimer Global
Securities Fund
Oppenheimer- 86 115 147 258 23 70 120 258 * 70 120 258
Oppenheimer Multiple
Strategies Fund
Strong Special Fund II, 90 129 170 303 27 84 143 303 * 84 143 303
Inc.
Strong Variable 91 132 176 314 28 87 149 314 * 87 149 314
Insurance Funds, Inc.-
Strong Discovery Fund
II, Inc.
Strong Variable 98 153 209 378 35 108 182 378 * 108 182 378
Insurance Funds, Inc.-
Strong International
Stock Fund, II
TCI Portfolios, Inc.- 88 122 159 282 25 77 132 282 * 77 132 282
TCI Balanced
TCI Portfolios, Inc.- 88 122 159 282 25 77 132 282 * 77 132 282
TCI Growth
TCI Portfolios, Inc.- 93 138 185 333 30 93 158 333 * 93 158 333
TCI International
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
-------------------------------- -------------------------------- --------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-------------------------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Eck Worldwide 88 121 157 278 25 76 130 278 * 76 130 278
Insurance Trust -Gold
and Natural Resources
Fund
Van Eck Worldwide 88 121 156 276 25 76 129 276 * 76 129 276
Insurance Trust-
Worldwide Bond Fund
Van Kampen American 108 181 255 461 45 136 228 461 * 136 228 461
Capital Life Investment
Trust- Real Estate
Securities Fund
Warburg Pincus Trust- 93 136 182 327 30 91 155 327 * 91 155 327
International Equity
Portfolio
Warburg Pincus Trust- 91 130 172 308 28 85 145 308 * 85 145 308
Small Company Growth
Portfolio
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist
the Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of
the Variable Account as well as those of the underlying Mutual Funds are
reflected in the Example. For more complete descriptions of the expenses of
the Variable Account, see "Variable Account Charges, Purchase Payments, and
Other Deductions." For more complete information regarding expenses paid out
of the assets of the underlying Mutual Funds, see the underlying Mutual Fund
prospectuses. Deductions for premium taxes may also apply but are not
reflected in the Example shown above (see "Premium Taxes").
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<PAGE> 13
SYNOPSIS
There are three types of Contracts: (1) Non-Qualified Contracts, (2)
Individual Retirement Annuities purchased with contributions rolled over from
Qualified Plans, Tax Sheltered Annuities or IRAs, or (3) Tax Sheltered
annuities with contributions rolled over or transferred from another Tax
Sheltered Annuity or custodial account.
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct
from the Contract Owner's Contract Value a Contingent Deferred Sales Charge not
to exceed 7% of the lesser of the total of all Purchase Payments made within 84
months prior to the date of the request to surrender, or the amount
surrendered. This charge, when applicable, is imposed to permit the Company to
recover sales expenses which have been advanced by the Company (see "Contingent
Deferred Sales Charge").
The Company will also assess an Administration Charge equal to an annual
rate of 0.15% of the underlying Mutual Fund's daily Net Asset Value of the
Variable Account. This charge is to reimburse the Company for administrative
expenses related to the issue and maintenance of the Contracts. The Company
does not expect to recover from this charge an amount in excess of accumulated
administrative expenses (see "Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the underlying Mutual Fund's daily Net Asset Value of the Variable
Account for mortality risk assumed by the Company (see "Mortality Risk
Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.45% of the underlying Mutual Fund's daily Net Asset Value of the Variable
Account as compensation for the Company's risk in undertaking not to increase
administrative charges on the Contracts regardless of the actual administrative
costs (see "Expense Risk Charge").
The initial Purchase Payment must be at least $15,000 and subsequent
Purchase Payments, if any, must be at least $1,000. Subsequent Purchase
Payments are not permitted for Contracts purchased in the states of New York,
Oregon, and Washington. The cumulative total of all Purchase Payments under
Contracts issued on the life of any one Designated Annuitant may not exceed
$1,000,000 without the prior consent of the Company (see "Allocation of
Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $5000, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in
payments of at least $50. In no event, however, will annuity payments be made
less frequently than annually (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable by the Company at the
time Purchase Payments are made, an equal premium tax deduction may be made
from the Contract prior to the allocation of any Purchase Payment to any
underlying Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the day the
Contract is received, it may be returned to the Home Office of the Company, at
the address shown on page 1 of this prospectus. When the Contract is received
by the Company, the Company will void the Contract and refund the Contract
Value in full unless otherwise required by state and/or federal law. All
Individual Retirement Annuity refunds will be return of Purchase Payments (see
"Right to Revoke").
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<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide Life and Annuity Insurance Company, formerly Financial
Horizons Life Insurance Company, is a stock life insurance company organized
under the laws of the State of Ohio and was established in February, 1981. The
Company is a member of the "Nationwide Insurance Enterprise", with its Home
Office at One Nationwide Plaza, Columbus, Ohio 43216. The Company offers
certain life insurance products and annuities.
THE VARIABLE ACCOUNT
The Variable Account was established as Financial Horizons VA Separate
Account - 2 by the Company on March 6, 1991, pursuant to the provisions of Ohio
law. The name of the Variable Account was subsequently changed to Nationwide
VA Separate Account-B pursuant to a resolution by the Company's Board of
Directors. The Company has caused the Variable Account to be registered with
the Securities and Exchange Commission as a unit investment trust pursuant to
the provisions of the Investment Company Act of 1940. Such registration does
not involve supervision of the management of the Variable Account or the
Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and,
as such, is not chargeable with liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard
to other income, gains, or losses of the Company.
Purchase Payments are allocated within the Variable Account among one or
more Sub-Accounts made up of shares in the underlying Mutual Fund options
designated by the Contract Owner. A separate Sub-Account is established within
the Variable Account for each of the underlying Mutual Fund options that may be
designated by the Contract Owner.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different Sub-Account
options. (See Appendix B, "Participating Funds" which contains a summary of
investment objectives for each underlying Mutual Fund held in the
Sub-Accounts.) More detailed information may be found in the current
prospectus for each underlying Mutual Fund offered. Such a prospectus for the
underlying Mutual Fund option(s) being considered must accompany this
prospectus and should be read in conjunction herewith. A copy of each
prospectus may be obtained without charge from Nationwide Life and Annuity
Company by calling 1-800-848-6331, TDD 1-800-238-3035 or writing P.O. Box
16609, Columbus, Ohio 43216-6609.
The underlying Mutual Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may
arise between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect
Contract Owners and variable annuity payees, including withdrawal of the
Variable Account from participation in the underlying Mutual Fund of Mutual
Funds which are involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual
Funds. These shares will be voted in accordance with instructions received
from Contract
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<PAGE> 15
Owners who have an interest in the Variable Account. If the Investment Company
Act of 1940 or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of underlying Mutual Fund shares attributable to
each Contract Owner is determined by dividing the Contract Owner's interest in
each respective Sub-Account of the Variable Account by the Net Asset Value of
the underlying Mutual Fund corresponding to the Sub-Account.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund. Voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest will receive periodic reports
relating to the underlying Mutual Fund, proxy material and a form with which to
give such voting instructions.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis and
is equal to an annual rate of 0.80% of the underlying Mutual Fund's daily Net
Asset Value of the Variable Account. The Company expects to generate a profit
through assessing this charge.
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
deducts an Expense Risk Charge from the Variable Account. This amount is
computed on a daily basis and is equal to an annual rate of 0.45% of the
underlying Mutual Fund's daily Net Asset Value of the Variable Account. The
Company expects to generate a profit through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts
is surrendered, the Company will, with certain exceptions, deduct a Contingent
Deferred Sales Charge not to exceed 7% of the lesser of the total of all
Purchase Payments made within 84 months prior to the date of the request to
surrender, or the amount surrendered. The Contingent Deferred Sales Charge,
when it is applicable, will be used to cover expenses relating to the sale of
the Contracts, including commissions paid to sales personnel, the costs of
preparation of sales literature and other promotional activity. The Company
attempts to recover its distribution costs relating to the sale of the
Contracts from the Contingent Deferred Sales Charge. Any shortfall will be
made up from the general account of the Company, which may indirectly include
portions of the Mortality and Expense Risk Charges, since the Company expects
to generate a profit from these charges. The maximum amount that may be paid
to a selling agent on the sale of these Contracts is 6.25% of Purchase
Payments.
The Contingent Deferred Sales Charge is calculated by multiplying the
applicable Contingent Deferred Sales Charge percentages noted below by the
Purchase Payments that are surrendered. For purposes of
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<PAGE> 16
calculating the Contingent Deferred Sales Charge, surrenders are considered to
come first from the oldest Purchase Payment made to the Contract, then the next
oldest Purchase Payment and so forth, with any earnings attributable to such
Purchase Payments considered only after all Purchase Payments made to the
Contract have been considered. For tax purposes, a surrender is usually
treated as a withdrawal of earnings first. This charge will apply in the
amounts set forth below to Purchase Payments within the time periods set forth.
The Contingent Deferred Sales Charge applies to Purchase Payments as
follows:
<TABLE>
<CAPTION>
NUMBER OF CONTINGENT NUMBER OF CONTINGENT
COMPLETED DEFERRED COMPLETED DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
In any Contract Year, the Contract Owner may withdraw without a
Contingent Deferred Sales Charge (CDSC) an amount equal to 10% of the total sum
of all Purchase Payments made to the Contract at the time of withdrawal, less
amounts previously withdrawn in the same Contract Year under the same 10% free
withdrawal provision. In addition, any amount withdrawn in order to meet
minimum Distribution requirements under the Code shall be free of CDSC. This
CDSC-free withdrawal privilege is non-cumulative; free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent
Contract Year. The Contract Owner may be subject to a tax penalty if the
Contract Owner takes withdrawals prior to age 59 1/2 (see "Non-Qualified
Contracts").
In addition, no Contingent Deferred Sales Charge will be deducted: (1)
upon the Annuitization of Contracts which have been in force for at least two
years, (2) upon payment of a death benefit pursuant to the death of the
Designated Annuitant, or (3) from any values which have been held under a
Contract for at least 84 months. No Contingent Deferred Sales Charge applies
upon the transfer of value among the Sub- Accounts or between the Fixed Account
and the Variable Account and vice-versa.
When a Contract is held by a Charitable Remainder Trust, the amount which
may be withdrawn from this Contract without application of a Contingent
Deferred Sales Charge, shall be the larger of (a) or (b), where (a) is:
The amount which would otherwise be available for withdrawal without
application of a Contingent Deferred Sales Charge;
and where (b) is:
The difference between the total Purchase Payments made to the Contract
as of the date of the withdrawal (reduced by previous withdrawals of such
Purchase Payments), and the Contract Value at the close of the day prior
to the date of the withdrawal.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For 403(b) Tax Sheltered Annuity Contracts issued in state jurisdictions
where insurance regulatory authorities have not approved applicable Contract
forms, the Contingent Deferred Sales Charge will be waived when:
A. the Contract Owner experiences a case of hardship (as provided in Code
Section 403(b) and as defined for purposes of Code Section 401(k));
B. the Contract Owner becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Contract Owner attains age 59 1/2 and has participated in the
Contract for at least 5 years, as determined from the Contract
Anniversary date;
D. the Contract Owner has participated in the Contract for at least 15
years as determined from the Contract Anniversary date;
E. the Contract Owner dies; or
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<PAGE> 17
F. the Contract Owner annuitizes after 2 years in the Contract.
For Non-Qualified Contracts and IRA Contracts, the Company will waive
the Contingent Deferred Sales Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this prospectus is exchanged for another
Contract issued by the Company or any of its affiliated insurance companies, of
the type and class which the Company determined is eligible for such exchange,
the Company will waive the Contingent Deferred Sales Charge on the first
Contract. A Contingent Deferred Sales Charge may apply to the contract
received in the exchange.
ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal on an annual basis
to 0.15% of the underlying Mutual Fund's daily Net Asset Value of the Variable
Account. The Administration Charge is designed only to reimburse the Company
for administrative expenses related to the issuance and maintenance of the
Contract. The Company will monitor this charge to ensure that it does not
exceed annual administration expenses.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The
method used to recoup premium tax expense will be determined by the Company at
its sole discretion and in compliance with applicable state law. The Company
currently deducts such charges from a Contract Owner's Contract Value either:
(1) at the time the Contract is surrendered, (2) at Annuitization, or (3) at
such earlier date as the Company may become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of
expenses: (1) administrative expenses relating to the issuance and maintenance
of the Contracts; (2) the mortality risk charges associated with guaranteeing
the annuity purchase rates at issue for the life of the Contracts; and (3)
charges associated with guaranteeing that the Mortality Risk, Expense Risk,
Contract Maintenance and Administration Charges described in this prospectus
will not be changed regardless of actual expenses. If these charges are
insufficient to cover these expenses, the loss will be borne by the Company.
Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each underlying Mutual Fund's prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have Purchase
Payments attributable to his or her participation in the Variable Account
allocated among one or more of the Sub-Accounts which consist of shares in the
underlying Mutual Funds. Shares of the respective underlying Mutual Funds
specified by the Contract Owner are purchased at Net Asset Value for the
respective Sub-Account(s) and converted into Accumulation Units. At the time
of purchase, the Contract Owner designates the underlying Mutual Funds to which
he or she desires to have Purchase Payments allocated. The Contract Owner may
change the election as to allocation of Purchase Payments or may elect to
exchange amounts among the Sub-Account options pursuant to such terms and
conditions applicable to such transactions as may be imposed by each of the
underlying Mutual Funds, in addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the
Date of Issue and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be a return of Purchase
Payments. In order to revoke the Contract, it must be mailed or delivered to
the Home Office of the Company at the mailing address shown on page 1 of this
prospectus. Mailing or delivery must occur on or before 10 days after receipt
of the Contract for revocation to be effective. In order to revoke the
Contract, if it has not been received, written notice must be mailed or
delivered to the Home Office of the Company at the mailing address shown on
page 1 of this prospectus.
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The liability of the Variable Account under this provision is limited
to the Contract Value in each Sub-Account on the date of revocation. Any
additional amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Company currently allows transfers up to 100% of the Variable
Account Contract Value from the Variable Account to the Fixed Account, without
penalty or adjustment. However, the Company reserves the right to restrict
transfers from the Variable Account to the Fixed Account to 10% of the Variable
Account Contract Value for any 12 month period. All amounts transferred to the
Fixed Account must remain on deposit in the Fixed Account until the expiration
of the Interest Rate Guarantee Period. Transfers from the Fixed Account may not
be made prior to the end of the then current Interest Rate Guarantee Period.
The Interest Rate Guarantee Period for any amount allocated to the Fixed
Account expires on the final day of a calendar quarter during which the one
year anniversary of the allocation of the Fixed Account occurs. Transfers must
also be made prior to the Annuitization Date. For all transfers involving the
Variable Account, the Contract Owner's value in each Sub-Account will be
determined as of the date the transfer request is received in the Home Office
in good order. The Company reserves the right to refuse transfers or Purchase
Payments into the Fixed Account if the Fixed Account is greater than or equal
to 30% of the Contract Value.
The Contract Owner may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The amount that may be transferred from the Fixed Account to the
Variable Account will be determined by the Company, at its sole discretion, but
will not be less than 10% of the total value of the portion of the Fixed
Account that is maturing. The amount that may be transferred from the Fixed
Account will be declared upon the expiration date of the then current Interest
Rate Guarantee Period. Transfers from the Fixed Account must be made within 45
days after the expiration date of the Interest Rate Guarantee Period. Contract
Owners who have entered into a Dollar Cost Averaging agreement with the Company
(see "Dollar Cost Averaging") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
Transfers may be made either in writing or, in states allowing such
transfers, by telephone. This telephone exchange privilege is made available
to Contract Owners automatically without the Owner's election. The Company
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include any or all of the
following, or such other procedures as the Company may, from time to time, deem
reasonable: requesting identifying information, such as name, contract number,
Social Security Number, and/or personal identification number; tape recording
all telephone transactions, and providing written confirmation thereof to both
the Contract Owner and any agent of record, at the last address of record. The
Company will not be liable for following instructions communicated by telephone
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne by the Contract Owner. The Company may
withdraw the telephone exchange privilege upon 30 days written notice to
Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all of the
rights under the Contract at any time during the lifetime of the Designated
Annuitant prior to the Annuitization Date. Such assignment will take effect
upon receipt and recording by the Company at its Home Office of a written
notice executed by the Contract Owner. The Company assumes no responsibility
for the validity or tax consequences of any assignment. The Company shall not
be liable as to any payment or other settlement made by the Company before
recording of the assignment. Where necessary for the proper administration of
the terms of the Contract, an assignment will not be recorded until the Company
has received sufficient direction from the Contract Owner and assignee as to
the proper allocation of Contract rights under the assignment.
Any portion of Contract Value which is pledged or assigned shall be
treated as a Distribution and shall be included in gross income to the extent
that the cash value exceeds the investment in the Contract for the taxable year
in which assigned or pledged. In addition, any Contract Values assigned may,
under certain conditions, be subject to a tax penalty equal to 10% of the
amount which is included in gross income. All rights in this Contract are
personal to the Contract Owner and may not be assigned without written consent
of the Company. Assignment of the entire Contract Value may cause the portion
of the Contract Value which exceeds the total investment in the Contract and
previously taxed amounts to be included in gross income for federal income tax
purposes each year that the assignment is in effect. Individual Retirement
Annuities and Tax Sheltered Annuities are not eligible for assignment.
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LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Tax Sheltered Annuity
Contract may receive a loan from the Contract Value subject to the terms of the
Contract, the Plan, and the Code, which may impose restrictions on loans.
Loans from Tax Sheltered Annuities are available beginning 30 days
after the Date of Issue. The Contract Owner may borrow a minimum of $1,000.
In non-ERISA plans, for Contract Values up to $20,000, the maximum loan balance
which may be outstanding at any time is 80% of the Contract Value, but not more
than $10,000. If the Contract Value is $20,000 or more, the maximum loan
balance which may be outstanding at any time is 50% of the Contract Value, but
not more than $50,000. For ERISA plans, the maximum loan balance which may be
outstanding at any time is 50% of the Contract Value, but not more than
$50,000. The $50,000 limit will be reduced by the highest loan balances owed
during the prior one-year period. Additional loans are subject to the contract
minimum amount. The aggregate of all loans may not exceed the Contract Value
limitations stated above.
For salary reduction Tax Sheltered Annuities, loans may only be
secured by the Contract Value. For loans from Qualified Contracts and other
Tax Sheltered Annuities, the Company reserves the right to limit a loan to 50%
of the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other named
collateral where the loan from a Contract exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal
to the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in
each option until the required balance is reached or all such variable units
are exhausted. The remaining required collateral will next be transferred from
the Fixed Account. No withdrawal charges are deducted at the time of the loan,
or on the transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the
collateral fixed account will never be less than 3.0%. Specific loan terms are
disclosed at the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less
frequently than quarterly, within five years. Loans used to purchase the
principal residence of the Contract Owner must be repaid within 15 years.
During the loan term, the outstanding balance of the loan will continue to earn
interest at an annual rate as specified in the loan agreement. Loan repayments
will consist of principal and interest in amounts set forth in the loan
agreement. Loan repayments will be allocated between the Fixed and Variable
Accounts in the same proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the
outstanding loan plus accrued interest. Until the loan is repaid, the Company
reserves the right to restrict any transfer of the Contract which would
otherwise qualify as a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to
accrue. A grace period may be available under the terms of the loan agreement.
If a loan payment is not made when due, or by the end of the applicable grace
period, then that payment, which may be a single periodic payment or payment of
the entire loan, will be treated as a deemed Distribution, as permitted by law,
may be taxable to the borrower, and may be subject to the early withdrawal tax
penalty. Interest which subsequently accrues on defaulted amounts may also be
treated as additional deemed Distributions each year. Any defaulted amounts,
plus accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount, and this amount
may again be treated as a Distribution where required by law. Additional loans
may not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract
may still be taxable in whole or part if the participant has additional loans
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from other plans or contracts. The Company will calculate the maximum
nontaxable loan based on the information provided by the participant or the
employer.
Loan repayments must be identified as such or else they will be
treated as Purchase Payments and will not be used to reduce the outstanding
loan principal or interest due. The Company reserves the right to modify the
term or procedures associated with the loan in the event of a change in the
laws or regulations relating to the treatment of loans. The Company also
reserves the right to assess a loan processing fee. Individual Retirement
Annuities and Non-Qualified Contracts are not eligible for loans.
OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS
OWNER, THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. If a Joint Owner
is named, the Joint Owner will possess an undivided interest in the Contract.
Prior to the Annuitization Date, a surviving Joint Owner shall retain sole
rights in the Contract upon the other Joint Owner's death if the deceased Joint
Owner was not also the Designated Annuitant. If the deceased Joint Owner was
also the Designated Annuitant, disposition of the Contract will be determined
based on the "Death of Designated Annuitant Prior to the Annuitization Date"
provision. Unless otherwise provided, when Joint Owners are named, the exercise
of any ownership right in the Contract (including the right to surrender or
partially surrender the Contract, to change the Contract Owner, the Contingent
Owner, the Designated Annuitant, the Contingent Designated Annuitant, the
Beneficiary, the Contingent Beneficiary, the Annuity Payment Option or the
Annuity Commencement Date) shall require a written indication of an intent to
exercise that right, signed by both Contract Owners. Joint Owners must be
spouses at the time joint ownership is requested.
If a Contract Owner dies prior to the Annuitization Date and the
Contract Owner and the Designated Annuitant are not the same person, Contract
ownership will be determined in accordance with the "Death of Contract Owner"
provision. If the Designated Annuitant (regardless of whether the Designated
Annuitant is also the Contract Owner) dies prior to the Annuitization Date,
ownership will be determined in accordance with the "Death of Designated
Annuitant Prior to the Annuitization Date" provision.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner. Such change may be subject to state and federal gift taxes,
and may also result in current federal income taxation (see "Taxes"). Any
change of Contract Owner will automatically revoke any prior Contract Owner
designation. Any request for change of Contract Owner must be (1) made by
proper written application, (2) received and recorded by the Company at its
Home Office, and (3) may include a signature guarantee as specified in the
"Surrender" provision. The change will become effective as of the date the
written request is signed. A new choice of Contract Owner will not apply to
any payment made or action taken by the Company prior to the time it was
received and recorded.
The Contract Owner may request a change in the Designated Annuitant or
Contingent Designated Annuitant before the Annuitization Date. Such a request
must be made in writing on a form acceptable to the Company and must be signed
by the Contract Owner and the person to be named as Designated Annuitant or
Contingent Designated Annuitant. Any such change is subject to underwriting
and approval by the Company.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person (or persons) who may receive
certain benefits under the Contract if the Contract Owner dies before the
Annuitization Date. If more than one Contingent Owner survives the Contract
Owner, each will share equally unless otherwise specified in the Contingent
Owner designation. If a Contingent Owner is not named or predeceases the
Contract Owner, all rights and interest of the Contingent Owner will vest in
the Contract Owner's estate. Subject to the terms of any existing assignment,
the Contract Owner may change the Contingent Owner from time to time prior to
the Annuitization Date by written notice to the Company. The change, upon
receipt and recording by the Company at its Home Office, will take effect as of
the time the written notice was signed, whether or not the Contract Owner is
living at the time of recording, but without further liability as to any
payment or settlement made by the Company before receipt of such change.
Unless the Contingent Owner (or Joint Owner) is also the named Beneficiary (or
Contingent Beneficiary, if applicable), the Contingent Owner (or Joint Owner)
shall have no rights in the Contract if the Contract Owner/ Designated
Annuitant dies. If a Contract Owner/ Designated Annuitant dies, disposition of
the Contract shall be determined based on the "Death of Designated Annuitant
Prior to the Annuitization Date" provision.
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The Beneficiary is the person or persons who may receive certain
benefits under the Contract in the event the Designated Annuitant dies prior to
the Annuitization Date. If more than one Beneficiary survives the Designated
Annuitant, each will share equally unless otherwise specified in the
Beneficiary designation. If no Beneficiary survives the Designated Annuitant,
all rights and interest of the Beneficiary shall vest in the Contingent
Beneficiary, and if more than one Contingent Beneficiary survives, each will
share equally unless otherwise specified in the Contingent Beneficiary
designation. If a Contingent Beneficiary is not named or predeceases the
Designated Annuitant, all rights and interest of the Contingent Beneficiary
will vest with the Contract Owner or the Contract Owner's estate. Subject to
the terms of any existing assignment, the Contract Owner may change the
Beneficiary or Contingent Beneficiary from time to time during the lifetime of
the Designated Annuitant, by written notice to the Company. The change, upon
receipt by the Company at its Home Office, will take effect as of the time the
written notice was signed, whether or not the Designated Annuitant is living at
the time of recording, but without further liability as to any payment or
settlement made by the Company before receipt of such change.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds described in this
prospectus should no longer be available for investment by the Variable Account
or if, in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate, the Company may
eliminate Sub-Accounts, combine two or more Sub-Accounts or substitute one or
more underlying Mutual Funds for other underlying Mutual Fund shares already
purchased or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities in the Variable Account may take place
without prior approval of the Securities and Exchange Commission, and under
such requirements as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life and
Annuity Company by writing P.O. Box 16609, Columbus, Ohio 43216-6609, or
calling 1-800-848-6331, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is
applied to the Annuity Payment Option elected and the amount of the first such
payment made shall be determined in accordance with the Annuity Table in the
Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units
remains fixed during the annuity payment period. The dollar amount of the
second and subsequent payments is not predetermined and may change from month
to month. The dollar amount of each subsequent payment is determined by
multiplying the fixed number of Annuity Units by the Annuity Unit Value for the
Valuation Period in which the payment is due. The Company guarantees that the
dollar amount of each payment after the first will not be affected by
variations in mortality experience from mortality assumptions used to determine
the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an
Annuity Unit for a Sub-Account for any subsequent Valuation Period is
determined by multiplying the Annuity Unit Value for the immediately preceding
Valuation Period by the Net Investment Factor for the Valuation Period for
which the Annuity Unit Value is being calculated, and multiplying the result by
an interest factor to neutralize the assumed investment rate of 3.5% per annum
(see "Net Investment Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables
contained in the Contracts. A higher assumption would mean a higher initial
payment but more slowly rising or more rapidly falling subsequent payments. A
lower assumption would have the opposite effect. If the actual investment rate
is at the annual rate of 3.5%, the annuity payments will be level.
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FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if
the net amount available to apply under any Annuity Payment Option is less than
$5,000, the Company shall have the right to pay such amount in one lump sum in
lieu of the payments otherwise provided for. In addition, if the payments
provided for would be or become less than $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in
payments of at least $50. In no event will the Company make payments under an
annuity option less frequently than annually.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date may be the first day of a calendar month or any other
agreed upon date and must be at least 2 years after the Date of Issue. In the
event the Contract is issued subject to the terms of a Tax Sheltered Annuity
Plan, Annuitization may occur during the first two years subject to approval by
the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company,
change the Annuity Commencement Date. The date to which such a change may be
made shall be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership
Provisions"), and the Company approves the request, the Annuity Commencement
Date may be deferred. The amount of the Death Benefit will be limited to the
Contract Value if the Annuity Commencement Date is postponed beyond the first
day of the calendar month after the Annuitant's 86th birthday.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at
any time prior to the Annuitization Date, elect one of the Annuity Payment
Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime
of the Annuitant, ceasing with the last payment due prior to the death
of the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE
ANNUITANT TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE
THE SECOND ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE
DIED BEFORE THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second
person and continuing thereafter during the lifetime of the survivor.
AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF
PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH
OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS
RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been
made for fewer than 120 or 240 months, as selected, payments will be
made as follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period
to such recipient as chosen by the Annuitant at the time the
Annuity Payment Option was selected. In the alternative, the
recipient may, at any time, elect to have the present value of
the guaranteed number of annuity payments remaining paid in a
lump sum as specified in section (2) below.
(2) If someone other than the Annuitant is the payee, the present
value, computed as of the date on which notice of death is
received by the Company at its Home Office, of the guaranteed
number of annuity payments remaining after receipt of such
notice and to which the deceased would have been entitled had
he or she not died, computed at the Assumed Investment Rate
effective in determining the Annuity Tables, shall be paid in
a lump sum.
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Some of the stated Annuity Options may not be available in all states.
The Contract Owner may request an alternative non-guaranteed option by giving
notice in writing prior to Annuitization. If such a request is approved by the
Company, it will be permitted under the Contract.
If the Owner fails to elect an Annuity Payment Option, the Contract
Value will continue to accumulate. Individual Retirement Annuities and Tax
Sheltered Annuities are subject to the minimum Distribution requirements set
forth in the Code.
DEATH OF CONTRACT OWNER
If the Contract Owner and the Designated Annuitant are not the same
person and the Contract Owner dies prior to the Annuitization Date, then the
Joint Owner, if any, becomes the new Contract Owner. If no Joint Owner is
named (or if the Joint Owner predeceases the Contract Owner), then the
Contingent Owner becomes the new Contract Owner. If no Contingent Owner is
named (or if the Contingent Owner predeceases the Contract Owner), then the
Contract Owner's estate becomes the Contract Owner. Unless the new Contract
Owner is the prior Contract Owner's spouse, the entire interest in the
Contract, less applicable deductions (which may include a Contingent Deferred
Sales Charge), must be distributed within five years of the prior Contract
Owner's death. The new Contract Owner may elect to receive Distribution in the
form of a life annuity or an annuity for a period not exceeding his or her life
expectancy. Such annuity must begin within one year following the date of the
prior Contract Owner's death. If the new Contract Owner is the spouse of the
prior Contract Owner, then the Contract may be continued without any required
Distribution.
If the Designated Annuitant (regardless of whether the Designated
Annuitant is also the Contract Owner) dies prior to the Annuitization Date, a
Death Benefit will be payable in accordance with the "Death of Designated
Annuitant Prior to the Annuitization Date" provision below, provided however,
that all Distributions made as a result of the death of the Contract Owner
shall be made within the time limits set forth in this provision. If a
Contract Owner/Designated Annuitant dies prior to the Annuitization Date, and
the Beneficiary is the Contract Owner/Designated Annuitant's spouse, such
spouse may elect to continue the Contract as the Contract Owner and Annuitant.
Individual Retirement Annuities or Tax Sheltered Annuities will be
subject to specific rules set forth in the Plan, Contract, or Code concerning
Distributions upon the death of the Contract Owner.
DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Designated Annuitant dies prior to the Annuitization Date, a
Death Benefit is payable unless the Contract Owner has also named a Contingent
Designated Annuitant, in which case the Death Benefit is payable upon the death
of the last survivor of the Designated Annuitant and Contingent Designated
Annuitant. The Death Benefit is payable to the Beneficiary. If no Beneficiary
is named (or if the Beneficiary predeceases the Designated Annuitant), then the
Death Benefit is payable to the Contingent Beneficiary. If no Contingent
Beneficiary is named (or if the Contingent Beneficiary predeceases the
Designated Annuitant), then the Death Benefit will be paid to Contract Owner or
the Contract Owner's estate.
The value of the Death Benefit will be determined as of the Valuation
Date coincident with or next following the date the Company receives in writing
(1) due proof of the Designated Annuitant's death and (2) an election for
either a single sum payment or an Annuity Payment Option; and (3) any form
required by state insurance laws. If a single sum payment is requested,
payment will be made in accordance with any applicable laws and regulations
governing the payment of Death Benefits. If an Annuity Payment Option is
requested, election must be made by the Beneficiary during the 90-day period
commencing with the date written notice is received by the Company. If no
election has been made by the end of such 90-day period commencing with the
date written notice is received by the Company, the Death Benefit will be paid
in a single sum payment. If the Designated Annuitant dies prior to his or her
86th birthday, the value of the Death Benefit will be the greater of (1) the
sum of all Purchase Payments, made to the Contract less any amounts
surrendered, (2) the Contract Value, or (3) the Contract Value as of the most
recent five-year Contract Anniversary, less any amounts surrendered since the
most recent five-year Contract Anniversary. If the Designated Annuitant dies
on or after his or her 86th birthday, then the Death Benefit will be equal to
the Contract Value.
If the Contract Owner is not a natural person, the death of the
Designated Annuitant (or a change of the Designated Annuitant) will be treated
like a death of the Contract Owner and will result in a Distribution of either:
(a) the Death Benefit described above (if there is no Contingent
Designated Annuitant and the Designated Annuitant has died),
or in all other cases
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(b) a Distribution to the Contract Owner if the Designated
Annuitant has been changed,
provided that any such Distribution must be made within the time period
specified in the "Death of Contract Owner" provision.
DEATH OF ANNUITANT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that
may be payable shall be as specified in the Annuity Payment Option selected.
REQUIRED DISTRIBUTION FOR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Tax Sheltered Annuity
Contract will be distributed in a manner consistent with the Minimum
Distribution and Incidental Benefit (MDIB) provisions of Section 401(a)(9) of
the Code and regulations thereunder, as applicable, and will be paid,
notwithstanding anything else contained herein, to the Contract Owner/Annuitant
under the Annuity Payments Option selected, over a period not exceeding:
(a) the life of the Contract Owner/Annuitant or the lives of the
Contract Owner/Annuitant and the Contract Owner/Annuitant's
designated Beneficiary; or
(b) a period not extending beyond the life expectancy of the Contract
Owner/Annuitant or the life expectancy of the Contract
Owner/Annuitant and the Contract Owner/Annuitant's designated
Beneficiary.
If the Contract Owner/Annuitant's entire interest is to be distributed
in equal or substantially equal payments over a period described in A or B,
such payments will commence not later than the first day of April following the
calendar year in which the Contract Owner/Annuitant attains age 70 1/2 (the
required beginning date). In the case of a governmental plan (as defined in
Code Section 414(d)), or church plan (as defined in Code Section 401(a)(9)(C)),
the Required Beginning Date will be the later of the dates determined under the
preceding sentence or April 1 of the calendar year following the calendar year
in which the Annuitant retires.
If the Contract Owner dies prior to the commencement of his or her
Distribution, the interest in the Tax Sheltered Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of his or her
death occurs unless:
(a) In the case of a Tax Sheltered Annuity, the Contract Owner names his
or her surviving spouse as the Beneficiary and such spouse elects to:
(I) treat the annuity as a Tax Sheltered Annuity established for
his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Contract Owner would have attained age 70 1/2; or
(b) In the case of a Tax Sheltered Annuity, the Contract Owner names a
Beneficiary other than his or her surviving spouse and such Beneficiary
elects to receive a Distribution of the account in nearly equal payments
over his or her life (or a period not exceeding his or her life
expectancy) commencing not later than December 31 of the year following
the year in which the Contract Owner dies.
If the Contract Owner/Annuitant dies after Distribution has commenced,
Distribution must continue at least as rapidly as under the schedule being used
prior to his or her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Contract Owner/Annuitant by the life expectancy of the Contract
Owner/Annuitant, or the joint and last survivor expectancy of the Contract
Owner/Annuitant and the Contract Owner/Annuitant's Designated Beneficiary
(whichever is applicable under the applicable Minimum Distribution or MDIB
provisions). Life expectancy and joint and last survivor expectancy are
computed by the use of return multiples contained in Section 1.72-9 of the
Treasury Regulations.
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REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the
Contract Owner attains age 70 1/2. Distribution may be accepted in a lump sum
or in nearly equal payments over: (a) the Contract Owner's life or the lives
of the Contract Owner and the Contract Owner's spouse or designated
Beneficiary, or (b) a period not extending beyond the Contract Owner and the
Contract Owner's spouse or designated Beneficiary.
If the Contract Owner dies prior to the commencement of the Distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of the Contract
Owner's death occurs unless:
(a) The Contract Owner has named his or her surviving spouse as the
designated Beneficiary and such spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity
established for his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments
over his or her life (or a period not exceeding his or her
life expectancy) and commencing not later than December 31 of
the year in which the Contract Owner would have attained age
70 1/2; or
(b) The Contract Owner has named a Beneficiary other than his or her
surviving spouse and such Beneficiary elects to receive a Distribution
of the account in nearly equal payments over his or her life (or a
period not exceeding his or her life expectancy) commencing not later
than December 31 of the year following the year in which the Contract
Owner dies.
If the Contract Owner dies after Distribution has commenced, the
Distribution must continue at least as rapidly as under the schedule being used
prior to the Contract Owner's death, except to the extent that a surviving
spouse Beneficiary may elect to treat the Contract as his or her own, in the
same manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those
mentioned above, penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income
tax rates. The portion of the Distribution which is taxable is based on the
ratio between the amount by which non-deductible Purchase Payments exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Contract Owner must annually report the amount of
non-deductible Purchase Payments, the amount of any Distribution, the amount by
which non-deductible Purchase Payments for all years exceed non-taxable
Distributions for all years, and the total balance of all Individual Retirement
Annuities.
Individual Retirement Annuity Distributions will not receive the
benefit of the tax treatment of a lump sum Distribution from a Qualified Plan.
If the Contract Owner dies prior to the time Distribution of the Contract
Owner's interest in the annuity is completed, the balance will also be included
in the Contract Owner's gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may determine whether the Death Benefit or any other
payment constitutes a direct skip as defined in Section 2612 of the Code, and
the amount of the tax on the generation-skipping transfer resulting from such
direct skip. If applicable, the payment will be reduced by any tax the Company
is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
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GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the automatic
reallocation of Contract Values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the
three month period falls on a Saturday, Sunday, recognized holiday or any other
day when the New York Stock Exchange is closed, the Asset Rebalancing exchange
will occur on the last business day before that day. Asset Rebalancing will
not affect future allocations of Purchase Payments. An Asset Rebalancing
request must be in writing on a form provided by the Company. The Contract
Owner may want to contact a financial adviser in order to discuss the use of
Asset Rebalancing in his or her Contract.
Contracts issued to a Tax Sheltered Annuity Plan as defined by the
Code may have superseding plan restrictions with regard to frequency of
underlying Mutual Fund exchanges and underlying Mutual Fund options.
The Company reserves the right to discontinue offering Asset
Rebalancing upon 30 days written notice; such discontinuation will not affect
Asset Rebalancing programs which have already commenced. The Company also
reserves the right to assess a processing fee for this service.
DOLLAR COST AVERAGING - The Contract Owner may direct the Company to
automatically transfer a specified amount from the Money Market Fund
Sub-Account, the Limited Maturity Bond Portfolio Sub-Account or the Fixed
Account to any other Sub-Account within the Variable Account on a monthly
basis. This service is intended to allow the Contract Owner to utilize Dollar
Cost Averaging, a long-term investment program which provides for regular,
level investments over time. The Company makes no guarantees that Dollar Cost
Averaging will result in a profit or protect against loss in a declining
market. Transfers for purposes of Dollar Cost Averaging can only be made from
the Money Market Fund Sub- Account, the Limited Maturity Bond Portfolio
Sub-Account or the Fixed Account. The minimum monthly Dollar Cost Averaging
transfer is $100. In addition, Dollar Cost Averaging monthly transfers from
the Fixed Account must be equal to or less than 1/30th of the Fixed Account
value when the Dollar Cost Averaging program is requested. Transfers out of
the Fixed Account, other than for Dollar Cost Averaging, may be subject to
certain additional restrictions (see "Transfers"). A written election of this
service, on a form provided by the Company, must be completed by the Contract
Owner in order to begin transfers. Once elected, transfers from the Money
Market Fund Sub-Account, the Limited Maturity Bond Portfolio Sub-Account or the
Fixed Account will be processed monthly until either the value in the Money
Market Fund Sub-Account, the Limited Maturity Bond Portfolio Sub-Account or the
Fixed Account is completely depleted or the Contract Owner instructs the
Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days written notice; such discontinuation will not affect
Dollar Cost Averaging programs already commenced. The Company also reserves
the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS - The Contract Owner may elect in writing on a
form provided by the Company to take Systematic Withdrawals of a specified
dollar amount (of at least $100) on a monthly, quarterly, semi-annual or annual
basis. The Company will process the withdrawals as directed by surrendering on
a pro-rata basis Accumulation Units from all of the Sub-Accounts in which the
Contract Owner has an interest, and the Fixed Account. A Contingent Deferred
Sales Charge may apply to Systematic Withdrawals in accordance with the
considerations set forth in the "Contingent Deferred Sales Charge" section.
Each Systematic Withdrawal is subject to federal income taxes on the taxable
portion. In addition, a 10% federal penalty tax may be assessed on Systematic
Withdrawals if the Contract Owner is under age 59 1/2. If directed by the
Contract Owner, the Company will withhold federal income taxes from each
Systematic Withdrawal. A Systematic Withdrawal program will terminate
automatically at the end of each Contract Year and may be reinstated only
pursuant to a new request. The Contract Owner may discontinue Systematic
Withdrawals at any time by notifying the Company in writing.
If the Contract Owner withdraws amounts pursuant to a Systematic
Withdrawal program, then the Contract Owner may withdraw each Contract Year
without a CDSC an amount up to the greater of (i) 10% of the total sum of all
Purchase Payments made to the Contract at the time of withdrawal, (in addition,
any amount withdrawn from any Individual Retirement Annuity Contract, in order
to meet minimum Distribution requirements shall be free of CDSC); or (ii) the
specified percentage of the Contract Value based on the Contract Owner's age,
as shown in the following table:
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<TABLE>
<CAPTION>
Contract Owner's Percentage of
Age Contract Value
---------------------- -----------------------
<S> <C>
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
</TABLE>
If the total amounts withdrawn in any Contract Year exceed the CDSC-free
amount as calculated under the Systematic Withdrawal method described above,
then such total withdrawn amounts will be eligible only for the 10% of Purchase
Payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section, and the total amount of CDSC charged during the Contract
Year will be determined in accordance with that provision.
The Contract Value and the Contract Owner's age for purposes of applying
the CDSC-free withdrawal percentage described in this provision are determined
as of the date the request for a Systematic Withdrawal program is received and
recorded by the Company at its Home Office. (In the case of Joint Owners, the
older Owner's age will be used.) The Contract Owner may elect to take such
CDSC-free amounts only once each Contract Year. Furthermore, this CDSC-free
withdrawal privilege for Systematic Withdrawals is non-cumulative; free amounts
not taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
Systematic Withdrawals are not available prior to the expiration of the
ten day free look provision of the Contract. The Company also reserves the
right to assess a processing fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable laws or regulations.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional Purchase Payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner should review the information in
these statements carefully. All errors or corrections must be reported to the
Company immediately to assure proper crediting to the Owner's Contract. The
Company will assume all transactions are accurately reported on quarterly
statements or confirmation statements unless the Contract Owner notifies the
Company otherwise within 30 days after receipt of the statement. The Company
will also send to Contract Owners each year an annual report and a semi-annual
report containing financial statements for the Variable Account, as of December
31 and June 30, respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial Purchase Payment must be at least $15,000. Subsequent
Purchase Payments, if any, must be at least $1,000. Subsequent Purchase
Payments are not permitted in the states of New York, Oregon, and Washington.
The cumulative total of all Purchase Payments under Contracts issued on the
life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
The initial Purchase Payment allocated to designated Sub-Accounts of the
Variable Account will be priced no later than 2 business days after receipt of
an order to purchase, if the application and all information necessary for
processing the purchase order are complete. The Company may, however, retain
the Purchase Payment for up to 5 business days while attempting to complete an
incomplete application. If the application cannot be made complete within 5
days, the prospective purchaser will be informed of the reasons for the delay
and the Purchase Payment will be returned immediately unless the prospective
purchaser specifically consents
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to the Company retaining the Purchase Payment until the application is made
complete. Thereafter, subsequent Purchase Payments will be priced on the basis
of the Accumulation Unit Value next completed for the appropriate Sub-Account
after the additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-Account
was arbitrarily set initially at $10 when the underlying Mutual Fund shares in
that Sub-Account were available for purchase. The value for any subsequent
Valuation Period is determined by multiplying the Accumulation Unit Value for
each Sub-Account for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation
Period to Valuation Period. The number of Accumulation Units will not change
as a result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the underlying Mutual Fund
held in the Sub-Account determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
Distributions made by the underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period.
(b) is the net of:
(1) the Net Asset Value per share of the underlying Mutual Fund
held in the Sub-Account determined at the end of the
immediately preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period (see "Charge
For Tax Provisions").
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account.
Such factor is equal to an annual rate of 1.40% of the underlying
Mutual Fund's daily Net Asset Value of the Variable Account.
For underlying Mutual Funds that credit dividends on a daily basis and
pay such dividends once a month (the Nationwide Separate Account Trust - Money
Market Fund), the Net Investment Factor allows for the monthly reinvestment of
these daily dividends.
The Net Investment Factor may be greater or less than one; therefore,
the value of an Accumulation Unit may increase or decrease. It should be noted
that changes in the Net Investment Factor may not be directly proportional to
changes in the Net Asset Value of underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge and Administration
Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their Net Asset Value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each Sub-Account
is determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit Value for the Sub-Account for the Valuation Period during
which the Purchase Payment is received by the Company. If part or all of the
Contract Value is surrendered or charges or deductions are made against the
Contract Value, an appropriate number of Accumulation Units from the Variable
Account and an appropriate
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<PAGE> 29
amount from the Fixed Account will be deducted in the same proportion that the
Contract Owner's interest in the Variable Account and the Fixed Account bears
to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper written application" means that the Contract Owner
must request the surrender in writing and include the Contract. The Company
may require that the signature(s) be guaranteed by a member firm of a major
stock exchange or other depository institution qualified to give such a
guaranty.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all Sub-Accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each Sub-Account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the Sub-Accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
Purchase Payments made by a Contract Owner, depending on the market value of
the underlying Mutual Fund shares.
SURRENDERS UNDER A TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of
the Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code, may be executed only -
1. when the Contract Owner attains age 59 1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code
Section 401(k)), provided that any surrender of Contract Value
in the case of hardship may not include any income
attributable to salary reduction contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts
(except that earnings, and employer contributions as of
December 31, 1988 in such Custodial Accounts may be withdrawn
in the case of hardship).
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C. Any Distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification in the event of a ten-day free look, the
Company will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Code, upon proper direction by the
Contract Owner. The foregoing is the Company's understanding of the withdrawal
restrictions which are currently applicable under Section 403(b)(11) and
Revenue Ruling 90-24. Such restrictions are subject to legislative change
and/or reinterpretation from time to time. Distributions pursuant to Qualified
Domestic Relations Orders will not be considered to be a violation of the
restrictions stated in this provision.
The Contract surrender provisions may also be modified pursuant to the
plan terms and Code tax provisions when the Contract is issued to fund a
Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A
PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for: (1) Qualified Contracts; (2) Individual
Retirement Annuities and Individual Retirement Accounts; (3) Tax Sheltered
Annuities; or (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time
of the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned by
Individual Retirement Accounts are also generally taxed when received. The
portion of each such payment which is excludable is based on the ratio between
the amount by which nondeductible Purchase Payments to all such Contracts
exceeds prior non-taxable Distributions from such Contracts, and the total
account balances in such Contracts at the time of the Distribution. The Owner
of such Individual Retirement Annuities or the Designated Annuitant under
Contracts held by Individual Retirement Accounts must annually report to the
Internal Revenue Service the amount of nondeductible Purchase Payments, the
amount of any Distribution, the amount by which nondeductible Purchase Payments
for all years exceed non-taxable Distributions for all years, and the total
balance in all Individual Retirement Annuities and Accounts. Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from
income the entire investment in the Contract, the Annuitant's final tax return
may reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are
taxable to the Contract Owner to the extent that the cash value of the Contract
exceeds the Contract Owner's investment at the time of the Distribution.
Distributions, for this purpose, include partial surrenders, dividends, loans,
or any portion of the Contract which is assigned or pledged; or for Contracts
issued after April 22, 1987, any portion of the Contract transferred by gift.
For these purposes, a transfer by gift may occur upon Annuitization if the
Contract Owner and the Annuitant are not the same individual. In determining
the taxable amount of a Distribution, all annuity contracts issued after
October 21, 1988, by the same company to the same contract owner during any 12
month period, will be treated as one annuity contract. Additional limitations
on the use of multiple contracts
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may be imposed by Treasury regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are
exceptions for immediate annuities and certain Contracts owned for the benefit
of an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase.
If this Contract is issued as the result of an exchange described in Section
1035 of the Code, it will generally be considered to have been purchased on the
purchase date of the contract given up in the exchange.
Code Section 72 also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59 1/2 or disability of the Contract Owner. The penalty
does not apply if the Distribution is one of a series of substantially equal
periodic payments made over the life or life expectancy (or joint lives or life
expectancies) of the Annuitant (and the Annuitant's Beneficiary), or for the
purchase of an immediate annuity, or is allocable to an investment in the
Contract before August 14, 1982. A Contract Owner wishing to begin taking
Distributions to which the 10% tax penalty does not apply should forward a
written request to the Company. Upon receipt of a written request from the
Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to first year withdrawals. If the Annuitant or Contract Owner
selects an annuity for life or life expectancy, or begins a pre-defined series
of withdrawals based on life expectancy, and changes the method of payment
before the expiration of 5 years and the attainment of age 59 1/2, the early
withdrawal penalty will apply. The penalty will be equal to that which would
have been imposed had no exception applied from the outset, and the Annuitant
or Contract Owner will also pay interest on the amount of the penalty from the
date it would have originally applied until it is actually paid.
In order to qualify as an annuity Contract under Section 72 of the Code,
the Contract must provide for Distribution to be made upon the death of the
Contract Owner. In such case, the Contingent Owner or other named recipient
must receive the Distribution within 5 years of the Owner's death. However,
the recipient may elect for payments to be made over their life or life
expectancy if such payments begin within one year from the death of the
Contract Owner. If the Contingent Owner or other named recipient is the
surviving spouse, such spouse may be treated as the Contract Owner and the
Contract may be continued throughout the life of the surviving spouse. In the
event the Contract Owner dies on or after the Annuitization Date and before the
entire interest has been distributed, the remaining portion must be distributed
at least as rapidly as under the method of Distribution being used as of the
date of the Contract Owner's death (see "Required Distribution For Tax
Sheltered Annuities"). If the Contract Owner is not an individual, the death
of the Designated Annuitant (or a change in the Designated Annuitant) will
result in a Distribution pursuant to these rules, regardless of whether a
Contingent Designated Annuitant has been named.
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner.
The Contract Owner is entitled to elect not to have federal income tax withheld
from any such Distribution, but may be subject to penalties in the event
insufficient federal income tax is withheld during a calendar year.
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.
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the Code,
and the amount of the tax on the generation-skipping transfer resulting from
such direct skip. If applicable, such payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Code. A direct skip may
occur when property is transferred to or a Death Benefit is paid to an
individual two or more generations younger than the Contract Owner.
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INDIVIDUAL RETIREMENT ANNUITIES
The Contract may be purchased as an Individual Retirement Annuity under
Section 408(b) of the Code. Because the Contract's initial and subsequent
Purchase Payments are greater than the maximum contribution permitted an
Individual Retirement Annuity, or an Individual Retirement Annuity Contract may
be purchased only in connection with a "rollover" (including a direct
trustee-to-trustee transfer, where permitted). Specifically, an Individual
Retirement Annuity Contract may be purchased only in connection with a rollover
of amounts from a Qualified Plan, Tax-Sheltered Annuity or Individual
Retirement Annuity. The Contract Owner should seek competent advice as to the
tax consequences associated with the use of a Contract as an Individual
Retirement Annuity.
Recent changes to the Code permit the rollover of most Distributions from
Qualified Plans to other Qualified Plans or Individual Retirement Accounts.
Most Distributions from Tax-Sheltered Annuities may be rolled into another
Tax-Sheltered Annuity or Individual Retirement Account. Distributions which
may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent) payments
made: (a) over the life (or life expectancy) of the employee, (b) the
joint lives (or joint life expectancies) of the employee and the
employee's designated Beneficiary, or (c) for a specified period of ten
years or more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater
of the cash value of the Contract or the sum of all Purchase Payments (less any
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a
variable annuity contract which does not satisfy the diversification standards
will not be treated as an annuity contract, unless the failure to satisfy the
regulations was inadvertent, the failure is corrected, and the Owner or the
Company pays an amount to the Internal Revenue Service. The amount will be
based on the tax that would have been paid by the Owner if the income, for the
period the contract was not diversified, had been received by the Owner. If
the failure to diversify is not corrected in this manner, the Owner of an
annuity contract will be deemed the owner of the underlying securities and will
be taxed on the earnings of his or her account. The Company believes, under
its interpretation of the Code and regulations thereunder, that the investments
underlying this Contract meet these diversification standards.
Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in 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 Contract would no longer qualify as an annuity under
Section 72 of the Code, the Company will take whatever steps are available to
remain in compliance.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to
the Company. However, the Company reserves the right to implement and adjust
the tax charge in the future, if the tax laws change.
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INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS AND TAX
SHELTERED ANNUITIES
The Contracts may be used with Individual Retirement Annuities,
Individual Retirement Accounts, Tax Sheltered Annuities and other plans
receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of Purchase Payments, and tax consequences
on Distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans, Individual Retirement Accounts, or Individual
Retirement Annuities. Most Distributions from Tax Sheltered Annuities may be
rolled into another Tax Sheltered Annuity, an Individual Retirement Account, or
an Individual Retirement Annuity. Distributions which may not be rolled over
are those which are:
1. one of a series of substantially equal annual (or more frequent) payments
made: (a) over the life (or life expectancy) of the employee, (b) the
joint lives (or joint life expectancies) of the employee and the
employee's designated Beneficiary, or (c) for a specified period of ten
years or more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred
directly to an appropriate plan as described above. Owners should consult a
financial consultant to discuss in detail a particular tax situation and the
use of the Contracts.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide
Separate Account Trust Money Market Fund Sub-Account. "Yield" is a measure of
the net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage of
the offering price of the Sub-Account's units. Yield is an annualized figure,
which means that it is assumed that the Sub-Account generates the same level of
net income over a 52-week period. The "effective yield" is calculated
similarly but includes the effect of assumed compounding, calculated under
rules prescribed by the Securities and Exchange Commission. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual funds with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2 Year CD Rates; and
Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/ Wiesenberger, Morningstar, Donoghue's;
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, National
Underwriter, U.S. News and World Report; rating services such as LIMRA, Value,
Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and
other publications such as the Wall Street Journal, Barron's, Investor's Daily,
and Standard & Poor's Outlook. In addition, Variable Annuity Research & Data
Service (The VARDS Report) is an independent rating service that ranks over 500
variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the underlying Mutual Funds
against all underlying mutual funds over specified periods and against funds in
specified categories. The rankings may or may not include the effects of sales
or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company.
The purpose of these ratings is to reflect the financial
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strength or claims-paying ability of the Company. The ratings are not intended
to reflect the investment experience or financial strength of the Variable
Account. The Company may advertise these ratings from time to time. In
addition, the Company may include in certain advertisements, endorsements in
the form of a list of organizations, individuals or other parties which
recommend the Company or the Contracts. Furthermore, the Company may
occasionally include in advertisements comparisons of currently taxable and tax
deferred investment programs, based on selected tax brackets, or discussions of
alternative investment vehicles and general economic conditions.
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the Variable Account. The Company may
advertise for the Sub-Accounts standardized "average annual total return",
calculated in a manner prescribed by the Securities and Exchange Commission,
and nonstandardized "total return." "Average annual total return" will show
the percentage rate of return of a hypothetical initial investment of $1,000
for at least the most recent one, five and ten year period, or for a period
covering the time the underlying Mutual Fund option held in the Sub-Account has
been in existence, if the underlying Mutual Fund option has not been in
existence for one of the prescribed periods. This calculation reflects the
deduction of all applicable charges made to the Contracts except for premium
taxes, which may be imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner and
for the same time periods as the average annual total return except total
return will assume an initial investment of $10,000 and will not reflect the
deduction of any applicable Contingent Deferred Sales Charge, which, if
reflected, would decrease the level of performance shown. The Contingent
Deferred Sales Charge is not reflected because the Contracts are designed for
long term investment. An assumed initial investment of $10,000 will be used
because that figure more closely approximates the size of a typical Contract
than does the $1,000 figure used in calculating the standardized average annual
total return quotations. The amount of the hypothetical initial investment
assumed affects performance because the Contract Maintenance Charge is a fixed
per Contract charge.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE
COMPANY IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE
FUTURE RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR
LESS THAN ORIGINAL COST.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Nationwide Advisory Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculations of Performance . . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
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APPENDIX A
FIXED ACCOUNT
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of
the Company, which support insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interests in the general account have
not been registered under the Securities Act of 1933 ("1933 Act"), nor is the
general account registered as an investment company under the Investment
Company Act of 1940 ("1940 Act"). Accordingly, neither the general account nor
any interest therein are generally subject to the provisions of the 1933 or
1940 Acts, and we have been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this prospectus which
related to the guaranteed interest portion. Disclosures regarding the Fixed
Account portion of the Contract and the general account, however, may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Variable Account and any other segregated asset
account. Fixed Account Purchase Payments will be allocated to the Fixed Account
by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those
assets chosen by the Company and allowed by applicable law. Investment income
from such Fixed Account assets will be allocated by the Company between itself
and the Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts
will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. The Company assumes this
"mortality risk" by virtue of annuity rates incorporated in the Contract which
cannot be changed. In addition, the Company guarantees that it will not
increase charges for maintenance of the Contracts regardless of its actual
expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion
of the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum
rate as stated in the contract when sold). ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 3.0% FOR ANY GIVEN YEAR. New Purchase Payments deposited to the
Contract which are allocated to the Fixed Account may receive a different rate
of interest than money transferred from the Variable Sub-Accounts to the Fixed
Account and amounts maturing in the Fixed Account at the expiration of an
Interest Rate Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the Purchase Payments allocated to
the Fixed Account, plus interest credited as described above, less the sum of
all administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The maximum percentage that may be transferred will be determined by
the Company at its sole discretion, but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing and will be declared
upon the expiration date of the then current Interest
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Rate Guarantee Period. The Interest Rate Guarantee Period expires on the final
day of a calendar quarter. Transfers must be made within 45 days after the
expiration date of the guarantee period. Owners who have entered into a Dollar
Cost Averaging Agreement with the Company (see "Dollar Cost Averaging") may
transfer from the Fixed Account to the Variable Account under the terms of that
agreement.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by
the Company as to dollar amount during the annuity payment period. The first
Fixed Annuity payment will be determined by applying the Fixed Account Contract
Value to the applicable Annuity Table in accordance with the Annuity Payment
Option elected. This will be done at the Annuitization Date on an age last
birthday basis. Fixed Annuity payments after the first will not be less than
the first Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
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APPENDIX B
PARTICIPATING UNDERLYING MUTUAL FUNDS
Below are the investment objectives of each underlying Mutual Fund available
through the Variable Account. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
DREYFUS STOCK INDEX FUND, INC.
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. NCM Capital Management, 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.
-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.
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-HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income
by investing primarily in high-risk, lower-rated, high-yielding,
fixed-income securities, while also considering growth of capital.
The Portfolio manager will seek high current income normally by
investing the Portfolio's assets as follows:
o at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
o up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired
as part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are
lower-rated or that are unrated. Lower-rated securities are
usually defined as Ba or lower by Moody's; BB or lower by
Standard & Poor's and may be deemed to be of a speculative
nature. The Portfolio may also purchase lower-quality bonds
such as those rated Ca3 by Moody's or C- by Standard & Poor's
which provide poor protection for payment of principal and
interest (commonly referred to as "junk bonds"). For a further
discussion of lower-rated securities, please see the "Risks of
Lower-Rated Debt Securities" section of the Portfolio's
prospectus.
-OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Variable Insurance Products Fund II is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988. The Fund's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies. Fidelity Management &
Research Company ("FMR") is the Fund's manager.
-ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed income instruments.
-CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing
primarily in companies that the Fund manager believes to be
undervalued due to an overly pessimistic appraisal by the public.
This strategy can lead to investments in domestic or foreign
companies, small and large, many of which may not be well known. The
Fund primarily invests in common stock and securities convertible into
common stock, but it has the flexibility to invest in any type of
security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified
open-end management investment company created under the laws of Massachusetts.
The Trust offers shares in the five separate mutual funds listed below, each
with its own investment objectives. Currently, shares of the Trust will be
sold only to life insurance company separate accounts to fund the benefits
under variable life insurance policies or variable annuity contracts issued by
life insurance companies. The assets of the Trust are managed by Nationwide
Advisory Services, Inc., One Nationwide Plaza, Columbus, Ohio 43216, a
wholly-owned subsidiary of Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a better-than-
average potential for sustained capital growth over the long term.
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-GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with the preservation of capital. It seeks to achieve its
objective by investing in a diversified portfolio of securities issued
or backed by the U.S. Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity
by investing primarily in money market instruments.
-SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less than $1 billion at the
time of purchase. Nationwide Financial Services, Inc. ("NFS"), the
Fund's adviser, has employed a group of sub-advisers, each of which
will manage a portion of the Fund's portfolio. These sub-advisers
are the Dreyfus Corporation, Neuberger & Berman, L. P., Pictet
International Management Limited, Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg Pincus Counsellors, Inc.
The sub-advisers were chosen because they utilize a number of
different investment styles when investing in small company stocks.
By utilizing a number of investment styles, NFS hopes to increase
prospects for investment return and to reduce market risk and
volatility.
-TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested
capital from a flexible combination of current return and capital
gains through investments in common stocks, convertible issues, money
market instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end
diversified management investment company established as a Massachusetts
business trust on December 14, 1983. Shares of the Trust are offered in
connection with certain variable annuity contracts and variable life insurance
policies issued through life insurance company separate accounts and are also
offered directly to qualified pension and retirement plans outside of the
separate account context. The investment adviser is Neuberger & Berman
Management Incorporated.
-GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide
investors with above average potential for capital appreciation. To
maximize this potential, the investment adviser may also utilize, from
time to time, securities convertible into common stocks, warrants and
options to purchase such stocks.
-LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be
available without significant risk to principal. It seeks to achieve
its objectives through investments in a diversified portfolio of
limited maturity debt securities.
-PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This Portfolio will
seek to achieve its objective by investing primarily in the common
stock of established companies. Its investment program seeks
securities believed to be undervalued based on fundamentals such as
low price-to-earnings ratios, consistent cash flows, and support from
asset values. The objective of the Partners Portfolio is not
fundamental and can be changed by the Trustees of the Trust without
shareholder approval. Shareholders will, however, receive at least 30
days prior notice thereof. There is no assurance the investment
objective will be met.
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OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-end, diversified
management investment company organized as a Massachusetts business trust in
1984. Shares of the Funds are sold only to provide benefits under variable
life insurance policies and variable annuity contracts. Oppenheimer Funds,
Inc. is the Funds' investment adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's.
Secondarily, the Fund seeks capital growth when consistent with its
primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by
investing a substantial portion of assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special
situations which are considered to have appreciation possibilities.
Current income is not an objective. These securities may be
considered to be speculative.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which
includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities,
bonds and other debt securities, and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. is a diversified, open-end management
company commonly called a Mutual Fund. The Special Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. (the
"Advisor") is the investment advisor for the Fund.
Investment Objective: To seek capital appreciation through
investments in a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series and classes of series of common stock.
The International Stock Fund II and The Strong Discovery Fund II, Inc.
("Funds") are offered by the Corporation to insurance company separate accounts
for the purpose of funding variable life insurance policies and variable
annuity contracts. Strong Capital Management, Inc. is the investment advisor
to the Funds.
-STRONG DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund
normally emphasizes investment in equity securities and may invest up
to 100% of its total assets in equity securities including common
stocks, preferred stocks and securities convertible into common or
preferred stocks. Although the Fund normally emphasizes investment in
equity securities, the Fund has the flexibility to invest in any type
of security that the Advisor believes has the potential for capital
appreciation including up to 100% of its total assets in debt
obligations, including intermediate to long-term corporate or U.S.
government debt securities.
-STRONG INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily
in the equity securities of issuers located outside the United
States.
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TCI PORTFOLIOS, INC., A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolio, Inc. was organized as a Maryland corporation in 1987.
It is a diversified, open-end management investment company, designed only to
provide investment vehicles for variable annuity and variable life insurance
products of insurance companies. A member of the Twentieth Century Family of
Mutual Funds, TCI Portfolios is managed by Investors Research Corporation.
-TCI BALANCED
Investment Objective: Capital growth and current income. The Fund
will seek to achieve its objective by maintaining approximately 60% of
the assets of the Fund in common stocks (including securities
convertible into common stocks and other equity equivalents) that are
considered by management to have better-than-average prospects for
appreciation and approximately 40% in fixed income securities. A
minimum of 25% of the fixed income portion of the Fund will be
invested in fixed income senior securities. There can be no assurance
that the Fund will achieve its investment objective.
-TCI GROWTH
Investment Objective: Capital growth. The Fund will seek to achieve
its objective by investing in common stocks (including securities
convertible into common stocks and other equity equivalents) that meet
certain fundamental and technical standards of selection and have, in
the opinion of the Fund's investment manager, better than average
potential for appreciation. The Fund tries to stay fully invested in
such securities, regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when
it is unable to find common stocks meeting its criteria of selection.
It may purchase securities only of companies that have a record of at
least three years continuous operation. There can be no assurance
that the Fund will achieve its investment objective.
-TCI INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to
achieve its investment objective by investing primarily in securities
of foreign companies that meet certain fundamental and technical
standards of selection and, in the opinion of the investment manager,
have potential for appreciation. Under normal conditions, the Fund
will invest at least 65% of its assets in common stocks or other
equity securities of issuers from at least three countries outside the
United States. Securities of United States issuers may be included in
the portfolio from time to time. Although the primary investment of
the Fund will be common stocks (defined to include depository receipts
for common stocks), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager
believes that the total return potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up
to 35% of its assets in such other securities. There can be no
assurance that the Fund will achieve its objectives.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc. refers to redemptions of securities in kind under
certain conditions, all surrendering or redeeming Contract Owners will
receive cash from the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment
company organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
-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.
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<PAGE> 42
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.
-SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a
portfolio of equity securities of small-sized domestic companies. The
Portfolio ordinarily will invest at least 65% of its total assets in
common stocks or warrants of small-sized companies (i.e., companies
having stock market capitalizations of between $25 million and $1
billion at the time of purchase) that represent attractive
opportunities for capital growth. The Portfolio intends to invest
primarily in companies whose securities are traded on domestic stock
exchanges or in the over-the-counter market. The Portfolio's
investments will be made on the basis of their equity characteristics
and securities ratings generally will not be a factor in the selection
process.
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<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 27, 1996
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VA SEPARATE ACCOUNT-B OF
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth in the
prospectus and should be read in conjunction with the prospectus dated December
27, 1996. The prospectus may be obtained from Nationwide Life and Annuity
Insurance Company by writing P.O. Box 16609, Columbus, Ohio 43216-6609, or
calling 1-800-848-6331, TDD 1-800-238- 3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculations of Performance . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-B, (formerly Financial Horizons VA
Separate Account-2) is a separate investment account of Nationwide Life and
Annuity Company ("Company") (formerly Financial Horizons Life Insurance
Company). On April 7, 1988, ownership of the Company changed from Nationwide
Mutual Insurance Company to Nationwide Life Insurance Company. The Company is
a member of the Nationwide Insurance Enterprise and all of the Company's common
stock is owned entirely by Nationwide Life Insurance Company. The common stock
of Nationwide Life Insurance Company is owed by Nationwide Corporation.
Nationwide Corporation is a holding company. All of its common stock is held by
Nationwide Mutual Insurance Company (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%).
SERVICES
The Company, which has responsibility for administration of the
Contracts and the Variable Account, maintains records of the name, address,
taxpayer identification number, and other pertinent information for each
Contract Owner and the number and type of Contract issued to each such Contract
Owner and records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company.
The Company will maintain a record of all purchases and redemptions of shares
of the underlying Mutual Funds. The Company, or affiliates of the Company may
have entered into agreements with either the investment adviser or distributor
for several of the underlying Mutual Funds. The agreements relate to
administrative services furnished by the Company or an affiliate of the Company
and provide for an annual fee based on the average aggregate net assets of the
Variable Account (and other separate accounts of the Company or life insurance
company subsidiaries of the Company) invested in particular underlying Mutual
Funds. These fees in no way affect the Net Asset Value of the underlying
Mutual Funds or fees paid by the Contract Owner.
The financial statements have been included herein in reliance upon
the reports of KPMG Peat Marwick LLP, independent certified public accountants,
Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm
as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
1
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<PAGE> 44
The Contract Owner may transfer up to 100% of the Contract Value from
the Variable Account to the Fixed Account. However, the Company, at its sole
discretion, reserves the right to limit such transfers to 25% of the Contract
Value for any 12 month period. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such portion will be determined by the
Company at its sole discretion (but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing), and will be
declared upon the expiration date of the then current Interest Rate Guarantee
Period. The Interest Rate Guarantee Period expires on the final day of a
calendar quarter. Transfers under this provision must be made within 45 days
after the termination date of the guarantee period. Owners who have entered
into a Dollar Cost Averaging agreement with the Company may transfer from the
Fixed Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior
to the first Contract Anniversary. Transfers from the Fixed Account may not be
made within 12 months of any prior Transfer. Transfers must also be made prior
to the Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus,
Ohio 43216, a wholly owned subsidiary of the Company. During the fiscal years
ended December 31, 1995, 1994 and 1993, no underwriting commissions were paid
by the Company to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide Separate Account Trust
Money Market Fund Sub-Account, subject to Rule 482 of the Securities Act of
1933, shall consist of a seven calendar day historical yield, carried at least
to the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, exclusive of capital changes, in the value of
hypothetical pre-existing account having a balance of one accumulation unit at
the beginning of the base period, subtracting a hypothetical charge reflecting
deductions from Contract Owner accounts, and dividing the net change in account
value by the value of the account at the beginning of the period to obtain a
base period return, and multiplying the base period return by (365/7) or
(366/7) in a leap year. The Nationwide Separate Account Trust Money Market Fund
Sub-Account's effective yield is computed similarly but includes the effect of
assumed compounding on an annualized basis of the current unit value yield
quotations of the Nationwide Separate Account Trust Money Market Fund.
The Nationwide Separate Account Trust Money Market Fund Sub-Account's
yield and effective yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Nationwide Separate Account
Trust Money Market Fund's portfolio, portfolio quality and average maturity,
changes in interest rates, and the Fund's expenses. Although the Sub-Account
determines its yield on the basis of a seven calendar day period, it may use a
different time period on occasion. The yield quotes may reflect the expense
limitation described "Investment Manager and Other Services" in the Fund's
Statement of Additional Information. There is no assurance that the yields
quoted on any given occasion will remain in effect for any period of time and
there is no guarantee that the Net Asset Values will remain constant. It
should be noted that a Contract Owner's investment in the Nationwide Separate
Account Trust Money Market Fund Sub-Account is not guaranteed or insured.
Yield of other money market funds may not be comparable if a different base
period or another method of calculation is used.
All performance advertising shall also include quotations of
standardized average annual total return, calculated in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission,
to facilitate comparison with standardized Average annual total return
advertised for a specific period is found by first taking a hypothetical $1,000
investment in each of the Sub-Accounts' units on the first day of the period at
the offering price, which is the Accumulation Unit Value per unit ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and this quotient is taken to the Nth root (N
represents the number of years in the period) and 1 is subtracted from the
result which is then expressed as a percentage, carried to at least the nearest
hundredth of a percent. Standardized average annual total return reflects the
deduction of a 1.40% Mortality, Expense Risk and Administration Charge. The
redeemable value also reflects the effect of any applicable Contingent Deferred
Sales Charge that may be imposed at the end of
2
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<PAGE> 45
the period (see "Contingent Deferred Sales Charge" located in the prospectus).
No deduction is made for premium taxes which may be assessed by certain states.
Nonstandardized total return may also be advertised, and is calculated in a
manner similar to standardized average annual total return except the
nonstandardized total return is based on a hypothetical initial investment of
$25,000 and does not reflect the deduction of any applicable Contingent
Deferred Sales Charge. Reflecting the Contingent Deferred Sales Charge would
decrease the level of the performance advertised. The Contingent Deferred
Sales Charge is not reflected because the Contract is designed for long term
investment. An assumed initial investment of $25,000 will be used because that
figure more closely approximates the size of a typical Contract than does the
$1,000 figure used in calculating the standardized average annual total return
quotations.
The standardized average annual total return and nonstandardized total
return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication.
Both the standardized average annual return and the nonstandardized total
return will be based on rolling calendar quarters and will cover periods of
one, five, and ten years, or a period covering the time the underlying Mutual
Fund option held in the Sub-Account has been in existence, if the underlying
Mutual Fund option has not been in existence for one of the prescribed periods.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
Quotations of standardized average annual total return and
non-standardized total return are based upon historical earnings and will
fluctuate. Any quotation of performance, therefore, would not be considered a
guarantee of future performance. Factors affecting a Sub-Account's
performance include general market conditions, operating expenses and
investment management. A Contract Owner's account when redeemed may be more or
less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity payments" located in the
prospectus.
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<PAGE> 46
<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> 47
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: PAGE
<S> <C>
(1) Financial statements and schedule
included in Prospectus.
(Part A):
Condensed Financial Information. N/A
(2) Financial statements and schedule
included in Part B:
Those financial statements and schedule 46
required by Item 23 to be included in
Part B have been incorporated therein
by reference to the Prospectus (Part A).
Nationwide VA Separate Account-B: N/A
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 46
Balance Sheets as of December 31, 1995 47
and 1994.
Statements of Income for the years ended 48
December 31, 1995, 1994 and 1993.
Statements of Shareholder's Equity for the 49
years ended December 31,1995, 1994
and 1993.
Statements of Cash Flows for the years 50
ended December 31, 1995, 1994
and 1993.
Notes to Financial Statements. 51
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C>
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Attached hereto.
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Attached hereto.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application - Attached
hereto.
(6) Articles of Incorporation of Depositor -
Attached hereto.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Attached hereto.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Attached hereto.
</TABLE>
67 of 84
<PAGE> 49
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
68 of 84
<PAGE> 50
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
69 of 84
<PAGE> 51
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
70 of 84
<PAGE> 52
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Investment Securities Agent
Colonial County Mutual insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services of California Insurance Broker
California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for
Policies placed through
Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Annuity Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
</TABLE>
71 of 84
<PAGE> 53
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Employers Insurance of Wausau A Mutual Wisconsin Insurance Company
Company
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Agency Alabama Life Insurance Agency
of Alabama, Inc.
Financial Horizons Distributors Agency Ohio Insurance Agency
of Ohio
Financial Horizons Distributors Agency Oklahoma Life Insurance Agency
of Oklahoma, Inc.
Financial Horizons Distributors Agency Texas Life Insurance Agency
of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration
Claims Examinations and Data
Processing Services
Gates, McDonald & Company of New York, New York Workers Compensation Claims
Inc. Administration
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and
Medicare Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates Managed
Care Delivery System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance
Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
</TABLE>
72 of 84
<PAGE> 54
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted
Redevelopment Corporation areas within the City of
Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of
acquiring, holding,
encumbering, transferring, or
otherwise disposing of shares,
bonds, and other evidences of
indebtedness, securities, and
contracts of other persons,
associations, corporations,
domestic or foreign and to
form or acquire the control of
other corporations
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
* Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance
Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer
Corporation
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
</TABLE>
73 of 84
<PAGE> 55
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for
Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
74 of 84
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration,
record keeping and consulting
and compensation consulting
Public Employees Benefit Services Delaware Marketing and Administration
corporation of Deferred Employee
Compensation Plans for Public
Employees
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
Wausau Business Insurance Company Illinois Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) Limited United Kingdom Insurance and Reinsurance
Company
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
75 of 84
<PAGE> 57
<TABLE>
NO. VOTING
SECUITIES
(SEE ATTACHED CARD)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Ohio Nationwide Life Separate Issuer of Annuity Contracts
Variable Account Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Contracts
* Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
76 of 84
<PAGE> 58
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
<PAGE> 60
78 of 84
<PAGE> 61
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| NATIONWIDE CORPORATION (NW Corp) |
| Common Stock: Control: |
| ------------- ------- |
| 13,642,432 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2
<PAGE> 64
Item 27. NUMBER OF CONTRACT OWNERS
N/A
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide DCVA II,
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.
<TABLE>
<CAPTION>
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, Ohio 43215
D. Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
</TABLE>
79 of 84
<PAGE> 65
<TABLE>
<CAPTION>
(b)
NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<S> <C>
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
Robert J. Woodward Executive Vice President - Chief
One Nationwide Plaza Investment Officer and Director
Columbus, Ohio 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
--------
Services,
Inc.
</TABLE>
80 of 84
<PAGE> 66
<<>>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than 16
months old for so long as payments under the variable annuity
contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this form
promptly upon written or oral request.
(d) Nationwide Life and Annuity Insurance Company ("Company"), for
itself and on behalf of its Nationwide VA Separate Account-B,
hereby represents that aggregate fees and charges associated with
the contracts described in this registration statement, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Code, is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
no-action letter to the American Council of Life Insurance
(publicly available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC Section
403(b)(11).
81 of 84
<PAGE> 67
Offered by
Nationwide Life and Annuity Insurance Company
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
NATIONWIDE VA SEPARATE ACCOUNT-B
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
PROSPECTUS
December 27, 1996
82 of 84
<PAGE> 68
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company
(formerly Financial Horizons Life Insurance Company):
We consent to the use of our report included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
December 18, 1996
83 of 84
<PAGE> 69
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE VA
SEPARATE ACCOUNT-B, has caused this Pre-Effective Amendment No. 1 to be signed
on its behalf in the City of Columbus, and State of Ohio, on this 18th day of
December, 1996.
NATIONWIDE VA SEPARATE ACCOUNT-B
--------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
---------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
--------------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Pre-Effective Amendment No. 1
has been signed by the following persons in the capacities indicated on the
18th day of December, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ---------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ---------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating
- --------------------------- Officer and Director
Joseph J. Gasper Chairman of the Board and Director
HENRY S. HOLLOWAY
- ---------------------------
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer--
- --------------------------- Nationwide Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- ---------------------------
David O. Miller
C. RAY NOECKER Director
- ---------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- --------------------------- Nationwide Insurance Enterprise and Director
Robert A. Oakley
JAMES F. PATTERSON Director By/s/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>
84 of 84
<PAGE> 70
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> 71
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
NATIONWIDE VA SEPARATE ACCOUNT - B
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
EXHIBITS TO FORM N-4
SEC FILE NO. 333-11415
<PAGE> 1
EXHIBIT NO. 1
BOARD OF DIRECTORS RESOLUTION OF THE DEPOSITOR
<PAGE> 2
EXCERPT FROM:
MINUTES OF A REGULAR MEETING OF THE BOARD OF DIRECTORS OF NATIONWIDE LIFE AND
ANNUITY INSURANCE COMPANY, held at the office of the Company in Columbus, Ohio,
on March 1, 1995.
The following resolution related to name changes for the Company's separate
accounts to coincide with the name change of the Company was presented for
consideration:
RESOLVED, that effective May 1, 1995 and thereafter the names of the separate
accounts of the Company be changed in the following manner:
Financial Horizons VA Separate Account-1 shall be
known as Nationwide VA Separate Account-A;
Financial Horizons VA Separate Account-2 shall be
known as Nationwide VA Separate Account-B;
Financial Horizons VA Separate Account-3 shall be
known as Nationwide VA Separate Account-C;
Financial Horizons VL Separate Account-1 shall be
known as Nationwide VL Separate Account-A; and
Financial Horizons Qualified Plans Variable Account
shall be known as Nationwide VA Separate Account-Q.
A motion was made, seconded and carried, that the resolution be adopted.
<PAGE> 3
EXCERPT FROM:
MINUTES OF A REGULAR MEETING OF THE BOARD OF DIRECTORS OF FINANCIAL HORIZONS
LIFE INSURANCE COMPANY, held at the office of the Company in Columbus, Ohio, on
March 6, 1991.
The following resolution concerning the establishment of Financial Horizons VA
Separate Account-2 was presented for consideration:
RESOLVED, that the Company, pursuant to the provisions of Ohio Revised Code
Section 3907.15, hereby establishes a separate account, designated Financial
Horizons VA Separate Account-2 (hereinafter the Variable Account) for the
following use and purposes, and subject to such conditions as hereafter set
forth:
RESOLVED, FURTHER, that the Variable Account shall be established for the
purpose of providing for the issuance of variable annuity contracts
(hereinafter the Contracts), which Contracts provide that part or all of the
annuity benefits and cash value will reflect the investment experience of one
or more designated underlying securities; and
RESOLVED FURTHER, that the fundamental investment policy of the Variable
Account shall be to invest or reinvest the assets of the Variable Account in
securities issued by investment companies registered under the Investment
Company Act of 1940, as may be specified in the respective Contracts; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, authorized to take all action they deem necessary or appropriate to: (a)
register the Variable Account as a unit investment trust under the Investment
Company Act of 1940, as amended; (b) register the Contracts in such amounts as
the officers of the Company shall from time to time deem appropriate under the
Securities Act of 1933 and to prepare and file amendments to such registration
as they may deem necessary or desirable; and (c) take all other action
necessary to comply with: the Investment Company Act of 1940, including the
filing of applications for such exemptions from the Investment Company Act of
1940 as the officers of the Company shall deem necessary or desirable; the
Securities Exchange Act of 1934; the Securities Act of 1933; and all other
applicable state and federal laws in connection with offering said Contracts
for sale and the operation of the Variable Account; and
<PAGE> 4
RESOLVED FURTHER, that John E. Fisher, John L. Marakas, Peter F. Frenzer,
Harvey S. Galloway, James E. Brock, Thomas E. Kryshak, Gordon E. McCutchan, W.
Sidney Druen and Joseph P. Rath and each of them, with full power to act
without the others, hereby are severally authorized and empowered to execute
and cause to be filed with the Securities and Exchange Commission on behalf of
the Variable Account and by the Company as sponsor and depositor any required
Registration Statement and Notice thereof registering the Variable Account as
an investment company under the Investment Company Act of 1940; and a
Registration Statement under the Securities Act of 1933, registering the
Contracts and any and all amendments to the foregoing on behalf of and as
attorneys for the Variable Account and the Company and on behalf of and as
attorneys for the principal executive officer and/or the principal financial
officer and/or the principal accounting officer and/or any other officer of the
Variable Account and the Company; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, authorized on behalf of the Variable Account and on behalf of the Company
to take any and all action which they may deem necessary or advisable in order
to sell the Contracts and, if necessary, to register or qualify Contracts for
offer and sale under the insurance and securities laws of any of the states of
the United States of America and in connection therewith to execute, deliver
and file all such applications, reports, covenants, resolutions and other
papers and instruments as may be required under such laws, and to take any and
all further action which said officers or counsel of the Company may deem
necessary or desirable in order to maintain such registration or qualification
for as long as said officers or counsel deem it to be in the best interests of
the Variable Account and the Company; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, authorized in the names and on behalf of the Variable Account and the
Company to execute and file irrevocable written consents on the part of the
Variable Account and of the Company to be used in such states wherein such
consents to service of process may be requisite under the insurance or
securities laws thereof in connection with said registration or qualification
of Contracts and appoint the appropriate state official, or such other persons
as may be allowed by said insurance or securities laws, agent of the Variable
Account and of the Company for the purpose of receiving and accepting process;
and
RESOLVED FURTHER, that the appropriate officers of the Company be, and they
hereby are, authorized to establish procedures under which the Company will
provide sales and administrative functions with respect to the Contracts issued
in connection therewith, including, but not limited to procedures for providing
any voting rights required by the federal securities
<PAGE> 5
laws for owners of such Contracts with respect to securities owned by the
Variable Account, adding additional underlying investment series to the
Variable Account, and permitting conversion or exchange of Contract values or
benefits among the various series.
A motion was made, seconded and carried, that the resolution be adopted.
<PAGE> 1
EXHIBIT NO. 3
UNDERWRITING OR DISTRIBUTION CONTRACT
<PAGE> 2
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this____day of __________, 1993, between Financial
Horizons Life Insurance Company ("Financial Horizons"), and Nationwide
Financial Services, Inc. ("NFS").
Financial Horizons proposes to develop, issue and administer, and NFS proposes
to provide the exclusive national distribution services for certain annuity
products (the "Products"). The Products to be sold hereunder are the Individual
Flexible Purchase Payment Deferred Variable Annuity Contract (Financial Horizons
Annuity) and such other products as may hereafter be agreed upon by the parties.
The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
--------------------------
1. Appointment of Product Administration
-------------------------------------
Financial Horizons is hereby appointed Product Administrator for the
Products.
2. Duties of Financial Horizons
----------------------------
Financial Horizons will perform in a proper and timely manner, those
functions enumerated in the column marked "Financial Horizons" in the
"Analysis of Administrative Functions," attached hereto as EXHIBIT A,
and incorporated herein by reference.
3. Duties of NFS
-------------
NFS will perform in a proper and timely manner, those functions
enumerated in the column marked "NFS" in the "Analysis of
Administrative Functions," attached hereto as EXHIBIT A, and
incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
-----------------------------------------------
1. Distribution of Products
------------------------
The Products will be distributed through registered representatives of
NASD broker-dealer firms, appointed by Financial Horizons, who shall
be duly qualified and licensed as agents (the "Agents"), in accordance
with applicable state insurance authority.
2. NFS shall be the exclusive National Distributor of the Products.
<PAGE> 3
3. Appointment and Termination of Agents
-------------------------------------
Appointment and termination of Agents shall be processed and executed
by Financial Horizons. NFS reserves the right to require Financial
Horizons to consult with it regarding licensing decisions.
4. Advertising
-----------
NFS shall not print, publish or distribute any advertisement, circular
or document relating to the Products or relating to Financial Horizons
unless such advertisement, circular or document has been approved in
writing by Financial Horizons. Such approval shall not be unreasonably
withheld, and shall be given promptly, normally within three (3)
business days. Neither Financial Horizons nor any of its affiliates
shall print, publish or distribute any advertisement, circular or
document relating to the Products or relating to NFS unless such
advertisement, circular or document has been approved in writing by
NFS. Such approval shall not be unreasonably withheld, and shall be
given promptly, normally within three (3) business days. However,
nothing herein shall prohibit any person from advertising the Products
on a generic basis.
5. Marketing Conduct
-----------------
The parties will jointly develop standards, practices and procedures
respecting the marketing of the Products. Such standards, practices
and procedures are intended to help Financial Horizons meet its
obligations as an issuer under the securities laws, to assure
compliance with state insurance laws, and to help NFS meet its
obligations under the securities laws as National Distributor. These
standards, practices and procedures are subject to continuing review
and neither Financial Horizons nor NFS will object unreasonably to
changes to such standards, practices and procedures recommended by
the other to comply with the intent of this provision.
6. Sales Material and Other Documents
----------------------------------
a. Sales Material
--------------
1) Financial Horizons shall develop and prepare all promotional
material to be used in the distribution of the Products, in
consultation with NFS.
2) Financial Horizons is responsible for the printing and the
expense of providing such promotional material.
<PAGE> 4
3) Financial Horizons is responsible for approval of such
promotional material by state insurance regulators, where
required.
4) NFS and Financial Horizons agree to abide by the Advertising
and Sales Promotion Material Guidelines, attached hereto as
EXHIBIT B, and incorporated herein by reference.
b. Prospectuses
------------
1) Financial Horizons is responsible for the preparation and
regulatory clearance of any required registration statements
and prospectuses for the Products. NFS is responsible for
the preparation and regulatory clearance of any underlying
mutual fund registration statements and prospectuses.
2) Financial Horizons is responsible for the printing of such
Product prospectuses in quantities as the parties agree are
necessary to assure sufficient supplies.
3) Financial Horizons will bear the cost of providing the
required supply of mutual fund prospectuses.
4) Financial Horizons is responsible for supplying Agents with
sufficient quantities of Product prospectuses.
c. Contracts, Applications and Related Forms
-----------------------------------------
1) Financial Horizons, in consultation with NFS, is responsible
for the design and printing of adequate supplies of Product
applications, contracts, related forms, and such service
forms as the parties agree are necessary.
2) Financial Horizons is responsible for supplying adequate
quantities of all such forms to the Agents.
7. Appointment of Agents
---------------------
a. NFS will assist Financial Horizons in facilitating the
appointment of Agents by Financial Horizons.
b. Financial Horizons will forward all appointment forms and
applications to the appropriate states and maintain all contacts
with the states.
<PAGE> 5
c. Financial Horizons will maintain appointment files on Agents, and
NFS will have access to such files as needed.
8. Licensing and Appointment Guide
-------------------------------
Financial Horizons shall provide to NFS a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities as
NFS may reasonably require.
9. Other
-----
a. Product Training
----------------
Financial Horizons is responsible for any Product training for
the Agents.
b. Field Sales Material
--------------------
1) Financial Horizons, in consultation with NFS, is responsible
for the development, printing and distribution of non-public
field sales material to be used by Agents.
2) NFS shall have the right to review all field sales materials
and to require any modification mandated by regulatory
requirements.
c. Productions Reports
-------------------
Financial Horizons will deliver to NFS the items listed in
Production Reports to be provided, attached hereto as EXHIBIT C,
and incorporated herein by reference.
d. Customer Service
----------------
Each party will notify the other of all material pertinent
inquiries and complaints it receives, from whatever source and to
whomever directed, and will consult with the other in responding
to such inquiries and complaints.
10. Auditing
--------
NFS will maintain all records relating to the mutual funds or other
investment options in accordance with generally accepted accounting
procedures. Any such records shall be made available to Financial
Horizons or its accountants or auditors upon reasonable written
request. Financial Horizons will provide NFS with any records, reports
or other materials relative to the
<PAGE> 6
distribution of the Products as may reasonably be required by NFS or
as may be required by any governmental agency having jurisdiction.
C. GENERAL PROVISIONS
------------------
1. Waiver
------
The forbearance or neglect of either party to insist upon strict
compliance by the other with any of the provisions of this Agreement,
whether continuing or not, or to declare a forfeiture of termination
against the other, shall not be construed as a waiver of any rights
or privileges of the forbearing party in the event of a further
default or failure of performance.
2. Limitations
------------
Neither party shall have authority on behalf of the other to: make,
alter or discharge any contractual terms of the Products; waive any
forfeiture; extend the time of making any contributions to the
products; guarantee dividends; alter the forms which either may
prescribe; nor substitute other forms in place of those prescribed by
the other.
3. Binding Effect
--------------
This Agreement shall be binding on and shall insure to the benefit of
the parties to it and their respective successors and assigns,
provided that neither party shall assign or sub-contract this
Agreement or any rights or obligations hereunder without prior written
consent of the other.
4. Indemnification
---------------
Each party ("Indemnifying Party") hereby agrees to release, indemnify
and hold harmless the other party, its officers, directors, employers,
agents, servants, predecessors or successors from any claims or
liability arising out of the acts or omissions of the Indemnifying
Party not authorized by this Agreement, including the violation of any
federal or state law or regulation.
5. Notices
-------
All notices, requests, demands and other communication under this
Agreement shall be in writing and shall be deemed to have been given
on the date of service if served personally on the party to whom
notice is to be given, or on the date of mailing if sent postage
prepaid by First Class Mail, Registered or Certified mail, by
overnight mail, properly addressed as follows:
<PAGE> 7
TO FINANCIAL HORIZONS:
Financial Horizons Life Insurance Company
Richard A. Karas, Vice President
Sales - Financial Services
One Nationwide Plaza
Columbus, Ohio 43216
TO NFS:
Nationwide Financial Services, Inc.
Marian A. Trimble, President
One Nationwide Plaza
Columbus, Ohio 43216
6. Governing Law
-------------
This Agreement shall be construed in accordance with and governed by
the laws of the State of Ohio.
7. Arbitration
-----------
The parties agree that misunderstandings or disputes arising from this
Agreement shall decided by arbitration, conducted upon request of
either party before three arbitrators (unless the parties agree on a
single arbitrator) designated by the American Arbitration Association,
and in accordance with the rules of such Association. The expenses of
the arbitration proceedings conducted hereunder shall be borne equally
by both parties.
8. Confidentiality
---------------
Any information, documents and materials, whether printed or oral,
furnished by either party or its agents or employees to the other
shall be held in confidence. No such information shall be given to any
third party, other than to such sub-contractors of NFS as may be
permitted herein, or under requirements of a lawful authority, without
the express written consent of the other party.
D. TERM OF AGREEMENT
-----------------
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by mutual
agreement of the parties in writing. Any decision by either party to
cease issuance or distribution of any specific Product shall not effect a
termination of the Agreement unless such termination is mutually agreed
upon, or unless notice is given pursuant to Section E.2. hereof.
<PAGE> 8
E. TERMINATION
-----------
1. Either party may terminate this Agreement for cause at any time, upon
written notice to the other, if the other knowingly and willfully: (a)
fails to comply with the laws or regulations or any state or
governmental agency or body having jurisdiction over the sale of
insurance of securities; (b) misappropriates any money or property
belonging to the other; (c) subjects the other to any actual or
potential liability due to misfeasance, malfeasance, or nonfeasance;
(d) commits any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
2. Either party may terminate this Agreement, without regard to cause,
upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
a) The parties irrevocably acknowledge the continuing right to use
any Product trademark that might then be associated with any
Products, but only with respect to all business in force at the
time of termination.
b) NFS will continue to sell to Financial Horizons at net asset
value, shares of all mutual funds which serve as underlying
investments for Products actually issued by Financial Horizons
pursuant to this Agreement, until such time as mutually agreed
upon by the parties. NFS may discontinue the sale at net asset
value of such shares in connection with the issuance by Financial
Horizons of new contracts after termination.
c) In the event this Agreement is terminated the parties will use
their best efforts to preserve in force the business issued
pursuant to this Agreement.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
By Richard A. Karas
--------------------------------------
Title Senior Vice President
-----------------------------------
NATIONWIDE FINANCIAL SERVICES, INC.
By Marian A. Trimble
--------------------------------------
Title President
-----------------------------------
<PAGE> 10
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
--------------------------
FINANCIAL HORIZONS NFS
- - Establishes - Consults with regard
underwriting criteria to new business
for application procedures and
processing and processing.
rejections.
- - Reviews the completed
application. Applies
underwriting/issue
criteria to application.
- - Notifies Agent and/or
customer of any error
or missing data
necessary to underwrite
application and establish
records for owner of
Product ("Contract Owner").
- - Prepares policy data page
for approved business and
mails with policy to Contract
Owner.
- - Establishes and maintains
all records required for
each Contract Owner, as
applicable.
- - Prepares and mails
confirmation and other
statements to Contract
Owners and Agents, as
required.
- - Prints, provides all
forms ancillary to issue
of contract/policy forms
for Products.
- - Maintains supply of
approved specimen policy
forms and all ancillary
forms, distributes
same to Agents.
<PAGE> 11
B. BILLING AND COLLECTION
----------------------
FINANCIAL HORIZONS
- - Receives premium/purchase
payments and reconciles
amount received with
remittance media.
- - Updates Contract Owner
records to reflect
receipt of premium/
purchase payment and
performs accounting/
investment allocation of
each payment received.
- - Deposits all cash received
under the Products in
accordance with the terms
of the Products.
C. BANKING
-------
FINANCIAL HORIZONS
- - Balances, edits,
endorses and prepares daily
deposit.
- - Places deposits in
depository account.
- - Transfers funds from
depository account to NFS
within 24 hours following
underwriting approval, in
accordance with investment
allocation.
- - Prepares daily cash
journal summary reports
and maintains same for
review by NFS.
<PAGE> 12
D. PRICING/VALUATION/ACCOUNTING
----------------------------
FINANCIAL HORIZONS NFS
- - Determines the "Net Amount - Issues Fund Shares to
Available for Investment" in Financial Horizons at
Fund Shares and places Fund net asset Value.
Share purchase or redemption
orders with the Fund, by - Confirms Financial
facsimile each day by 10:00 Horizons' Fund purchases
a.m. E.T. If for any reason and redemptions.
Financial Horizons is unable
to process such orders, it - Transmit by facsimile
will provide NFS with Fund Share prices to
estimates. Financial Horizons by
6:00 p.m. EST each day.
- - Maintains and makes
available, as reasonably - Maintains records of all
requested, records used in Fund Shares owned by
determining "Net Amount Financial Horizons,
Available for Investment." including the date
purchased and sold,
- - Collects information needed cost, and other
in determining Variable information maintained
Account unit values from the by NFS in its ordinary
Funds including daily net course of business.
asset value, capital gains
or dividend distributions, - Cooperates in annual
and the number of Fund audit of separate
Shares acquired or sold account financials
during the immediately conducted for purposes
preceding valuation period. of financial statement
certification and
- - Performs daily unit publication.
valuation calculation.
<PAGE> 13
E. CONTRACT OWNER SERVICE/
----------------------
RECORD MAINTENANCE
------------------
FINANCIAL HORIZONS NFS
- - Receives and processes all - Accommodates customer
Contract Owner service service function by
requests, including but providing any supporting
not limited to information or
informational requests, documentation which may
beneficiary changes, and be in the control of
transfers of Contract NFS.
Value among eligible
investment options.
- - Maintains daily records of
all changes made to
Contract Owner accounts.
- - Researches and responds - Researches and responds
to all Contract Owner/Agent to Financial Horizon's
inquiries. inquiries regarding fund
performance.
- - Keeps all required
Contract Owner records.
- - Maintains adequate number
of toll free lines to
service Contract
Owner/Agent inquiries.
F. DISBURSEMENTS
-------------
(SURRENDERS, DEATH
------------------
CLAIMS, LOANS)
--------------
FINANCIAL HORIZONS NFS
- - Receives and processes
surrenders, loans, and
death claims in accordance
with established
guidelines.
- - Prepares checks for
surrenders, loans, and
death claims, and forwards
to Contract Owner or
Beneficiary. Prepares and
mails confirmation
statement of disbursement
to Contract
Owner/Beneficiary with
copy to Agent.
<PAGE> 14
G. COMMISSIONS
-----------
FINANCIAL HORIZONS NFS
- - Ascertains, on receipt of
applications, whether
writing Agent is
appropriately licensed.
- - Pays commissions and other
fees in accordance with
agreements relating to
same.
H. PROXY PROCESSING
----------------
FINANCIAL HORIZONS NFS
- - Receives record date - Provides proxy,
information from Funds solicitation materials,
Receives proxy and record date
solicitation materials information.
from Funds.
- - Prepares Voting
Instruction cards and
mails solicitation, if
necessary.
- - Tabulates and votes all
Fund Shares in accordance
with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
-----------------------------------
FINANCIAL HORIZONS NFS
- - Prepares and mails
quarterly and annual
Statements of Account to
Contract Owners.
- - Prepares and mails all - Prepares and mails to
semi-annual and annual Financial Horizons all
reports of Variable required semi-annual and
Account(s) to Contract annual financial reports
Owners. to shareholder of the
Funds.
<PAGE> 15
J. REGULATORY/STATEMENT REPORTS
- -------------------------------
FINANCIAL HORIZONS NFS
- - Prepares and files
Separate Account Annual
Statements.
- - Prepares and mails the
appropriate, required IRS
reports at the Contract
Owner level. Files same
with required regulatory
agencies.
- - Prepares and files form - Prepares and files form
N-SAR for the Separate N-SAR for the Funds.
Account.
K. PREMIUM TAXES
- ---------------
- -
FINANCIAL HORIZONS NFS
- - Collects, pays and
accounts for premium taxes
as appropriate.
- - Prepares and maintains all
premium tax records by
state.
- - Maintains liabilities in
General Account ledger for
accrual of premium tax
collected.
- - Integrates all company
premium taxes due and
performs related
accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
- -----------------------------------
FINANCIAL HORIZONS NFS
- - Provides periodic reports - Provides periodic
in accordance with the reports in accordance
Schedule of Reports to be with the Schedule of
prepared jointly by Reports to be prepared
Financial Horizons and jointly by Financial
NFS. (See EXHIBIT C) Horizons and NFS. (See
EXHIBIT C)
<PAGE> 16
M. AGENT LICENSE RECORDKEEPING
- ------------------------------
FINANCIAL HORIZONS NFS
- - Receives, establishes, - Cooperates with
processes, and maintains Financial Horizons in
Agent appointment records. the Agent appointment
process with the broker-
dealer firms.
<PAGE> 17
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY THE OFFICE OF SALES-FINANCIAL SERVICES
In order to assure compliance with state and federal regulatory requirements
and to maintain control over the distribution of promotional materials dealing
with the Products, Financial Horizons and NFS require that ALL variable
contract promotional materials be REVIEWED and APPROVED by both Financial
Horizons and NFS PRIOR to their use. These guidelines are intended to provide
appropriate regulatory and distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. The Office of Sales-Financial Services
("OS-FS") and NFS shall approve in writing all promotional material.
Such approval shall not be unreasonably withheld, and shall be given
promptly, normally within three (3) days.
2. All promotional material will be submitted in "draft" form to
permit any changes or corrections to be made prior to the printing.
3. Financial Horizons and NFS will provide each other with details
as to each and every use of all promotional material submitted.
Approval for one use will not constitute approval for any other use.
Different standards of review may apply when the same advertising
material is intended for different uses. The following information
will be provided for each item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be used (e.g., brochure, mailing, 482
ads, etc.).
c. How the material will be used (e.g., brochure, mailing, 482 ads,
etc.).
d. The projected date of initial use and, if a special promotion,
the projected date of last use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for
the new use must be submitted.
6. OS-FS and NFS will assign a form number to each item of advertising
and sales promotional material. This number will appear on each piece
of advertising and sales
<PAGE> 18
promotional material. It will be used to aid in necessary filings,
and to maintain appropriate controls.
7. OS-FS and NFS will provide WRITTEN APPROVAL for all material to be
used.
8. Financial Horizons and NFS will provide each other with a minimum of 50
copies of all material in final print form to effect necessary state
filings.
9. NFS will coordinate SEC/NASD filings of sales and promotional material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Marketing Director,
Office of Sales-Financial Services, Financial Horizons Life Insurance
Company, One Nationwide Plaza, Columbus, Ohio 43216 (phone (614)
249-6258) or to President, Nationwide Financial Services, Inc., One
Nationwide Plaza, Columbus, Ohio (phone (614) 249-7863).
<PAGE> 19
EXHIBIT C
PRODUCTION REPORTS TO BE PROVIDED
Financial Horizons agrees to provide the following reports to NFS:
1. Daily Receipt Report: Indicates which Agents are
generating sales.
2. Daily Approval Report: Indicates which applications have
been approved.
3. Daily Activity Summary: Indicates top firms' sales and
liquidation by month, year-to-date
as well as total assets by firm.
4. Dealer Activity Indicates top firms' sales and
Summary by Territory: liquidation by month, year-to-date.
5. Summary of Sales by Indicates sales
Territory and Dealer: by territory/dealer/branch,
including non-commissionable
amounts and actual commission
payments, as well as chargebacks.
(Internal use only)
6. Summary of Sales by Indicates sales by territory/
Territory and Dealer: dealer/branch, including
chargebacks.
7. Commission Report: Indicates commissions paid and
chargebacks, matched to commission
checks.
In addition, Financial Horizons will provide reports detailing current
appointments and other information, as reasonably requested by NFS.
<PAGE> 1
EXHIBIT NO. 4
THE VARIABLE ANNUITY CONTRACT FORM
<PAGE> 2
[LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
1-800-533-5622
(Hereinafter called the Company)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY will make annuity payments to the
Annuitant starting on the Annuitization Date, as set forth in the Contract.
This Contract is provided in return for the Purchase Payments made as required
in the Contract.
TEN DAY LOOK
To be sure that the Owner is satisfied with this Contract, the Owner has ten
days to examine the Contract and return it to the Home Office for any reason.
When the Contract is received in the Home Office, the Company will return the
Contract Value to the Owner, without deduction for any sales charges or
administration fees as of the date of cancellation, where permitted by state
law.
Executed for the Company on the Date of Issue.
/s/ GORDON E. MCCUTCHEON /s/ JOSEPH J. ???????????
- ------------------------ -------------------------
Secretary President
READ YOUR CONTRACT CAREFULLY
Individual Modified Single Premium Deferred Variable Annuity,
Non-Participating, Non-Qualified
ANNUITY PAYMENTS, DEATH BENEFITS, AND OTHER CONTRACT VALUES PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE
VARIABLE, MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE
NET INVESTMENT FACTOR, AND ARE NOT GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
NOTICE - The details of the variable provisions in the
Contract may be found on Pages 15, 16, and 21.
<PAGE> 3
CONTENTS
DATA PAGE.................................................INSERT
CONTENTS.....................................................2
DEFINITIONS..................................................3
GENERAL PROVISIONS...........................................6
ACCUMULATION PROVISIONS......................................11
ANNUITIZATION PROVISIONS.....................................18
ANNUITY PAYMENT OPTIONS......................................19
ANNUITY TABLES...............................................22
2
<PAGE> 4
DEFINITIONS
ACCUMULATION UNIT - An Accumulation Unit is an accounting unit of measure.
It is used to calculate the Variable Account Contract Value prior to the
Annuitization Date.
ANNUITANT - The Annuitant is the person designated to receive annuity payments
during Annuitization and upon whose life any annuity payment involving life
contingencies depends. This person must be age 85 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant
of greater age. The Annuitant may be changed prior to the Annuitization Date
with the consent of the Company.
ANNUITIZATION DATE - The Annuitization Date is the date annuity payments are
scheduled to begin.
ANNUITIZATION - Annuitization is the process of selecting an Annuity Payment
Option to begin the payout phase of the Contract.
ANNUITY PAYMENT OPTION - The Annuity Payment Option is the chosen form of
annuity payments. Several options are available under this Contract.
ANNUITY UNIT - An Annuity Unit is an accounting unit of measure used to
calculate the value of Variable Annuity payments.
BENEFICIARY - The Beneficiary is the person who may receive certain benefits
under the Contract upon the death of the Annuitant prior to the Annuitization
Date. The Beneficiary can be changed by the Contract Owner as set forth in the
Contract.
COMPANY - The Company is the Nationwide Life and Annuity Insurance Company.
CONTINGENT ANNUITANT - The Contingent Annuitant is the person designated to be
the Annuitant if the Annuitant is not living at the Annuitization Date. If a
Contingent Annuitant is named, all provisions of the Contract which are based
on the death of the Annuitant prior to the Annuitization Date will be based on
the death of the last survivor of the Annuitant and Contingent Annuitant.
CONTINGENT BENEFICIARY - The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Annuitant.
CONTINGENT OWNER - The Contingent Owner, if named, may succeed to the rights of
the Contract Owner upon the Contract Owner's death before the Annuitization
Date.
3
<PAGE> 5
CONTRACT - The Individual Modified Single Premium Deferred Variable Annuity
described herein.
CONTRACT ANNIVERSARY - An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER(S) (OWNER) - The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Annuitant, Contingent Annuitant,
Beneficiary, Contingent Beneficiary, Annuity Payment Option, and the
Annuitization Date.
CONTRACT VALUE - The Contract Value is the sum of the value of all Variable
Account Accumulation Units attributable to the Contract plus any amount held
under the Contract in the Fixed Account.
CONTRACT YEAR - A Contract Year is each year starting with the Date of Issue of
the Contract and each Contract Anniversary thereafter.
DATE OF ISSUE - The Date of Issue is the date the first Purchase Payment is
applied to the Contract.
DEATH BENEFIT - The benefit payable upon the death of the Annuitant prior to
the Annuitization Date. This benefit does not apply upon the death of the
Contract Owner when the Owner and Annuitant are not the same person. If the
Annuitant dies after the Annuitization Date, any benefit that may be payable
shall be as specified in the Annuity Payment Option elected.
DISTRIBUTION - A Distribution is any payment of part or all of the Contract
Value.
FIXED ACCOUNT - The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ANNUITY - A Fixed Annuity is a series of payments which are guaranteed by
the Company as to dollar amount during Annuitization.
HOME OFFICE - The Home Office is the main office of the Company located in
Columbus, Ohio.
INTEREST RATE GUARANTEE PERIOD - An Interest Rate Guarantee Period is the
interval of time in which an interest rate credited to the Fixed Account under
this Contract is guaranteed to remain the same. For Purchase Payments into the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of a calendar quarter
following one year from deposit or transfer. At the end of an Interest Rate
Guarantee Period, a new interest rate is declared with an Interest Rate
4
<PAGE> 6
Guarantee Period starting at the end of the prior period and ending at the end
of the calendar quarter one year later.
JOINT OWNER - The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Contract Owner. IF A JOINT OWNER IS
NAMED, REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS CONTRACT WILL APPLY TO
BOTH THE OWNER AND JOINT OWNER. JOINT OWNERS MUST BE SPOUSES AT THE TIME JOINT
OWNERSHIP IS REQUESTED.
MUTUAL FUNDS (FUNDS)- The registered management investment companies in which
the assets of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACT - A Non-Qualified Contract is a Contract which does not
qualify for favorable tax treatment under the provisions of sections 401
(qualified plans), 408 (individual retirement annuities) or 403(b) (tax
sheltered annuities) of the Internal Revenue Code of 1986.
PURCHASE PAYMENT - A Purchase Payment is a deposit of new value into the
contract. The term "Purchase Payment" does not include transfers between the
Variable Accounts and Fixed Accounts or among the Sub-Accounts.
SUB-ACCOUNTS - Sub-Accounts are separate and distinct divisions of the Variable
Account, to which specific Mutual Fund shares are allocated and for which
Accumulation Units and Annuity Units are separately maintained.
VALUATION DATE - A Valuation Date is each day the New York Stock Exchange and
the Company's Home Office are open for business. It may also be any other day
during which there is a sufficient degree of trading of the Variable Account's
Mutual Fund shares such that the current net asset value of its Accumulation
Units might be materially affected.
VALUATION PERIOD - A Valuation Period is the interval of time between one
Valuation Date and the next Valuation Date. It is measured from the closing of
business of the New York Stock Exchange and ending at the close of business for
the next succeeding Valuation Date.
VARIABLE ACCOUNT - The Variable Account is a separate investment account of the
Company into which Variable Account Purchase Payments are allocated. The
Variable Account is divided into Sub-Accounts, each of which invests in the
shares of a separate Mutual Fund.
VARIABLE ANNUITY - A Variable Annuity is a series of payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
5
<PAGE> 7
GENERAL PROVISIONS
DEDUCTION FOR PREMIUM TAXES
The Company will charge against the Contract Value the amount of any premium
taxes levied by a state or any other government entity upon Purchase Payments
received by the Company. The method used to recoup premium taxes will be
determined by the Company at its sole discretion and in compliance with
applicable state law. The Company currently deducts such charges from a
Contract Owner's Contract Value either (1) at the time the Contract is
surrendered, (2) at Annuitization, or (3) at such earlier date as the Company
may be subject to such taxes.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a Mortality and Expense Risk Charge equal, on an annual
basis, to [1.25%] of the daily net asset value of the Variable Account. This
deduction is made to compensate the Company for assuming the mortality risks
and expense risks under this Contract. The Company assumes a "mortality risk"
that fixed and variable annuity payments will not be affected by the death
rates of persons receiving such payments or of the general population by virtue
of annuity rates incorporated in the Contract which cannot be changed. The
Company also assumes a mortality risk by its promise to pay in certain
circumstances a Death Benefit that is greater than the Contract Value. The
"expense risk" involves the guaranty by the Company that it will not increase
charges for administration of the Contract regardless of the Company's actual
administrative expenses.
ADMINISTRATION CHARGE
The Company will deduct an Administration Charge equal, on an annual basis, to
[0.15%] of the daily net asset value of the Variable Account. This deduction
is made to reimburse the Company for expenses incurred in the administration of
the Contract and of the Variable Account.
BENEFICIARY PROVISIONS
The Beneficiary is the person or persons who may receive certain benefits under
the Contract in the event the Annuitant dies prior to the Annuitization Date.
If more than one Beneficiary survives the Annuitant, each will share equally
unless otherwise specified in the Beneficiary designation. If no Beneficiary
survives the Annuitant, all rights and interests of the Beneficiary shall vest
in the Contingent Beneficiary, and if more than one Contingent Beneficiary
survives, each will share equally unless otherwise specified in the Contingent
Beneficiary designation. If a Contingent Beneficiary predeceases the Annuitant
or if a Contingent Beneficiary is not named, all rights and interests of the
6
<PAGE> 8
Contingent Beneficiary will vest with the Contract Owner or the Contract
Owner's estate. Subject to the terms of any existing assignment, the Contract
Owner may change the Beneficiary or Contingent Beneficiary from time to time
during the lifetime of the Annuitant, by written notice to the Company. The
change, upon receipt and recording by the Company at the Home Office, will take
effect as of the time the written notice was signed, whether or not the
Annuitant is living at the time of recording, but without further liability as
to any payment or settlement made by the Company before receipt of such change.
CONTRACT OWNERSHIP PROVISIONs
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF AS OWNER, THE
PURCHASER WOULD HAVE NO RIGHTS UNDER THE CONTRACT. If a Joint Owner is named,
the Joint Owner will possess an undivided interest in the Contract. The
Contract Owner has sole rights in the Contract prior to the Annuitization Date.
Unless otherwise provided, when Joint Owners are named, the exercise of any
ownership right in the Contract (including the right to surrender or partially
surrender the Contract, to change the Owner, Contingent Owner, the Annuitant,
the Contingent Annuitant, the Beneficiary, the Contingent Beneficiary, the
Annuity Payment Option or the Annuitization Date) shall require a written
indication of an intent to exercise that right, which must be signed by both
the Owner and Joint Owner. Joint Owners must be spouses at the time joint
ownership is requested. If a Contract Owner dies prior to the Annuitization
Date and the Contract Owner and the Annuitant are not the same person, Contract
ownership will be determined in accordance with the "Death of Contract Owner"
provision on page 8. If the Annuitant (regardless of whether the Annuitant is
also the Contract Owner) dies prior to the Annuitization Date, ownership will
be determined in accordance with the "Death of Annuitant Prior to Annuitization
Date" provision on page 9. On and after the Annuitization Date, the Contract
Owner is the Annuitant.
Prior to the Annuitization Date, the Contract Owner may name a new Contract
Owner. Such change may be subject to state and federal gift taxes and may also
result in current federal income taxation. Any change of Contract Owner
designation will automatically revoke any prior Contract Owner designation.
Any request for change of Contract Owner must be (1) made by proper written
application, and, (2) received and recorded by the Company at its Home Office,
and (3) may include a signature guarantee as specified in the "Surrender"
provision on page 11. Subject to the terms of any existing assignment, the
Contract Owner may change the Beneficiary or Contingent Beneficiary from time
to time during the lifetime of the Annuitant, by written notice to the Company.
The change, upon receipt and recording by the Company at the Home Office, will
take effect as of the time the written notice was signed, whether or not the
Annuitant is living at the time of recording, but without further liability as
to any payment or settlement made by the Company before receipt of such change.
7
<PAGE> 9
The Contract Owner may request a change in the Annuitant or Contingent
Annuitant before the Annuitization Date. Such a request must be made in
writing on a form acceptable to the Company and must be signed by the Contract
Owner and the person to be named as Annuitant or Contingent Annuitant. Such
request must be received by the Company at its Home Office prior to the
Annuitization Date. Any such change is subject to underwriting and approval by
the Company.
CONTINGENT OWNER
The Contingent Owner is the person or persons who may receive certain benefits
under the Contract in the event the Contract Owner dies before the
Annuitization Date. If more than one Contingent Owner survives the Contract
Owner, each will share equally unless otherwise specified in the Contingent
Owner designation. If a Contingent Owner is not named or predeceases the
Contract Owner, all rights and interest of the Contingent Owner will vest in
the Contract Owner's estate. Subject to the terms of any existing assignment,
the Contract Owner may change the Contingent Owner from time to time prior to
the Annuitization Date, by written notice to the Company. The change, upon
receipt and recording by the Company at its Home Office, will take effect as of
the time the written notice was signed, whether or not the Contract Owner is
living at the time of recording, but without further liability as to any
payment or settlement made by the Company before receipt of such change.
DEATH OF CONTRACT OWNER
If the Contract Owner and the Annuitant are not the same person and the
Contract Owner dies prior to the Annuitization Date, then the Joint Owner, if
any, becomes the new Contract Owner. If no Joint Owner is named (or if the
Joint Owner predeceases the Contract Owner), then the Contingent Owner becomes
the new Contract Owner. If no Contingent Owner is named (or if the Contingent
Owner predeceases the Contract Owner), then the Contract Owner's estate becomes
the Contract Owner. Unless the new Contract Owner is the prior Contract
Owner's surviving spouse, the entire interest in the Contract, less applicable
deductions (which may include a Contingent Deferred Sales Charge), must be
distributed within five years of the prior Contract Owner's death or be
distributed in the form of a life annuity or an annuity for a period not
exceeding his or her life expectancy. Such annuity must begin within one year
following the date of the prior Contract Owner's death. If the new Contract
Owner is the surviving spouse of the prior Contract Owner, the Contract may be
continued without any required Distribution.
If the Annuitant (regardless of whether the Annuitant is also the Contract
Owner) dies prior to the Annuitization Date, a Death Benefit will be payable in
accordance with the "Death of Annuitant Prior to the Annuitization Date" below.
8
<PAGE> 10
DEATH OF ANNUITANT PRIOR TO ANNUITIZATION DATE
If the Annuitant dies prior to the Annuitization Date, a Death Benefit is
payable unless the Contract Owner has also named a Contingent Annuitant, in
which case the Death Benefit is payable upon the death of the last survivor of
the Annuitant and Contingent Annuitant. The Death Benefit is payable to the
Beneficiary. If no Beneficiary is named (or if the Beneficiary predeceases the
Annuitant), then the Death Benefit is payable to the Contingent Beneficiary.
If no Contingent Beneficiary is named (or if the Contingent Beneficiary
predeceases the Annuitant), then the Death Benefit will be paid to Contract
Owner or the Contract Owner's estate.
The value of the Death Benefit will be determined as of the Valuation Date
coincident with or next following the date the Company receives in writing at
the Home Office the following three items (1) due proof of the Annuitant's
death; and (2) an election for either (a) a single sum payment or (b) an
Annuity Payment Option; and (3) any applicable state required form(s).
Proof of death is either:
(1) a copy of a certified death certificate;
(2) a copy of a certified decree of a court of competent jurisdiction as
to the finding of death;
(3) a written statement by a medical doctor who attended the deceased; or
(4) any other proof satisfactory to the Company.
If a single sum payment is requested, payment will be made in accordance with
any applicable laws and regulations governing the payment of Death Benefits.
If an Annuity Payment Option is requested, election must be made by the
Contract Owner during the 90-day period commencing with the date written notice
is received by the Company. If no election has been made by the end of such
90-day period, the Death Benefit will be paid in a single sum payment. If the
Annuitant dies prior to his 85th birthday, the value of the Death Benefit will
be the greater of (1) the sum of all Purchase Payments, less any amounts
surrendered, (2) the Contract Value or (3) the Contract Value as of the most
recent five- year Contract Anniversary, less any amounts surrendered since the
most recent five-year Contract Anniversary. If the Annuitant dies on or after
his 85th birthday, then the Death Benefit will be equal to the Contract Value.
If the Contract Owner is not a natural person, the death of the Annuitant (or a
change of the Annuitant) will be treated like a death of the Contract Owner and
will result in a Distribution pursuant to the first paragraph in the "Death of
Contract Owner" provision on page 8, regardless of whether a Contingent
Annuitant has also been named.
9
<PAGE> 11
DEATH OF ANNUITANT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be paid according to the Annuity Payment Option selected.
ALTERATION OR MODIFICATION
All changes in or to the terms of the Contract must be: (1) made in writing;
and (2) signed by the President or Secretary of the Company. No other person
can alter or change any of the terms or conditions of this Contract.
ASSIGNMENT
Where permitted, the Owner may assign all rights under this Contract at any
time during the lifetime of the Annuitant, prior to the Annuitization Date.
The Company will not be bound by any assignment until written notice is
received and recorded at the Home Office. The Company is not responsible for
the validity or tax consequences of any assignment. An assignment will not
apply to any payment made or action taken by the Company prior to the time it
was recorded.
The value of any portion of the Contract which is assigned, pledged or
transferred by gift may be treated like a cash withdrawal for federal tax
purposes and may be subject to a tax penalty. All rights in this Contract are
personal to the Contract Owner and may not be assigned without written consent
of the Company.
ENTIRE CONTRACT
This document is the whole Contract between the Owner and the Company. This
Contract, Data Page and Endorsement(s) (if any), make up the entire Contract.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, all payments and
benefits under this Contract will be adjusted. Payments and benefits will be
made, based on the correct age or sex. Proof of age of an Annuitant may be
required at any time, in a form satisfactory to the Company. When the age or
sex of an Annuitant has been misstated, the dollar amount of any overpayment
will be deducted from the next payment or payments due under this Contract.
The dollar amount of any underpayment made by the Company as a result of any
such misstatement will be paid in full with the next payment due under this
Contract.
10
<PAGE> 12
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, proof that such person is living may be required by the Company.
Such proof may be required prior to making the payments.
PROTECTION OF PROCEEDS
Proceeds under this Contract are not assignable by any beneficiary prior to the
time they are due. Proceeds are not subject to the claims of creditors or to
legal process, except as mandated by applicable laws.
REPORTS
At least once each year, prior to the Annuitization Date, a report showing the
Contract Value will be provided to the Owner.
INCONTESTABILITY
This Contract will not be contested.
CONTRACT SETTLEMENT
The Company may require this Contract to be returned to the Home Office prior
to making any payments. All sums payable to or by the Company under this
Contract are payable at the Home Office.
NUMBER AND GENDER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular; and all references in the male gender will include the
female and neuter genders.
NON-PARTICIPATING
This Contract is non-participating. It will not share in the surplus of the
Company.
ACCUMULATION PROVISIONS
SURRENDER
The Owner may surrender part or all of the Contract Value at any time this
Contract is in force and prior to the earlier of the Annuitization Date or the
death of the Annuitant or Contingent Annuitant if any. All surrenders will
have the following conditions:
11
<PAGE> 13
1. The request for surrender must be in writing.
2. The surrender value will be paid to the Owner after proper written
application and the Contract are received at the Home Office.
3. The Company reserves the right to require that the signature(s) be
guaranteed by a member firm of a major stock exchange or other
depository institution qualified to give such a guaranty. Payment of
the Variable Account Contract Value will be made within seven days of
receipt of both proper written application and the Contract. Payment
of the Fixed Account Contract Value may be deferred up to six months
following receipt of application.
4. When written application and the Contract are received, the Company
will surrender the number of Variable Account Accumulation Units and
an amount from the Fixed Account needed to equal: (a) the dollar
amount requested; plus (b) any Contingent Deferred Sales Charge which
applies.
5. If a partial surrender is requested, unless the Owner has instructed
otherwise, the surrender will be made as follows: (a) from the
Variable Account Contract Value; and (b) from the Fixed Account
Contract Value. The amounts surrendered from the Fixed Account and
the Variable Account, will be in the same proportion that the Owner's
interest in the Fixed Account and Variable Account bears to the total
Contract Value.
CONTINGENT DEFERRED SALES CHARGE
If part or all of the Contract Value is surrendered, a Contingent Deferred
Sales Charge may be made by the Company. The Contingent Deferred Sales Charge
is designed to cover expenses relating to the sale of the Contract.
The Contingent Deferred Sales Charge is calculated by multiplying the
applicable Contingent Deferred Sales Charge Percentages noted below by the
Purchase Payments that are surrendered. For purposes of calculating the amount
of the Contingent Deferred Sales Charge, surrenders are considered to come
first from the oldest Purchase Payment made to the Contract, then from the next
oldest Purchase Payment and so forth, with any earnings attributable to such
Purchase Payments considered only after all Purchase Payments made to the
Contract have been considered. (For tax purposes, a surrender is treated as a
withdrawal of earnings first.)
12
<PAGE> 14
<TABLE>
<CAPTION>
Number of Completed Contingent Number of Completed
Years from Date of Deferred Sales Years from Date of Contingent Deferred
Purchase Payment Charge Percentage Purchase Payment Sales Charge Percentage
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
WITHDRAWALS WITHOUT CHARGE
Each Contract Year, the Contract Owner may withdraw without a Contingent
Deferred Sales Charge (CDSC) an amount equal to 10% of the total sum of all
Purchase Payments made to the Contract at the time of withdrawal, less any
Purchase Payments previously withdrawn that were subject to a CDSC. This
CDSC-free withdrawal privilege is non-cumulative, that is, free amounts not
taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase
Payments which have been held under the Contract for at least 7 years; (2)
earnings attributable to Purchase Payments made to the Contract; (3) Death
Benefit payments made upon the death of the Annuitant prior to the
Annuitization Date; (4) amounts applied to an Annuity Payment Option after two
years from the Date of Issue; or (5) amounts transferred among the Sub-Accounts
or from the Fixed Account to the Variable Account or vice versa.
For a discussion of the withdrawals that are subject to a CDSC, see the
"Contingent Deferred Sales Charge" section on page 12.
SURRENDER VALUE
The Surrender Value is the amount that will be paid if the full Contract Value
is surrendered. The Surrender Value at any time will be:
1. The Contract Value; less
2. Any Contingent Deferred Sales Charge which applies.
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER
The Company has the right to suspend or delay the date of any Surrender payment
from the Variable Account for any period:
1. When the New York Stock Exchange is closed;
13
<PAGE> 15
2. When trading on the New York Stock Exchange is restricted;
3. When an emergency exists as a result of which: disposal of securities
held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to fairly determine the value of the net
assets of the Variable Account;
4. During any other period when the Securities and Exchange Commission,
by order, so permits for the protection of security holders; or
5. When the request for Surrender is not made in writing.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth in numbers 2, 3, and 4 above exist.\
The Company further reserves the right to delay payment of a total Surrender of
Fixed Account Contract Value for up to [six] months in those states where
applicable law requires the Company to reserve such right.
MODIFIED SINGLE PURCHASE PAYMENTS
The Contract is bought for the initial Purchase Payment and any subsequent
Purchase Payments. The cumulative total of all Purchase Payments under this
and any other annuity Contract(s) issued by the Company having the same
Annuitant may not exceed $1,000,000 without the prior consent of the Company.
The initial Purchase Payment is due on the Date of Issue and may not be less
than [$15,000]. Purchase payments, if any, after the initial Purchase Payment
must be at least [$1,000] and may be made at any time.
ALLOCATION OF PURCHASE PAYMENTS
The Owner elects to have the Purchase Payments allocated among the Fixed
Account and the Sub-Accounts of the Variable Account at the time of
application. The allocation of future Purchase Payments may be changed by the
owner by a written request that is received and recorded by the Company.
CONTRACT VALUE
The Contract Value at any time will be the sum of: (1) the Variable Account
Contract Value; and (2) the Fixed Account Contract Value.
14
<PAGE> 16
FIXED ACCOUNT CONTRACT VALUE
The Fixed Account Contract Value at any time will be: the sum of all amounts
credited to the Fixed Account under this Contract less any amounts canceled or
withdrawn for charges, deductions, or surrenders.
INTEREST TO BE CREDITED
The Company will credit interest to the Fixed Account Contract Value. Such
interest will be credited at such rate or rates as the Company prospectively
declares from time to time, at the sole discretion of the Company. Such rates
will be declared to the Owner in writing after each quarterly period. Any such
rate or rates so determined, for which deposits are received, will remain in
effect for a period of not less than 12 months. However, the Company
guarantees that it will credit interest at not less than 3.0% per year or any
lesser amount as permitted by state law.
VARIABLE ACCOUNT CONTRACT VALUE
The Variable Account Contract Value is the sum of the value of all Variable
Account Accumulation Units under this Contract.
If: (1) part or all of the Variable Account Contract Value is surrendered; or
(2) charges or deductions are made against the Variable Account Contract Value;
then, an appropriate number of Accumulation Units will be canceled or
surrendered to equal such amount.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company. The
Company has allocated a part of its assets for this Contract and certain other
contracts to the Variable Account. Such assets of the Variable Account remain
the property of the Company. However, they may not be charged with the
liabilities from any other business in which the Company may take part.
The Variable Account is divided into Sub-Accounts which invest in shares of the
Mutual Funds. Purchase payments are allocated among one or more of these
Sub-Accounts, as designated by the Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Purchase Payments applied to the Variable Account will be invested at net
asset value in one or more of the Sub-Accounts.
15
<PAGE> 17
VALUATION OF ASSETS
Mutual Fund shares in the Variable Account will be valued at their net asset
value.
VARIABLE ACCOUNT ACCUMULATION UNITS
The number of Accumulation Units for each Sub-Account of the Variable Account
is found by dividing: (1) the net amount allocated to the Sub- Account; by (2)
the Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Company received the Purchase Payment.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account of the Variable Account
was arbitrarily set at $10 when the first Mutual Fund shares were available for
purchase. The value for any later Valuation Period is found as follows:
The Accumulation Unit Value for each Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment Factor for the Sub- Account for the
next following Valuation Period. The result is the Accumulation Unit Value.
The value of an Accumulation Unit may increase or decrease from one Valuation
Period to the next. The number of Accumulation Units will not change as a
result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2) and subtracting (3) from the result, where:
1. is the net result of:
a. the net asset value per share of the Mutual Fund held in the
Sub-Account, determined at the end of the current Valuation
Period; plus
b. the per share amount of any dividend or capital gain
Distributions made by the Mutual Fund held in the Sub-Account,
if the "ex-dividend" date occurs during the current Valuation
Period.
16
<PAGE> 18
2. is the net result of:
a. the net asset value per share of the Mutual Fund held in the
Sub-Account, determined at the end of the last prior Valuation
Period; plus or minus
b. the per share charge or credit for any taxes reserved for the
last prior Valuation Period, plus or minus
c. a per share charge or credit for any taxes reserved for, which
is determined by the Company to have resulted from the
investment operations of the Sub-Account.
3. is a factor representing the Mortality and Expense Risk Charge and the
Administration Charge deducted from the Variable Account. Such factor
is equal, on an annual basis, to [1.40%] of the daily net asset value
of the Variable Account.
For funds 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.
FIXED ACCOUNT PROVISIONS
The Fixed Account is the general account of the Company. It is made up of all
assets of the Company other than: (1) those in the Variable Account; and (2)
those in any other segregated asset account.
TRANSFER PROVISIONS
The Owner may annually transfer a portion of the value of the Fixed Account to
the Variable Account and a portion of the Variable Account to the Fixed
Account, without penalty or adjustment. Within any Contract Year, the Company
reserves the right to restrict transfers from the Variable Account to the Fixed
Account to 10% of the Variable Account at the time of the transfer.
Contract Owners may annually transfer at the end of an Interest Rate Guarantee
Period, a minimum of 10% of the funds with a maturing interest rate guarantee
from the Fixed Account to the Variable Account. The maximum allowable transfer
amount from the Fixed Account to the Variable Account will be determined by the
Company at its sole discretion.
Nationwide reserves the right to refuse transfers or Purchase Payments into the
Fixed Account if the Fixed Account is greater than or equal to 30% of total
Contract Value. Transfers must be made prior to the Annuitization Date.
Transfers may occur among the Sub-Accounts once daily.
17
<PAGE> 19
SYSTEMATIC WITHDRAWALS
The Contract Owner may elect in writing on a form provided by the Company to
take Systematic Withdrawals of a specified dollar amount (of at least $100) on
a monthly, quarterly, semi-annual or annual basis. The Company will process
the withdrawals as directed by surrendering on a pro-rata basis Accumulation
Units from all of the Sub-Accounts in which the Contract Owner has an interest,
and the Fixed Account. A Contingent Deferred Sales Charge may apply to
Systematic Withdrawals in accordance with the considerations set forth in the
"Contingent Deferred Sales Charge" and "Withdrawals Without Charge" sections on
pages 12 and 13. Each Systematic Withdrawal is subject to federal income taxes
on the taxable portion. In addition, a 10% federal penalty tax may be assessed
on Systematic Withdrawals if the Contract Owner is under age 59-1/2. If
directed by the Contract Owner, the Company will withhold federal income taxes
from each Systematic Withdrawal. A Systematic Withdrawal program will
terminate automatically at the end of each Contract Year and may be reinstated
only on or after the next Contract Anniversary pursuant to a new request. The
Contract Owner may discontinue Systematic Withdrawals at any time by notifying
the Company in writing.
If the Contract Owner withdraws amounts pursuant to a Systematic Withdrawal
program, then the Contract Owner may withdraw each Contract Year without a CDSC
an amount up to the greater of (i) 10% of the total sum of all Purchase
Payments made to the Contract at the time of withdrawal, less any Purchase
Payments previously withdrawn that were subject to a CDSC, or (ii) the
specified percentage of the Contract Value based on the Contract Owner's age,
as shown in the following table:
CONTRACT OWNER'S AGE PERCENTAGE OF CONTRACT VALUE
- -------------------- ----------------------------
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
If the total amounts withdrawn in any Contract Year exceed the CDSC-free amount
as calculated under the Systematic Withdrawal method described above, then such
total withdrawn amounts will be eligible only for the 10% of purchase payment
CDSC-free withdrawal privilege described in the "Withdrawals Without Charge"
section on page 13, and the total amount of CDSC charged during the Contract
Year will be determined in accordance with that provision.
The Contract Value and the Contract Owner's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a Systematic Withdrawal program is received and recorded by the
Company at its Home Office. (In the case of Joint Owners, the older
18
<PAGE> 20
Owner's age will be used.) The Contract Owner may elect to take such CDSC-free
amounts only once each Contract Year. Furthermore, this CDSC- free withdrawal
privilege for Systematic Withdrawals is non-cumulative, that is, free amounts
not taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
Systematic Withdrawals are not available prior to the expiration of the ten day
free look provision of the Contract. The Company also reserves the right to
assess a processing fee for this service.
DISTRIBUTION PROVISIONS
The following events will give rise to a Distribution:
1. Reaching the Annuitization Date - Distribution will be made pursuant
to the Annuity Payment Option selected.
2. Death of the Annuitant prior to the Annuitization Date - Distribution
to be made in accordance with the options available under the Death of
Annuitant provisions of this Contract.
3. Death of the Owner - Distribution to be made in a manner consistent
with the Death of Owner provisions of this Contract.
4. Other Surrender - Distribution to be made in accordance with the
Surrender provisions of this Contract.
ANNUITIZATION PROVISIONS
GENERAL
All of the provisions within this section are subject to the restrictions set
forth in the Section entitled "Death Of Owner".
ANNUITIZATION
This is the process of selecting an Annuity Payment Option to begin the payout
phase of the Contract. As of the Annuitization Date, the Contract Value is
surrendered and applied to the purchase rate then in effect for the option
selected. The purchase rates for any options guaranteed to be available will
be determined on a basis not less favorable than the 1983 "Table a" with ages
set back 6 years, with minimum interest at 3.0%. The rates shown in the
Annuity Tables are calculated on this guaranteed basis. Annuitization is
irrevocable once payments have begun.
19
<PAGE> 21
ANNUITIZATION DATE
Such date may be the first day of a calendar month or any other agreed upon
date. It must be at least [two] years after the Date of Issue. The
Annuitization Date may not be later than the first day of the first calendar
month after the Annuitant's [85th] birthday, unless a later date has been
requested by the Contract Owner; and approved by the Company. This date is
selected by the Contract Owner at the time of application. Any applicable
premium taxes not already deducted may be deducted from the Contract Value at
the Annuitization Date. The remaining Contract Value will then be applied to
the Annuity Payment Option selected by the Owner.
CHANGE OF ANNUITIZATION DATE
The Owner may change the Annuitization Date. A change of Annuitization Date
must be made by written request. The request must be received at the Home
Office prior to both new and old Annuitization Dates. The date to which such a
change may be made must be the first day of a calendar month.
CHANGE OF ANNUITY PAYMENT OPTION
The Owner may change the Annuity Payment Option prior to the Annuitization
Date. A change of the Annuity Payment Option must be made by written request
and must be received at the Home Office prior to the Annuitization Date. After
a change of Annuity Payment Option is received at the Home Office, it will
become effective as of the date it was requested. A change of Annuity Payment
Option will not apply to any payment made or action taken by the Company before
it is received.
ANNUITY PAYMENT OPTIONS
An Annuity Payment Option may be selected prior to Annuitization. Any Annuity
Payment Option not set forth in the Contract or a combination of available
options which is satisfactory to both the Company and the Annuitant may be
selected.
SUPPLEMENTARY AGREEMENT
A Supplementary Agreement will be issued within 30 days following the
Annuitization Date. The Supplementary Agreement will set forth the terms of
the Annuity Payment Option selected.
FREQUENCY AND AMOUNT OF PAYMENTS
Payments will be made based on the Annuity Payment Option selected and
frequency selected. However, if the net amount to be applied to any annuity
20
<PAGE> 22
payment option at the Annuitization Date is less than [$5000], the Company has
the right to pay such amount in one lump sum.
If any payment provided for would be or becomes less than [$50], the Company
has the right to change the frequency of payment to an interval that will
result in payments of at least [$50].
FIXED ANNUITY PROVISIONS
A Fixed Annuity is an annuity with level payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. At the
Annuitization Date, a designated portion of the Contract Value will be applied
to the applicable Annuity Table. This will be done in accordance with the
Annuity Payment Option selected.
VARIABLE ANNUITY PROVISIONS
A Variable Annuity is a series of payments which are not predetermined or
guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
DETERMINATION OF FIRST VARIABLE ANNUITY PAYMENT
At the Annuitization Date, a designated portion of the Contract Value will be
applied to purchase rates based on the 1971 Individual Annuity Mortality Table
with ages set back one year and 3.5% interest.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. The value
of an Annuity Unit for each Sub-Account was arbitrarily set at $10 when the
first Mutual Fund shares were bought. The value for any later Valuation Period
is found as follows:
1. The Annuity Unit Value for each Sub-Account for the last prior
Valuation Period is multiplied by the Net Investment Factor for the
Sub- Account for the Valuation Period for which the Annuity Unit Value
is being calculated.
2. The result is multiplied by an interest factor. This is done because
the Assumed Investment Rate of 3.5% per year is built into the Annuity
Tables.
VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
Variable Annuity payments after the first vary in amount. The payment amount
changes with the investment performance of the Sub-Accounts within the
21
<PAGE> 23
Variable Account. The dollar amount of such payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the unit
value as of the Annuitization Date. This result establishes the fixed
number of Annuity Units for each monthly annuity payment after the
first. This number of Annuity Units remains fixed during the annuity
payment period.
2. The fixed number of Annuity Units is multiplied by the Annuity Unit
Value for the Valuation Date for which the payment is due. This
result establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in expenses or mortality experience.
ANNUITY PAYMENT OPTIONS
GENERAL
All annuity payments will be mailed within 10 working days of the first of
the month in which they are scheduled to be made. The following is a list of
options guaranteed to be made available by the Company.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
JOINT AND LAST SURVIVOR ANNUITY
The amount to be paid under this option will be paid during the lifetimes of
the Annuitant and designated second person. Payments will continue as long as
either is living.
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If
the Annuitant dies prior to the end of this guaranteed period, the recipient
chosen by the Annuitant to receive the remaining payments may choose to
continue receiving payments until the end of the guaranteed period, or receive
the commuted value of the remaining guaranteed payments in a lump sum. Such
lump sum payment will be equal to the present value of the remaining guaranteed
payments. The payment will be computed as of the date on which proof of the
death of the Annuitant is received at the Home Office and computed
22
<PAGE> 24
at an assumed investment rate which is the greater of that used in the Annuity
Tables in effect on the date of the calculation of the lump sum and that used
in the Annuity Tables in effect on the Annuitization Date.
ANY OTHER OPTION
The amount and period under any other option will be determined by the Company.
Payment options not set forth in the Contract are available only if they are
approved by both the Company and the Annuitant.
23
<PAGE> 25
MONTHLY BENEFITS PER $1000 APPLIED
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
ANNUITANT'S AGE LAST BIRTHDAY
FEMALE AGE
----------
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 3.36 3.46 3.56 3.64 3.71
-------- 55 3.42 3.56 3.69 3.82 3.93
60 3.47 3.64 3.82 3.99 4.16
65 3.70 3.92 4.15 4.39
70 4.00 4.30 4.61
</TABLE>
<TABLE>
<CAPTION>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
MALE GUARANTEED PERIOD FEMALE GUARANTEED PERIOD
ANNUITANT'S ANNUITANT'S
ATTAINED AGE 120 240 ATTAINED AGE 120 240
LAST BIRTHDAY NONE MONTHS MONTHS LAST BIRTHDAY NONE MONTHS MONTHS
- ------------- ---- ------ ------ ------------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
40 3.41 3.40 3.38 40 3.23 3.23 3.22
41 3.44 3.44 3.41 41 3.26 3.26 3.24
42 3.48 3.48 3.45 42 3.29 3.29 3.27
43 3.52 3.52 3.48 43 3.32 3.32 3.30
44 3.57 3.56 3.52 44 3.35 3.35 3.33
45 3.61 3.60 3.56 45 3.39 3.38 3.37
46 3.66 3.65 3.60 46 3.42 3.42 3.40
47 3.71 3.69 3.64 47 3.46 3.46 3.43
48 3.76 3.74 3.68 48 3.50 3.50 3.47
49 3.81 3.79 3.73 49 3.55 3.54 3.51
50 3.87 3.85 3.77 50 3.59 3.58 3.55
51 3.93 3.90 3.82 51 3.64 3.63 3.59
52 3.99 3.96 3.87 52 3.68 3.67 3.63
53 4.05 4.02 3.92 53 3.74 3.72 3.68
54 4.12 4.09 3.97 54 3.79 3.78 3.72
55 4.19 4.15 4.03 55 3.85 3.83 3.77
56 4.27 4.22 4.08 56 3.90 3.89 3.82
57 4.34 4.30 4.14 57 3.97 3.95 3.88
58 4.43 4.37 4.20 58 4.03 4.01 3.93
59 4.51 4.45 4.26 59 4.10 4.08 3.99
60 4.60 4.54 4.32 60 4.18 4.15 4.04
61 4.70 4.62 4.39 61 4.25 4.22 4.11
62 4.80 4.72 4.45 62 4.34 4.30 4.17
63 4.91 4.82 4.51 63 4.42 4.38 4.23
64 5.03 4.92 4.58 64 4.52 4.47 4.30
65 5.15 5.03 4.65 65 4.61 4.56 4.37
66 5.28 5.14 4.71 66 4.72 4.66 4.44
67 5.43 5.27 4.78 67 4.83 4.76 4.51
68 5.58 5.39 4.84 68 4.95 4.87 4.58
69 5.74 5.53 4.90 69 5.08 4.98 4.65
70 5.91 5.66 4.96 70 5.21 5.10 4.72
71 6.10 5.81 5.02 71 5.36 5.22 4.79
72 6.30 5.96 5.08 72 5.51 5.36 4.86
73 6.51 6.12 5.13 73 5.67 5.50 4.93
74 6.73 6.28 5.18 74 5.85 5.65 5.00
75 6.97 6.44 5.23 75 6.04 5.80 5.06
</TABLE>
24
<PAGE> 1
EXHIBIT NO. 5
THE VARIABLE ANNUITY APPLICATION FORM
<PAGE> 2
[THE BEST OF AMERICA [ ] NON-QUALIFIED
LOGO] [ ] IRA (OWNER AND
ANNUITANT MUST BE
ANNUITY APPLICATION THE SAME)
$15,000 MINIMUM INITIAL PAYMENT [ ] 403(b)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACT OWNER (If Applicable) [ ] JOINT OWNER [ ] CONTINGENT
(Spouse Only) OWNER
1 ---------------------------------------------------------------
(Print) Last First MI ------------------------------------------------
Last First MI
CONTRACT ---------------------------------------------------------------
OWNER(S) Address ------------------------------------------------
Address
---------------------------------------------------------------
City State Zip ------------------------------------------------
If no annuitant City State Zip
is specified in Soc. Sec. No./Tax I.D. Sex [ ] M Soc. Sec. No./Tax I.D. Sex [ ] M
section 2, the - - [ ] F - - [ ] F
contract owner ----- ----- ----- ----- ----- -----
will be the MO. DAY YEAR MO. DAY YEAR
annuitant. Date of Birth Date of Birth
------------------------- --------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUITANT [ ] CONTINGENT ANNUITANT
(If Applicable)
2 ---------------------------------------------------------------
(Print) Last First MI ------------------------------------------------
Last First MI
ANNUITANT ---------------------------------------------------------------
Address ------------------------------------------------
Address
---------------------------------------------------------------
City State Zip ------------------------------------------------
Complete only City State Zip
if different Soc. Sec. No./Tax I.D. Sex [ ] M Soc. Sec. No./Tax I.D. Sex [ ] M
from the - - [ ] F - - [ ] F
contract owner. ----- ----- ----- ----- ----- -----
MO. DAY YEAR MO. DAY YEAR
Date of Birth Date of Birth
------------------------- --------------------------
Annuitization Date
----------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY [ ] CONTINGENT BENEFICIARY
3
-------------------------------------------------------------- ------------------------------------------------
BENEFICIARY (Print) Last First MI (Print) Last First MI
-------------------------------------------------------------- ------------------------------------------------
Relationship To Owner(s) Relationship To Owner(s)
- ------------------------------------------------------------------------------------------------------------------------------------
4 FIRST PURCHASE PAYMENT $
-------------------------------
ANNUITY Submitted herewith. A copy of this application duly signed by the agent will constitute receipt for such
PURCHASE amount. If this application is declined, there will be no liability on the part of the company, and any
PAYMENTS sums submitted with this application will be refunded.
(MINIMUM INITIAL PURCHASE PAYMENT OF $15,000)
- ------------------------------------------------------------------------------------------------------------------------------------
5 Will the proposed contract replace any existing annuity or insurance contracts?
REPLACEMENT [ ] No [ ] Yes Existing Company
----------------------------------------------------
In accordance with TEFRA (1982), please provide the cost basis of the contract.
Pre-TEFRA $ Post-TEFRA $
----------------------------- --------------------------
(Before August 14, 1982)
- ------------------------------------------------------------------------------------------------------------------------------------
6
REMARKS
- ------------------------------------------------------------------------------------------------------------------------------------
FHL-571 (9/96)
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
7 FIDELITY VARIABLE TCI PORTFOLIOS, INC. DOLLAR COST AVERAGING (OPTIONAL)
ALLOCATIONS INS. PRODUCTS FUND % TCI Balanced
--- Transfers must be at least $100
% Growth Portfolio % TCI Growth
--- --- Change of these instructions requires
% High Income Portfolio % TCI International completion of form provided by the
--- --- Company.
% Equity-Income Portfolio
--- NATIONWIDE SEPARATE Please transfer $________________ per
% Overseas Portfolio ACCOUNT TRUST month from the (check one)
---
Initial minimum: % Capital App. Fund [ ] Nationwide Money Market Fund
$15,000 FIDELITY VARIABLE INS. ---
PRODUCTS FUND II % Govt. Bond Fund [ ] Nationwide Fixed Account
If no allocations ---
are specified, the % Asset Manager Portfolio % Money Market Fund [ ] Neuberger and Berman Limited
entire amount will --- --- Maturity Bond Portfolio
be allocated to the % Contrafund Portfolio % Small Company Fund
Nationwide Money --- --- Monthly transfers from the Fixed
Market Fund % Total Return Fund Account must be equal to or less
pending instruction DREYFUS --- than 1/30th of the Fixed Account
from the Contract when DCA is requested.
Owner. % Stock Index Fund NEUBERGER & BERMAN (Fund Name, whole % only, totaling 100%)
--- A.M.T.
% Socially Responsible %
--- Growth Fund % Growth Portfolio ---- ----------------------------------
--- %
STRONG VARIABLE % LTD Maturity Bond ---- ----------------------------------
INSURANCE FUNDS, INC. --- Portfolio %
% Partners Portfolio ---- ----------------------------------
% Strong Discovery --- %
--- Fund II, Inc. ---- ----------------------------------
% Strong Int'l Stock OPPENHEIMER VARIABLE %
--- Fund II ACCOUNT FUNDS ---- ----------------------------------
100 % TOTAL
% STRONG SPECIAL % Bond Fund
--- FUND II, INC. --- Begin processing these transfer
% Multiple Strategies instructions on _________________ 19____
VAN ECK WORLDWIDE --- Fund Mo. Day Yr.
INSURANCE TRUST % Global Securities
--- Fund (All DCA transactions will be confirmed
% Worldwide Bond Fund on quarterly statements. Please review
--- VAN KAMPEN the information in these statements
% Gold & Natural AMERICAN CAPITAL LIFE carefully. All errors or corrections must
--- Resources Fund INVESTMENT TRUST be reported to Nationwide within 30 days
to assure proper crediting to your
WARBURG PINCUS TRUST % Real Estate contract.)
Whole % International Equity --- Securities Fund
percentages --- Portfolio
only, must % Small Company Growth NATIONWIDE LIFE INS. CO
total 100% --- Portfolio
% Fixed Account
---
- ------------------------------------------------------------------------------------------------------------------------------------
8 OPTIONAL: I (Contract Owner) appoint ___________________________________________________ as my Limited Attorney in
LIMITED fact. Once this appointment is received and recorded by Nationwide Life and Annuity, my Limited Attorney in
POWER OF fact may exchange contract values in my name between and among the sub-accounts of my contract and change
ATTORNEY allocations among the sub-accounts for my future contributions.
I and my Limited Attorney in Fact, agree, for ourselves, our heirs, the legal representative of our estates,
[ ] NO [ ] YES their successors and assigns, to release Nationwide Life and Annuity from any liability for acting in reliance
on instructions given pursuant to the Limited Power. We jointly and severally agree to indemnify Nationwide
Life and Annuity from and against any claim, liability or expense arising out of any action by Nationwide Life
and Annuity in reliance on such instructions.
- -------------- THIS POWER IS PERSONAL TO THE HOLDER AND MAY NOT BE DELEGATED TO ANY OTHER PERSON OR ORGANIZATION. THE HOLDER
Initialed by MUST BE A CURRENTLY LICENSED AND APPOINTED REPRESENTATIVE OF NATIONWIDE LIFE AND ANNUITY AND MUST BE THE AGENT
Contract Owner OF RECORD FOR THIS CONTRACT, OR THE POWER WILL AUTOMATICALLY TERMINATE.
- ------------------------------------------------------------------------------------------------------------------------------------
9 [ ] Please send me a copy of the Statement of Additional Information to the Prospectus.
Signed at: on
------------------------------------------ ----------------------------------------
SIGNATURES City State (Mo / Day / Year)
Contract Owner Joint Owner
---------------------------------------- ------------------------------------
(If Applicable)
Witness #020-
------------------------------------------ ------------------------------------------------
(Signature of Producer) (Print Producer Name and Number)
Producer Phone # ( ) Address
------------------------- ------------------------------------------------------
Producer: Do you have reason to believe the contract applied for is to replace existing annuities or
insurance owned by the annuitant? [ ] Yes [ ] No
Broker Dealer Telephone
------------------------------------- ----------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SEND COMPLETED APPLICATION - WITH A CHECK MADE OUT TO NATIONWIDE LIFE AND ANNUITY INSURANCE CO. TO:
FOR REGULAR MAIL: Nationwide Life and Annuity Insurance Co.
P.O. Box 182008
Columbus, Ohio 43218-2008
(800) 533-5622
</TABLE>
<PAGE> 1
EXHIBIT NO. 6
ARTICLES OF INCORPORATION OF THE DEPOSITOR
<PAGE> 2
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
I, Dennis W. Click, Assistant Secretary of FINANCIAL HORIZONS LIFE
INSURANCE COMPANY, hereby certify that the attached is a true and correct copy
of the AMENDED ARTICLES OF INCORPORATION of FINANCIAL HORIZONS LIFE INSURANCE
COMPANY.
I further certify that the AMENDED ARTICLES OF INCORPORATION have not
been amended, altered, or repealed and are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the
corporate seal of FINANCIAL HORIZONS LIFE INSURANCE COMPANY to be hereunto
affixed this 10th day of November, 1994.
/s/ Dennis W. Click
-------------------------------
Dennis W. Click
Assistant Secretary
<PAGE> 3
AMENDED ARTICLES OF INCORPORATION
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
FIRST: The name of said Corporation shall be "FINANCIAL HORIZONS LIFE
INSURANCE COMPANY."
SECOND: Said Corporation is to be located, and its principal offices
maintained, in the City of Columbus, County of Franklin, State
of Ohio.
THIRD: This Corporation is formed for the purpose of making insurance
upon the lives of individuals, and every type of insurance
appertaining thereto or connected therewith, and granting,
purchasing or disposing of annuities, as authorized by Section
3907.01, Ohio Revised Code, as it now exists or may hereafter be
amended.
*FOURTH: The maximum number of shares which the Corporation is authorized
to have outstanding is Sixty-Six Thousand (66,000) shares, all
of which shall be with par value of Forty Dollars ($40.00) each.
FIFTH: The amount of capital with which the Corporation will begin
business is One Million Forty Thousand Dollars ($1,040,000.00).
SIXTH: The corporate powers and business of the Corporation shall be
exercised, conducted and controlled, and the corporate property
managed by a board of directors consisting of not less than five
(5), nor more than twenty-one (21), as may from time to time be
fixed by the Code of Regulations of the Corporation. At the
first election of directors one-third of the directors shall be
elected to serve until the next annual meeting, one-third shall
be elected to serve until the second annual meeting, one-third
shall be elected to serve until the third annual meeting;
therefore all directors shall be elected to serve for terms of
three (3) years each, and until their successors are elected and
qualified. Vacancies in the board of directors, arising from any
cause, shall be filled by the remaining directors.
The directors shall be elected at the annual meetings of the
stockholders by a majority of the stockholders present in person
or by proxy, provided that vacancies may be filled as herein
provided for.
The stockholders of the Corporation shall have the right,
subject to the statutes of the State of Ohio and these Articles
of Incorporation, to adopt a Code of Regulations governing the
transaction of the business and affairs of the Corporation which
may be altered, amended or repealed in a manner provided by law.
* Amended effective December 9, 1993
<PAGE> 4
The board of directors shall elect from their own number a Chairman
of the Board of Directors, a General Chairman, and a President. The
board of directors shall also elect a Vice President and a Secretary
and a Treasurer, or a Secretary-Treasurer. The board of directors may
also elect or appoint such additional vice presidents, assistant
secretaries and assistant treasurers as may be deemed advisable or
necessary, and may fix their duties. The board of directors may
appoint such other officers as may be provided in the Code of
Regulations. All officers, unless sooner removed by the board of
directors, shall hold office for one (1) year, or until their
successors are elected and qualified. Other than the Chairman of the
Board of Directors, the General Chairman and the President, the
officers need not be members of the board of directors. Officers shall
be elected at each annual organization meeting of the board of
directors, but elections or appointments to fill vacancies may be had
at any meeting of the directors.
SEVENTH: The annual meeting of the stockholders of the Corporation shall be
held at such time as may be fixed in the Code of Regulations of the
Corporation. Any meeting of the stockholders, annual or special, may
be held in or outside the State of Ohio. Reasonable notice of all
meeting of stockholders should be given, by mail or publication, or as
prescribed by the Code of Regulations or by law.
Amended effective December 9, 1993
<PAGE> 1
EXHIBIT NO. 9
OPINION OF COUNSEL
<PAGE> 2
[LETTERHEAD]
DRUEN, RATH, & DIETRICH
ATTORNEYS AT LAW
(614) 249-8537
December 18, 1996
Nationwide Life and Annuity
Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
To the Company:
We have prepared the Registration Statement filed with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, Individual Modified Single Premium Deferred Variable Annuity
Contracts to be sold by Nationwide Life and Annuity Insurance Company
("Nationwide") and to be issued and administered through the Nationwide VA
Separate Account-B. 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. The Nationwide VA Separate Account-B 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 Individual Modified Single
Premium Deferred Variable Annuity Contracts have been duly
authorized by Nationwide. When
<PAGE> 3
Nationwide Life and Annuity Insurance Company
December 16, 1996
Page 2
issued and sold in the manner stated in the prospectus
constituting a part of the Registration Statement, the
contracts 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 name as the firm determining the
legality of the securities being registered. In addition, we hereby attest that
the securities being registered will be legally issued and will reporesent
binding obligations of the depositor.
Very truly yours,
/s/ Druen, Rath & Dietrich
DRUEN, RATH & DIETRICH
<PAGE> 1
EXHIBIT NO. 13
COMPUTATION OF PERFORMANCE CALCULATIONS
<PAGE> 2
PERFORMANCE ADVERTISING CALCULATION SCHEDULE
The Variable Account may from time to time quote historical performance in
advertisements.
A yield and effective yield may be advertised for money market sub-accounts,
computed according to the following formulas:
365
YIELD = [BPR X --- - 1] X 100
7
365/7
EFFECTIVE YIELD = [BPR - 1] X 100
Where:
UVend
BPR = Base Period Return = (-----)
UVbeg
UVget = Unit Value at beginning of period
UVend = Unit Value at end of period
Standardized average annual total return may be advertised for non-money market
funds, computed according to the following general formula:
ERV 1/n
T = [(---) - 1] X 100; if n is greater than or equal to 1
P
ERV
T = [(---) - 1] X 100; if n is less than 1
P
ERV = AV - CDSC
1 1/n
AVn <1 = P (----- X UVend) - AC
UVbeg
P AC
AVn is greater than or equal to 1 = [----- - epsilon -----] X UVend
UVbeg UVann
<PAGE> 3
Where:
T = average annual total return
P = a hypothetical initial payment of $1,000
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the quoted periods at the end of the quoted
periods (or fractional portion thereor)
AV = accrued value
AC = administrative charge, equal to $30 per year
CDSC = contingent deferred sales charge, equal to (7-a)% of the lesser
of $1,000 or AV (CDSC expires after 7 completed contract years)
UVbeg = Unit Value at beginning of period
UVend = Unit Value at end of period
UVann = Unit Value at contract anniversary
Nonstandardized total return is calculated similarly to the above, except that
CDSC will be equal to $0 and P will be $10,000.
