<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-86408
'40 Act File No. 812-9326-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
POST EFFECTIVE AMENDMENT NO. 2
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2
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)
This Post-Effective amendment amends the Registration Statement in
respect of the Prospectus, Statement of Additional Information, and the
Financial Statements.
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on January 5, 1996 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commission. Registrant filed its Rule
24f-2 Notice for the fiscal year ended December 31, 1994, on February 22, 1995.
================================================================================
1 of 79 REDLINED
<PAGE> 2
SUPPLEMENT DATED JANUARY 5, 1996 TO
PROSPECTUS DATED JULY 1, 1995 FOR
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VA SEPARATE ACCOUNT - B
This Supplement updates certain information contained in your Prospectus. Please
read it and keep it with your Prospectus for future reference.
I. EFFECTIVE JANUARY 5, 1996, THE FOLLOWING UNDERLYING MUTUAL FUNDS WILL BE
AVAILABLE IN THE NATIONWIDE VA SEPARATE ACCOUNT-B:
Nationwide Separate Account Trust - Small Company Fund
Strong Variable Insurance Funds, Inc. - International Stock Fund II
Accordingly, the "Summary of Contract Expenses" section located in the
Prospectus is hereby amended to include the following expense information:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Management Fees Other Expenses Total Expenses
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NSAT - Small Company Fund 1.00% 0.25% 1.25%
- ----------------------------------------------------------------------------------------------------
Strong - International Stock Fund II 1.00% 1.05% 2.05%
- ----------------------------------------------------------------------------------------------------
</TABLE>
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>
NSAT - Small Company Fund 28 87 148 313 28 87 148 313 * 87 148 313
- ------------------------------------------------------------------------------------------------------------------------------------
Strong-International Stock Fund II 37 112 189 390 37 112 189 390 * 112 189 390
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this Prospectus do not permit annuitizations during
the first two Contract years.
II. "APPENDIX B" OF THE PROSPECTUS IS ALSO AMENDED TO INCLUDE THE FOLLOWING
INFORMATION REGARDING THE MUTUAL FUNDS:
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 objective. 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 Financial Services,
Inc. of One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of
Nationwide Life Insurance Company.
2 of 79
<PAGE> 3
- -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.
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 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 ("Funds") are
offered by the Corporation to insurance company separate accounts for the
purpose of funding variable life and annuity contracts. Strong Capital
Management Inc. (the "Advisor") is the investment advisor to the Funds.
- -INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in the
equity securities of issuers located outside the United States.
III. THE INFORMATION REGARDING THE STRONG SPECIAL FUND II, INC. WHICH MAY BE
FOUND IN "APPENDIX B" OF YOUR PROSPECTUS IS HEREBY AMENDED AS FOLLOWS:
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. ("Special Fund II") is a diversified,
open-end management company commonly called a mutual fund. The Special Fund II
was incorporated in Wisconsin and may only be purchased by the separate accounts
of insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. (the "Advisor")
is the investment advisor for the Fund.
- -SPECIAL FUND II
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
IV. THE SEVENTH PARAGRAPH OF THE "SYNOPSIS" SECTION AND THE LAST SENTENCE OF
THE "PREMIUM TAXES" SECTION LOCATED IN THE PROSPECTUS IS HEREBY AMENDED BY
ADDING THE FOLLOWING:
The Company will waive any Contract deduction for any Premium Taxes
assessed by the State of Pennsylvania for any Purchase Payments received by
the Company on or after January 5, 1996. The Company reserves the right to
implement and adjust the Premium Tax charge in the future if the
Pennsylvania Premium Tax laws change.
V. THE "CONTINGENT DEFERRED SALES CHARGE" SECTION OF THE PROSPECTUS IS HEREBY
AMENDED BY ADDING THE FOLLOWING:
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.
3 of 79
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY VA SEPARATE ACCOUNT-B
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page........................................................................ 5
Item 2. Definitions....................................................................... 6
Item 3. Synopsis or Highlights............................................................ 12
Item 4. Condensed Financial Information................................................... N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies............. 12
Item 6. Deductions and Expenses........................................................... 14
Item 7. General Description of Variable Annuity Contracts................................. 14
Item 8. Annuity Period.................................................................... 17
Item 9. Death Benefit and Distributions................................................... 19
Item 10. Purchases and Contract Value..................................................... 23
Item 11. Redemptions...................................................................... 24
Item 12. Taxes............................................................................ 26
Item 13. Legal Proceedings................................................................ 29
Item 14. Table of Contents of the Statement of Additional Information..................... 29
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page....................................................................... 36
Item 16. Table of Contents................................................................ 36
Item 17. General Information and History.................................................. 36
Item 18. Services......................................................................... 36
Item 19. Purchase of Securities Being Offered............................................. 36
Item 20. Underwriters..................................................................... 36
Item 21. Calculation of Performance Information........................................... 36
Item 22. Annuity Payments................................................................. 37
Item 23. Financial Statements............................................................. 38
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits................................................ 58
Item 25. Directors and Officers of the Depositor.......................................... 60
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant... 62
Item 27. Number of Contract Owners........................................................ 73
Item 28. Indemnification.................................................................. 73
Item 29. Principal Underwriter............................................................ 73
Item 30. Location of Accounts and Records................................................. 77
Item 31. Management Services.............................................................. 77
Item 32. Undertakings..................................................................... 77
</TABLE>
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<PAGE> 5
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 DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VA SEPARATE ACCOUNT-B
OF NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
Prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). Reference throughout the prospectus to Individual Deferred
Variable Annuity Contracts shall also mean certificates issued under Group
Flexible Fund Retirement Contracts. The Contracts are sold to individuals for
use in retirement plans which may qualify for special federal tax treatment
under the Internal Revenue Code. Annuity payments under the Contracts are
deferred until a selected later date.
Purchase payments 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 uses its assets to
purchase shares at net asset value in one or more of the following series of the
underlying Mutual Fund options:
AVAILABLE FOR ALL CONTRACTS
AMERICAN CAPITAL LIFE INVESTMENT TRUST
American Capital Real Estate Securities Portfolio
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<S> <C> <C> <C>
Equity-Income Portfolio Growth Portfolio High Income Portfolio* Overseas Portfolio
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
(FORMERLY "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 VARIABLE INSURANCE PRODUCTS FUND
Strong Discovery Fund II, Inc. Strong Special Fund II, Inc.
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
Worldwide Bond Fund Gold and Natural Resources Fund
(Formerly Global Bond Fund)
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
This Prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide VA Separate Account-B before investing. You should read it and keep
it for future reference. A Statement of Additional Information dated July 1,
1995, 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 the number listed above, or writing P.O. Box 16609, Columbus,
Ohio 43216-6609.
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 JULY 1, 1995, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 25 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS JULY 1, 1995.
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
1
5 of 79
<PAGE> 6
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 during
Annuitization and upon whose life any annuity payments involving life
contingencies depends. This person must be age 85 or younger at the time of the
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 date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence, as originally shown on the Contract Data Page of the Contract unless
changed by the Owner.
ANNUITY PAYMENT OPTION- The method for making 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 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.
CODE-The Internal Revenue Code of 1986, as amended.
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 the 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- A Contingent Owner, if named, may succeed to the rights of
Contract Owner upon the Contract Owner's death before Annuitization.
CONTRACT- The Individual Deferred Variable Annuity Contract described in his
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 Contingent Owner, Annuitant, Contingent Annuitant,
Beneficiary, Contingent Beneficiary, Annuity Payment Option, or the Annuity
Commencement Date.
CONTRACT VALUE- The Variable Account Contract Value.
CONTRACT YEAR- Each year commencing with the Date of Issue, and each Contract
Anniversary thereafter shall be a Contract Year.
DATE OF ISSUE- The date shown as the Date of Issue on the Contract Data Page of
the Contract.
DEATH BENEFIT- The benefit payable upon the death of the Annuitant 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 ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
INDIVIDUAL RETIREMENT ANNUITY- An annuity which qualifies for treatment under
Section 408 of the Internal Revenue Code.
JOINT OWNER- The Joint Owner, if any, possesses an individual interest in the
entire Contact 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.
2
6 of 79
<PAGE> 7
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 CONTRACTS- Contracts other than Qualified Contracts, Individual
Retirement Annuities or Tax Sheltered Annuities.
NON-QUALIFIED PLANS- Retirement Plans which do not receive favorable tax
treatment under the provisions of the Internal Revenue Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Plan or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
QUALIFIED CONTRACTS- Contracts issued under Qualified Plans.
QUALIFIED PLANS- Retirement Plans which receive favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
TAX SHELTERED ANNUITY- An annuity which qualifies for treatment under Section
403(b) of the Internal Revenue Code of 1986, as amended.
VALUATION DATE- Each day the New York Stock Exchange and the Company's home
office is 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- A separate investment account of the Company into which
Variable Account purchase payments are allocated.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
3
7 of 79
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS......................................................................... 2
SUMMARY OF CONTRACT EXPENSES...................................................................... 5
SYNOPSIS.......................................................................................... 8
CONDENSED FINANCIAL INFORMATION................................................................... N/A
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY..................................................... 8
THE VARIABLE ACCOUNT.............................................................................. 8
Underlying Mutual Fund Options........................................................... 9
Voting Rights............................................................................ 9
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS................................. 10
Mortality Risk Charge.................................................................... 10
Expense Risk Charge...................................................................... 10
Administration Charge.................................................................... 10
Premium Taxes............................................................................ 10
Expenses of Variable Account............................................................. 10
Investments of the Variable Account...................................................... 10
Right to Revoke.......................................................................... 11
Transfers................................................................................ 11
Assignment............................................................................... 11
Loan Privilege........................................................................... 11
Contingent Owner and Beneficiary Provisions.............................................. 12
Ownership Provisions..................................................................... 13
Substitution of Securities............................................................... 13
Contract Owner Inquiries................................................................. 13
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT........................................................... 13
Value of an Annuity Unit................................................................. 14
Assumed Investment Rate.................................................................. 14
Frequency and Amount of Annuity Payments................................................. 14
Annuity Commencement Date................................................................ 14
Change in Annuity Commencement Date...................................................... 14
Change in Form of Annuity................................................................ 14
Annuity Payment Options.................................................................. 14
Death of Contract Owner.................................................................. 15
Death Benefit at Death of Annuitant Prior to the Annuitization Date...................... 16
Death Benefit After the Annuitization Date............................................... 16
Required Distribution for Qualified Plans or Tax Sheltered Annuities..................... 16
Required Distributions for Individual Retirement Annuities............................... 17
Generation-Skipping Transfers............................................................ 17
GENERAL INFORMATION............................................................................... 18
Contract Owner Services.................................................................. 18
Statements and Reports................................................................... 18
Allocation of Purchase Payments and Contract Value....................................... 19
Value of a Variable Account Accumulation Unit............................................ 19
Net Investment Factor.................................................................... 19
Valuation of Assets...................................................................... 20
Determining the Contract Value........................................................... 20
Surrender (Redemption)................................................................... 20
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract...................... 21
Taxes.................................................................................... 21
Non-Qualified Contracts.................................................................. 22
Diversification.......................................................................... 23
Charge for Tax Provisions................................................................ 23
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and
Tax Sheltered Annuities................................................................ 23
Advertising.............................................................................. 23
LEGAL PROCEEDINGS................................................................................. 25
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION..................................... 25
APPENDIX A........................................................................................ 26
APPENDIX B........................................................................................ 27
</TABLE>
4
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<PAGE> 9
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge ...................... 0%
-----
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE ........................... $ 0
-----
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges ............................ 1.25%
-----
Administration Charge ......................................... 0.20%
-----
Total Variable Account Annual Expenses ........................ 1.45%
-----
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Capital Real Estate Securities 1.00% 0.00% 1.00%
Portfolio
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.14% 0.26% 0.40%
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund 0.00% 0.25% 0.25%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP-Equity-Income Portfolio 0.52% 0.06% 0.58%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP-Growth Portfolio 0.62% 0.07% 0.69%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP-High Income Portfolio 0.61% 0.10% 0.71%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP-Overseas Portfolio 0.77% 0.15% 0.92%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Asset Manager Portfolio 0.72% 0.07% 0.79%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Contrafund Portfolio 0.62% 0.27% 0.89%
- -------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.06% 0.56%
- -------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- -------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.04% 0.54%
- -------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.02% 0.52%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.79% 0.12% 0.91%
Management Trust-Growth Portfolio
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.60% 0.13% 0.73%
Management Trust-Limited Maturity Bond
Portfolio
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.80% 0.50% 1.30%
Management Trust-Partners Portfolio
- -------------------------------------------------------------------------------------------------------------
Oppenheimer-Bond Fund 0.75% 0.06% 0.81%
- -------------------------------------------------------------------------------------------------------------
Oppenheimer-Global Securities Fund 0.75% 0.20% 0.95%
- -------------------------------------------------------------------------------------------------------------
Oppenheimer-Multiple Strategies Fund 0.74% 0.05% 0.79%
- -------------------------------------------------------------------------------------------------------------
Strong Discovery Fund II, Inc. 1.00% 0.21% 1.21%
- -------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.10% 1.10%
- -------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Balanced 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Growth 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI International 1.50% 0.00% 1.50%
- -------------------------------------------------------------------------------------------------------------
Van Eck-Worldwide Bond Fund 0.75% 0.18% 0.93%
- -------------------------------------------------------------------------------------------------------------
Van Eck-Gold and Natural Resources Fund 0.75% 0.21% 0.96%
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus-International Equity Portfolio 1.00% 0.44% 1.44%
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus-Small Company Growth Portfolio 0.90% 0.35% 1.25%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from contract values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's net
asset value, which is the share price used to calculate the unit values of
the Variable Account.
5
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<PAGE> 10
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 If you annuitize your Contract
at the end of the applicable your 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>
American Capital Real 26 79 135 287 26 79 135 287 * 79 135 287
Estate Securities
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 19 60 103 223 19 60 103 223 * 60 103 223
- ---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 18 55 95 207 18 55 95 207 * 55 95 207
Responsible Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 21 66 113 243 21 66 113 243 * 66 113 243
VIP-Equity-Income
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Growth 22 69 119 255 22 69 119 255 * 69 119 255
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Overseas 25 77 131 279 25 77 131 279 * 77 131 279
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-High Income 23 70 120 257 23 70 120 257 * 70 120 257
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 24 72 124 265 24 72 124 265 * 72 124 265
II-Asset Manager Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 25 76 129 276 25 76 129 276 * 76 129 276
II-Contrafund Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation 21 65 112 241 21 65 112 241 * 65 112 241
Fund
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 21 64 109 235 21 64 109 235 * 64 109 235
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 21 65 111 239 21 65 111 239 * 65 111 239
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 21 64 110 236 21 64 110 236 * 64 110 236
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 25 76 130 278 25 76 130 278 * 76 130 278
Advisers Management
Trust-Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 23 71 121 259 23 71 121 259 * 71 121 259
Advisers Management
Trust-Limited Maturity
Bond Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 29 88 151 318 29 88 151 318 * 88 151 318
Advisers Management
Trust-Partners Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Bond Fund 24 73 125 267 24 73 125 267 * 73 125 267
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Global 25 77 132 282 25 77 132 282 * 77 132 282
Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Multiple 24 72 124 265 24 72 124 265 * 72 124 265
Strategies Fund
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 11
<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>
Strong Discovery Fund II, 28 86 146 309 28 86 146 309 * 86 146 309
Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, 27 82 140 298 27 82 140 298 * 82 140 298
Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI 26 79 135 287 26 79 135 287 * 79 135 287
Balanced
- ---------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Growth 26 79 135 287 26 79 135 287 * 79 135 287
- ---------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI 31 95 161 338 31 95 161 338 * 95 161 338
International
- ---------------------------------------------------------------------------------------------------------------------------------
Van Eck-Worldwide Bond 25 77 131 280 25 77 131 280 * 77 131 280
Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Van Eck-Gold and Natural 25 78 133 283 25 78 133 283 * 78 133 283
Resources Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Warburg 30 93 158 332 30 93 158 332 * 93 158 332
Pincus-International
Equity Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus-Small 28 87 148 313 28 87 148 313 * 87 148 313
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 a Contract
Owner will bear directly or indirectly when investing in the Contract. The
expenses of the Nationwide VA Separate Account-B as well as those of the
underlying Mutual Fund options are reflected in the Example. For more and
complete descriptions of the expenses of the Variable Account, see "Variable
Account Charges, Purchase Payments, and Other Deductions." For more and complete
information regarding expenses paid out of the assets of the underlying Mutual
Fund options, see the Mutual Funds' 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> 12
SYNOPSIS
The Company does not deduct a sales charge from purchase payments made for
these Contracts. Nor is any sales charge deducted upon the surrender of the
Contract.
The Company assesses an Administration Charge equal to an annual rate of
0.20% of the daily net asset value of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. The Company does not expect to recover from these
charges an amount in excess of accumulated administrative expenses (see
"Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the daily net asset value of the Variable Account for mortality risk
assumed by the Company (see "Mortality Risk Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of 0.45%
of the daily net asset value of the Variable Account as compensation for the
Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial Purchase Payment must be at least $15,000 and subsequent
purchase payments at least $1000. The cumulative total of all purchase payments
under a Contract may not exceed $1,000,000 without the prior consent of the
Company (see "Allocation of Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $5,000, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $50 (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable at the time purchase
payments are made, the premium tax deduction will be made from the Contract
prior to allocation to any underlying Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of purchase payments (see "Right to
Revoke").
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Financial Horizons Life Insurance Company, a stock life insurance
company organized under the laws of the State of Ohio, was established in
February, 1981. Pursuant to a resolution by the Company's Board of Directors,
the name Financial Horizons Life Insurance Company has been changed to
Nationwide Life and Annuity Insurance Company. The Company is a member of the
"Nationwide Insurance Enterprise", with its home office at One Nationwide Plaza,
Columbus, Ohio 43216-6609. The Company offers 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 changed to Nationwide VA Separate
Account-B pursuant to a resolution by the Board of Directors. The Company has
caused the Variable Account to be registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940. Such registration does not involve supervision
of the management of the Variable Account or the Company by the Securities and
Exchange Commission.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company does not guarantee the investment performance
of the Variable Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses, whether or not realized,
from the assets of the Variable Account are, in accordance with the Contracts,
credited to or charged against the Variable Account without regard to other
income, gains, or losses of the Company.
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<PAGE> 13
Purchase payments are allocated within the Variable Account among one or
more sub-accounts made up of shares in the underlying Mutual Funds designated by
the Contract Owner. There are two sub-accounts within the Variable Account for
each of the underlying Mutual Fund options which may be designated by the
Contract Owner. One such sub-account contains the underlying Mutual Funds shares
attributable to Accumulation Units under Qualified Contracts and one such
sub-account contains the underlying Mutual Funds shares attributable to
Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different underlying
Mutual Fund options. (See Appendix B which contains a summary of investment
objectives for each underlying Mutual Fund). 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
Insurance 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 Funds may also be available to registered separate
accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect the
Contract Owners and variable annuity payees, including withdrawal of the
Variable Account from participation in the underlying Mutual Fund or Mutual
Funds which are involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to purchase
payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the Investment Company
Act of 1940 or any Regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares held in the Variable Account which is attributable to
each Contract is determined by dividing the reserve for such Contract by the net
asset value of one share.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the underlying Mutual Fund, proxy material and a
form with which to give such voting instructions with respect to the proportion
of the underlying Mutual Fund shares held in the Variable Account corresponding
to his or her interest in the Variable Account.
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<PAGE> 14
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments will
not be affected by the death rates of persons receiving such payments or of the
general population by virtue of annuity rates incorporated in the Contract which
cannot be changed.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis and
is equal to an annual rate of 0.80% of the daily net asset value of the Variable
Account. The Company expects to generate a profit through assessing this charge.
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
deducts an Expense Risk Charge from the Variable Account. This amount is
computed on a daily basis and is equal to an annual rate of 0.45% of the daily
net asset value of the Variable Account. The Company expects to generate a
profit through assessing this charge.
ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal to an annual rate of
0.20% of the daily net asset value of the Variable Account. The deduction of the
Administration Charge is made from each sub-account in the same proportion that
the Contract Value in each sub-account bears to the total Contract Value in the
Variable Account. These charges are designed only to reimburse the Company for
administrative expenses and the Company will monitor these charges to ensure
that they do not exceed annual administration expenses.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon purchase
payments received by the Company. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. 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) in those states which require, at the
time purchase payments are made to the Contract.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of Expenses:
(1) administration expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk expense of guaranteeing the annuity purchase rates
at issue for the life of the Contracts; and (3) expense risk associated with
guaranteeing expenses through the deduction by the Company of the Mortality
Risk, Expense Risk and Administration Charges described above. 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 of the underlying Mutual Funds' prospectuses.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his 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
Application, the Contract Owner designates the underlying Mutual Funds to which
he desires to have purchase payments allocated. Such election is subject to any
minimum purchase payment limitations which may be imposed by the underlying
Mutual Funds designated. 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.
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<PAGE> 15
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 return of purchase payments. In
order to revoke the Contract, it must be mailed or delivered to the home office
of the Company at the mailing address shown on page 1 of this Prospectus.
Mailing or delivery must occur on or before 10 days after receipt of the
Contract for revocation to be effective. In order to revoke the Contract, if it
has not been received, written notice must be mailed or delivered to the home
office of the Company at the mailing address shown on page 1 of this Prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each sub-account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
Transfers among sub-account underlying Mutual Fund options are permitted 12
times per year. The Owner's value in each sub-account will be determined as of
the date the transfer request is received in good order in the home office.
Transfers among the sub-accounts 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 their having to elect
this privilege. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include
any or all of the following, or such other procedures as the Company may, from
time to time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal identification number;
tape recording all telephone transactions; 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 the Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Annuitant. Such assignment will take effect upon
receipt by the Company of a written notice thereof executed by the Contract
Owner. The Company assumes no responsibility for the validity or sufficiency of
any assignment. The Company shall not be liable as to any payment or other
settlement made by the Company before receipt of the assignment. Qualified
Contracts may not be assigned, pledged or otherwise transferred except under
such conditions as may be allowed by applicable law.
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.
Individual Retirement Annuities, Individual Retirement Accounts and Tax
Sheltered Annuities are not eligible for assignment.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity Contract may receive a loan from the Contract Value subject to
the terms of the Contract, the Plan, and the Internal Revenue Code ("Code"),
which impose restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period.
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<PAGE> 16
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 Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the employer's
plan.
Loan repayments must be identified as such or else they will be treated as
purchase payments, and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify the term or procedures
of the loan in the event of a change in the laws or regulations relating to the
treatment of loans. The Company also reserves the right to assess a loan
processing fee. Individual Retirement Annuities, SEP-IRA accounts and
Non-Qualified Contracts are not eligible for loans.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
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 interests 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.
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
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<PAGE> 17
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 is not named or predeceases the
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 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 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.
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. The Contract
Owner(s) retains sole rights in the Contract upon the other's death prior to the
Annuitization Date. Unless otherwise provided, when Joint Owner(s) 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, the
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 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 Annuitant are not the same person, Contract ownership will be
determined in accordance with the "Death of Contract Owner" provision. 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 the Annuitization Date" provision. 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 (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 it home office, and (3)
may include a signature guarantee as specified in the "Surrender" provision.
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.
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. Any such change is
subject to underwriting and approval by the Company.
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 in view of the purposes of the
Contract, the Company may substitute shares of another underlying Mutual Fund
for underlying Mutual Fund shares already purchased or to be purchased in the
future by purchase payments under the Contract. No substitution of securities in
the Variable Account may take place without prior approval of the Securities and
Exchange Commission, and under such requirements as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life and Annuity
Insurance Company by writing P.O. Box 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 in accordance with the Annuity Table in the
Contract.
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<PAGE> 18
Subsequent Variable Annuity payments vary in amount in accordance with the
investment performance of the Variable Account. The dollar amount of the first
annuity payment determined as above is divided by the value of an Annuity Unit
as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when the
first underlying Mutual Fund shares were purchased. The value of an Annuity Unit
for a sub-account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (see "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the net
amount available to apply under any Annuity Payment Option is less than $5,000,
the Company shall have the right to pay such amount in one lump sum in lieu of
annuity payments. 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.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
Application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"), and
the Company approves the request, the Annuity Commencement Date may be deferred.
No further changes in the Designated Annuitant will be permitted under the
Contract. The amount of the Death Benefit will be limited to the Contract Value
if the Annuity Commencement Date is postponed beyond the first day of the
calendar month after the Designated Annuitant's 86th birthday or such other
Annuity Commencement Date provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of the
Annuitant, ceasing with the last payment due prior to the death of the
Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT TO
RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE
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THE SECOND ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED
BEFORE THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly during
the joint lifetimes of the Annuitant and designated second person and
continuing thereafter during the lifetime of the survivor. AS IS THE CASE
UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED
UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING
ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made for
fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments will be
continued during the remainder of the selected period to the
Beneficiary or the Beneficiary may, at any time, elect to have the
present value of the guaranteed number of annuity payments remaining
paid in a lump sum as specified in section (2) below.
(2) If a Beneficiary is the payee, the present value, computed as of the
date on which notice of death is received by the Company at its home
office, of the guaranteed number of annuity payments remaining after
receipt of such notice and to which the deceased would have been
entitled had he or she not died, commuted at the Assumed Investment
Rate effective in determining the Annuity Tables, shall be paid in a
lump sum.
Some of the stated Annuity Options may not be available in all states. The
Owner may request an alternative non-guaranteed option by giving notice in
writing prior to annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity Payment
Option, the Contract Value will continue to accumulate. Qualified Plan
Contracts, Individual Retirement Annuities or Tax Sheltered Annuities are
subject to the minimum distribution requirements set forth in the Plan,
Contract, or Internal Revenue Code.
DEATH OF CONTRACT OWNER
In the event the Contract Owner dies, the following rules will apply in
those situations where the Contract was not issued in connection with a
Qualified Plan, Tax Sheltered Annuity or Individual Retirement Annuity:
(1) 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 name (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 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, 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, when the
Contract may be continued without any required Distribution.
(2) 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" provision below.
(3) In the event the Contract Owner/Annuitant dies on or after the
Annuitization Date, distribution, if any, must be made to the Beneficiary
at least as rapidly as under the method of distribution being used as of
the date of the Contract Owner/Annuitant's death.
If the Contract Owner is not a natural person, the death of the Annuitant
(or a change of the Annuitant) will be treated like a death of the Contract
Owner and will result in a distribution pursuant to Section (1) above,
regardless of whether a Contingent Annuitant has also been named. The
distribution will take the form of either:
(a) the Death Benefit described below under the "Death Benefit of
Annuitant Prior to the Annuitization Date" (if the Annuitant has died
and there is no Contingent Annuitant), or, in all other cases,
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(b) the benefit described in Section (1) above, except that in the event
of a change of Annuitant, the benefit will be paid to the Contract
Owner if the Annuitant is living, or as a Death Benefit to the
Beneficiary upon the death of the Annuitant (and the Contingent
Annuitant, if any) prior to the expiration of the period described in
Section (1) above.
Qualified Contracts, Individual Retirement Annuities or Tax Sheltered
Annuities will be subject to specific rules, set forth in the Plan, Contract, or
Internal Revenue Code concerning distributions upon the death of the Owner
Annuitant.
DEATH BENEFIT AT DEATH OF ANNUITANT PRIOR TO THE 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 the
following: (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
form required by state insurance laws. If single sum payment is requested,
payment will be made in accordance with any applicable laws and regulations
governing the payment of Death Benefit. 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 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 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.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Internal Revenue Code and regulations thereunder, as
applicable, and will be paid, notwithstanding anything else contained herein, to
the Owner/Annuitant under the Annuity Payments Option selected, over a period
not exceeding:
A. the life of the Owner/Annuitant or the lives of the Owner/Annuitant
and the Owner/Annuitant's designated Beneficiary; or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and the
Owner/Annuitant's designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as defined in Code Section
89(i)(4)), the Required Beginning Date will be the later of the dates determined
under the preceding sentence or April 1 of the calendar year following the
calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her distribution, the
interest in the Qualified Contract or Tax Sheltered Annuity must be distributed
by December 31 of the year in which the fifth anniversary of his or her death
occurs unless:
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(a) In the case of a Tax Sheltered Annuity, the Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his or
her benefit; or
(ii) receive distribution of the account in nearly equal payments over his
or her life (or a period not exceeding his or her life expectancy) and
commencing not later than December 31 of the year in which the Owner
would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
beneficiary elects to receive a distribution of the account in nearly equal
payments over his or her life (or a period not exceeding his or her life
expectancy) commencing not later than December 31 of the year following the
year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
Designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70-1/2. Distribution may be accepted in a lump sum or in nearly
equal payments over: (a) the Owner's life or the lives of the Owner and his or
her spouse or Designated Beneficiary, or (b) a period not extending beyond the
Owner's life expectancy or the life expectancy of the Owner and the Owner's
spouse or designated Beneficiary.
If the Owner dies prior to the commencement of his or her distribution, the
interest in the Individual Retirement Annuity must be distributed by December 31
of the year during which the fifth anniversary of his or her death occurs
unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and such
spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established for
his or her benefit; or
(ii) receive distribution of the account in nearly equal payments over his
or her life (or a period not exceeding his or her life expectancy) and
commencing not later than December 31 of the year in which the Owner
would have attained age 70-1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse and
such beneficiary elects to receive a distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except to the extent that a surviving spouse beneficiary may elect to
treat the contract as his or her own, in the same manner as is described in
Section (a)(i) above.
If the amounts distributed do not satisfy the distribution rules mentioned
above, a penalty tax of 50% is levied on the amount that should have been
distributed for that year.
A pro-rata portion of all distributions will be included in the gross
income of the person receiving the distribution and taxed at ordinary income tax
rates. The portion of the distribution which is taxable is based on the ratio
between the amount by which non-deductible purchase payments exceed prior
non-taxable distributions and total account balances at the time of the
distribution. The 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 Accounts and
Annuities.
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Individual Retirement Annuity distributions will not receive the benefit of
the tax treatment of a lump sum distribution from a Qualified Plan. If the Owner
dies prior to the time distribution of his or her interest in the annuity is
completed, the balance will also be included in his or her gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the
Internal Revenue 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
Internal Revenue Code.
A direct skip may occur when property is transferred to or a Death Benefit
is paid to an individual two or more generations younger than the Contract
Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING-The Contract Owner may direct the automatic reallocation
of contract values to the underlying Mutual Fund options or 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 made in
writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Internal Revenue Code may have superseding plan restrictions with
regard to the frequency of fund exchanges and underlying Mutual Fund options.
The Contract Owner may want to contact a financial adviser in order to discuss a
specific Contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owners, however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer from the Money Market sub-account or the Limited Maturity
Bond Portfolio sub-account to any other sub-account within the Variable Account
on a monthly basis. This service is intended to allow the 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 sub-account or the Limited Maturity Bond Portfolio
sub-account. The minimum monthly Dollar Cost Averaging transfer is $100. A
written election of this service, on a form provided by the Company, must be
completed by the Contract Owner in order to begin transfers. Once elected,
transfers from the Money Market sub-account or the Limited Maturity Bond
Portfolio sub-account will be processed monthly until either the value in the
Money Market sub-account or the Limited Maturity Bond Portfolio sub-account is
completely depleted or the Contract Owner instructs the Company in writing to
cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners however; any such
discontinuation would not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all sub-accounts in
which the Contract Owner has an interest. Each Systematic Withdrawal is subject
to federal income taxes on the taxable portion. In addition, a 10% federal
penalty tax may be assessed on Systematic Withdrawals if the Contract Owner is
under age 59-1/2. If directed by the Contract Owner, the Company will withhold
federal income taxes from each Systematic Withdrawal. The Contract Owner may
discontinue Systematic Withdrawals at any time by notifying the Company in
writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners however; any such
discontinuation would not affect any Systematic Withdrawal
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programs already commenced. The Company also reserves the right to assess a
processing fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional purchase payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner should review the information in these
statements carefully. All errors or corrections must be reported to the Company
immediately to assure proper crediting to the Owner's Contract. The Company will
assume all transactions are accurate unless the Contract Owner notifies the
Company otherwise within 30 days after receipt of the statement. The Company
will also send to Contract Owners each year an annual report and a semi-annual
report containing financial statements for the Variable Account, as of December
31 and June 30, respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase payments are allocated to one or more sub-accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year purchase payment must be at least $15,000 and
additional payments, if any, must be at least $1,000. The Company, however,
reserves the right to lower this $1,000 purchase payment minimum for certain
employer sponsored programs. The Contract Owner may increase or decrease
purchase payments or change the frequency of payment. The Contract Owner is not
obligated to continue purchase payments in the amount or at the frequency
elected. There are no penalties for failure to continue purchase payments.
The cumulative total of all purchase payments under Contracts issued on the
life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial purchase payment allocated to designated sub-accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase if the Application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and the
Company may retain the purchase payment for up to 5 business days while
attempting to complete an incomplete Application. If the Application cannot be
made complete within 5 days, the prospective purchaser will be informed of the
reasons for the delay and the purchase payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the purchase payment until the Application is made complete. Thereafter, the
purchase payment will be priced within 2 business days.
Purchase payments will not be priced on the following nationally recognized
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each sub-account was
arbitrarily set initially at $10 when underlying Mutual Fund shares in that
sub-account were available for purchase. The value for any subsequent Valuation
Period is determined by multiplying the Accumulation Unit value for each
sub-account for the immediately preceding Valuation Period by the Net Investment
Factor for the sub-account during the subsequent Valuation Period. The value of
an Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
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(a) is:
(1) the net asset value per share of the underlying Mutual Fund held in
the sub-account determined at the end of the current Valuation Period,
plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the sub-account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net asset value per share of the underlying Mutual Fund held in the
sub-account determined at the end of the immediately preceding Valuation
Period.
(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 1.45 % of the daily net asset value of
the Variable Account.
For underlying Mutual Funds that credit dividends on a daily basis and pay
such dividends once a month (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, and any charge or credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract is the Contract Value. The number of Accumulation
Units credited per each sub-account are determined by dividing the net amount
allocated to the sub-account by the Accumulation Unit Value for the sub-account
for the Valuation Period during which the purchase payment is received by the
Company. In the event part or all of the Contract Value is surrendered or
charges or deductions are made against the Contract Value, an appropriate number
of Accumulation Units from the Variable Account will be deducted.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper Written Application" means that the surrender must be
requested in writing by the Contract Owner, satisfy all good order requirements,
and the Company may require that the signature(s) be guaranteed by a member firm
of the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a Commercial Bank or a Savings and Loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases (for example, requests
by a corporation, partnership, agent, fiduciary, or surviving joint owner), the
Company will require additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account to equal the gross dollar
amount requested. 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.
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.
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Certain redemption restrictions also apply to Contracts issued under the
Texas Optional Retirement Program or the Louisiana Optional Retirement Plan.
With respect to Contracts issued under the Texas Optional Retirement Program,
the Texas Attorney General has ruled that withdrawal benefits are available only
in the event of a participant's death, retirement, termination of employment due
to total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable Contingent Deferred Sales Charge. The
Company issues this Contract to participants in the Texas Optional Retirement
Program in reliance upon, and in compliance with, Rule 6c-7 of the Investment
Company Act of 1940 and to participants in the Louisiana Optional Retirement
Plan in reliance upon, and in compliance with, an exemptive order the Company
obtained from the Securities and Exchange Commission on August 22, 1990.
SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made pursuant
to a salary reduction agreement (within the meaning of Code Section
402(g)(3)(A) or (C)), or transfers from a Custodial Account described in
Section 403(b)(7) of the Internal Revenue 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).
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 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 Internal Revenue Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Section
403(b)(11) and Revenue Ruling 90-24. Such restrictions are subject to
legislative change and/or reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the plan
terms and Internal Revenue Code tax provisions when the contract is issued to
fund a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A
PERSONAL TAX ADVISER.
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TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Internal Revenue Code (the "Code") governs taxation of
annuities in general. That section sets forth different rules for annuities
purchased by (1) Qualified Plans (corporate pension and profit sharing plans,
simplified employee pension-individual retirement account plans, and retirement
plans for self-employed individuals), Individual Retirement Annuities, and Tax
Sheltered Annuities and (2) annuities which are not purchased by such plans.
(For discussion of tax treatment of non-qualified contracts, see below). Each
type of annuity is discussed separately below.
The Tax Reform Act of 1986 and subsequent legislation changed some of the
rules regarding the tax treatment of distributions from Qualified Plans and
annuities purchased by Qualified Plans. You should consult your financial
consultant or legal or tax advisor to discuss in detail your particular tax
situation and the use of the Contracts.
Generally the amount of any payment of items of interest to a nonresident
alien of the United States shall be subject to withholding of a tax equal to
thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A
payment may not be subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the recipient's
conduct of a trade or business in the United States and such payment is
includable in the recipient's gross income.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Designated Annuitant dies prior to excluding
from income the entire investment in the Contract, the Designated Annuitant's
final tax return may reflect a deduction for the balance of the investment in
the Contract.
Distributions made from the Contract prior to the Annuity Commencement 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 surrender,
dividends, loans, any portion of the Contract that is assigned or pledged, or
any portion of the Contract transferred by gift. For these purposes, a transfer
by gift may occur upon annuitization if the Contract Owner and the Designated
Annuitant are not the same individual. In determining the taxable amount of a
distribution, all annuity contracts issued by the same company to the same
contract owner in any calendar year, will be treated as one annuity contract.
Distributions prior to the Annuity Commencement 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 the Contracts used to fund Qualified Plans, Individual Retirement Annuities
and Tax Sheltered Annuities; immediate annuities; and certain Contracts owned
for the benefit of an individual. An immediate annuity, for purposes of this
discussion, is a single premium Contract on which payments begin within one year
of purchase.
Internal Revenue Code Section 72 also provides for a penalty, equal to 10%
of any distribution which is includable in gross income, if such distribution is
made prior to attaining age 59-1/2, the death or disability of the Contract
Owner. The penalty does not apply if the distribution is one of a series of
substantially equal periodic payments made over the life or life expectancy (or
joint lives or life expectancies) of the Designated Annuitant (and the
Designated Annuitant's Beneficiary), or is made from an immediate annuity, or is
allocable to an investment in the Contract before August 14, 1982. A Contract
Owner wishing to begin taking distributions to which the 10% tax penalty does
not apply should forward a written request to the Company. Upon receipt of a
written request from the Contract Owner, the Company will inform the Contract
Owner of the procedures pursuant to Company Policy and subject to limitations of
the Contract including but not limited to first year withdrawals. If the
Designated Annuitant selects an annuity for life or life expectancy and changes
the method of payment before the expiration of 5 years and the attainment of age
59-1/2, the early withdrawal penalty will apply. The penalty will be equal to
that which would have been imposed had no exception applied from the
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outset, and the Designated Annuitant will also pay interest on the amount of the
penalty from the date it would have originally applied until it is actually
paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year from the death of
the Contract Owner. If the Contract Owner's Beneficiary is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. In the event the Contract
Owner dies on or after the Annuitization Date and before the entire interest has
been distributed, the remaining portion must be distributed at least as rapidly
as under the method of distribution being used as of the date of the Contract
Owner's death. (See "Required Distribution For Qualified Plans or Tax Sheltered
Annuities".)
The Company is required to withhold tax from certain distributions to the
extent that such distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such distribution, but may be subject to penalties in the event insufficient
federal income tax is withheld during a calendar year.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Internal Revenue Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless the
failure to satisfy the regulations was inadvertent, the failure is corrected,
and the owner or the Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the Owner if the
income, for the period the contract was not diversified, had been received by
the Owner. If the failure to diversify is not corrected in this manner, the
owner of an annuity contract will be deemed the owner of the underlying
securities and will be taxed on the earnings of his or her account. The Company
believes, under its interpretation of the Code and regulations thereunder, that
the investments underlying this Contract meet these diversification standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of purchase payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Internal Revenue Code of 1986, as amended, permits the rollover of most
distributions from Qualified Plans to other Qualified Plans, Individual
Retirement Accounts, or Individual Retirement Annuities. Most distributions from
Tax Sheltered Annuities may be rolled into another Tax Sheltered Annuity, an
Individual Retirement Account, or an Individual Retirement Annuity.
Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the employee,
b) the joint lives (or joint life expectancies) of the employee and
the employee's designated beneficiary, or c) for a specified period of
ten years or more, or
2. a required minimum distribution.
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Any distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the distribution is transferred directly
to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities may not
provide life insurance benefits. If the Death Benefit exceeds the greater of the
cash value of the Contract or the sum of all purchase payments (less
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of the Employee Retirement Income Security Act (ERISA). It is the
responsibility of the plan and its fiduciaries to determine and satisfy section
404(c) requirements.
ADVERTISING
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 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: the S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2-1/2 Year CD Rates;
and the 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
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
The Company may from time to time advertise several types of historical
performance for the sub-accounts of the Variable Account. The Company may
advertise for the sub-accounts standardized "average annual total return",
calculated in a manner prescribed by the Securities and Exchange Commission, and
nonstandardized "total return". "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund held in the sub-account has been in
existence, if the
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underlying Mutual Fund has not been in existence for one of the prescribed
periods. This calculation reflects the deduction of all applicable charges made
to the Contracts except for premium taxes, which may be imposed by certain
states.
Nonstandardized "total return" will be calculated in a similar manner and
for the same time periods as the average annual total return except total return
will assume an initial investment of $10,000. 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.
For those underlying Mutual Funds which have not been held as sub-accounts
within the Variable Account for a quoted period, the standardized average annual
total return and nonstandardized total return quotations will show the
investment performance such underlying Mutual Funds 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 Financial 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.............................................................. 1
Calculations of Performance............................................... 1
Fund Performance Summary.................................................. N/A
Annuity Payments.......................................................... 2
Financial Statements...................................................... 3
</TABLE>
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APPENDIX A
ANNUITY PAYMENT PERIOD-FIXED ANNUITY
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 Contract Value to the
applicable Annuity Table in accordance with the Annuity Payment Option elected.
This will be done at the Annuitization Date on an age last birthday basis. Fixed
Annuity payments after the first will not be less than the first Fixed Annuity
payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year).
ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
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APPENDIX B
PARTICIPATING UNDERLYING MUTUAL FUNDS
AVAILABLE FOR ALL CONTRACTS
AMERICAN CAPITAL LIFE INVESTMENT TRUST
The 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 portfolios 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 Portfolio's investment adviser.
-AMERICAN CAPITAL REAL ESTATE SECURITIES PORTFOLIO
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.
DREYFUS STOCK INDEX FUND
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on January
24, 1989 and commenced operations on September 29, 1989. Wells Fargo Nikko
Investment Advisors serves as the Fund's index fund manager. As of May 1, 1994,
the Dreyfus Life and Annuity Index Fund began doing business as the Dreyfus
Stock Index Fund.
Investment Objective: To provide investment results that correspond to the price
and yield performance of publicly traded common stocks in the aggregate, as
represented by the Standard & Poor's Composite Stock Price Index. The Fund is
neither sponsored by nor affiliated with Standard & Poor's Corporation.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under Maryland
law on July 20, 1992, and commenced operations on October 7, 1993. The Dreyfus
Corporation serves as the Fund's investment advisor. Tiffany Capital Advisors,
Inc. serves as the Fund's sub-investment adviser and provides day-to-day
management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital growth
equity investment in companies that, in the opinion of the Fund's management,
not only meet traditional investment standards, but which also show evidence
that they conduct their business in a manner that contributed to the enhancement
of the quality of life in America. Current income is secondary to the primary
goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981. The funds
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
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integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would have
the greatest potential may be regarded as speculative, and investment in
the Portfolio may involve greater risk than is inherent in other mutual
funds. It is also important to point out that the Portfolio makes most
sense for you if you can afford to ride out changes in the stock market,
because it invests primarily in common stocks. FMR also can make temporary
investments in securities such as investment-grade bonds, high-quality
preferred stocks and short-term notes, for defensive purposes when it
believes market conditions warrant.
-HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower-rated, high-yielding, fixed-income
securities, while also considering growth of capital. The Portfolio manager
will seek high current income normally by investing the Portfolio's assets
as follows:
- at least 65% in income-producing debt securities and preferred stocks,
including convertible securities
- up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's; BB or lower by Standard & Poor's and may be deemed to be of a
speculative nature. The Portfolio may also purchase lower-quality bonds
such as those rated Ca3 by Moody's or C- by Standard & Poor's which provide
poor protection for payment of principal and interest (commonly referred to
as "junk bonds"). For a further discussion of lower-rated securities,
please see the "Risks of Lower-Rated Debt Securities" section of the
Portfolio's prospectus.
-OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily through
investments in foreign securities. The Overseas Portfolio provides a means
for investors to diversify their own portfolios by participating in
companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Variable Insurance Products Fund II is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988. The fund's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies. FMR is the fund's
manager.
-ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds
and short-term fixed income instruments.
-CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The fund primarily invests in common stock and
securities convertible into common stock, but it has the flexibility to
invest in any type of security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts. The Trust
offers shares in the four 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
insurance or annuity policies issued by life insurance companies. The assets of
the Trust are managed by Nationwide Financial Services, Inc. of One Nationwide
Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of Nationwide Life
Insurance Company.
-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.
-TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return (i.e.,
earnings growth plus potential dividend yield) on invested capital from a
flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market instruments
and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (FORMERLY "ADVISERS MANAGEMENT
TRUST")
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
-GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to purchase
such stocks.
-LIMITED MATURITY BOND PORTFOLIO (FORMERLY "BOND PORTFOLIO")
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and rising
bond prices, indicate that capital appreciation may be available without
significant risk to principal. It seeks to achieve its objectives through
investments in a diversified portfolio of limited maturity debt securities.
-PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed to
be undervalued based on fundamentals such as low price-to-earnings ratios,
consistent cash flows, and support from asset values. The objective of the
Partners Portfolio is not fundamental and can be changed by the Trustees of
the Trust without shareholder approval. Shareholders will, however, receive
at least 30 days notice thereof. There is no assurance the investment
objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-end, diversified
management investment company organized as a Massachusetts business trust in
1984. Shares of the Funds are sold only to provide benefits under variable life
insurance policies and variable annuity contracts. Oppenheimer Management
Corporation is the Funds' investment adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income from
investment in high yield fixed-income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, the fund
seeks capital growth when consistent with its primary objective.
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-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to be speculative.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG VARIABLE INSURANCE PRODUCTS FUNDS
The Strong Variable Insurance Products Funds are diversified, open-end
management investment companies, commonly called mutual funds. Strong Special
Fund II, Inc. ("Special Fund II") and Strong Discover Fund II, Inc. ("Discovery
Fund II") were separately incorporated in Wisconsin on December 28, 1990. Shares
of the Funds may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity and variable life
insurance contracts. Strong/Corneliuson Capital Management, Inc. is the
investment advisor for each of the Funds.
-DISCOVERY FUND II, INC.
Investment Objective: The Discovery Fund II's investment objective is to
seek maximum capital appreciation through investments in a diversified
portfolio of securities.
-SPECIAL FUND II, INC.
Investment Objective: The Special Fund II's investment objective is to seek
capital appreciation through investments in a diversified portfolio of
equity securities.
TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS.
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is
a diversified, open-end investment management 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
30
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<PAGE> 35
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 (FORMERLY VAN ECK INVESTMENT TRUST)
Van Eck Investment Trust is an open-end management investment company
organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
-WORLDWIDE BOND FUND (FORMERLY GLOBAL BOND FUND)
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-GOLD AND NATURAL RESOURCES FUND
Investment Objective: To seek long-term capital appreciation by investing
in equity and debt securities of companies engaged in the exploration,
development, production and distribution of gold and other natural
resources, such as strategic and other metals, minerals, forest products,
oil, natural gas and coal. Current income is not an objective.
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.
31
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<PAGE> 36
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 1995
INDIVIDUAL 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 July 1, 1995. The
Prospectus may be obtained from Nationwide Life and Annuity Insurance Company by
writing P.O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-243-6295,
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............................................................. 1
Calculations of Performance.............................................. 1
Fund Performance Summary................................................. N/A
Annuity Payments......................................................... 2
Financial Statements..................................................... 3
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-B is a separate investment account of
Nationwide Life and Annuity Insurance Company ("Company"). On April 7, 1988,
ownership of the Company changed from Nationwide Mutual Insurance Company to
Nationwide Life Insurance Company. The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned entirely by
Nationwide Life Insurance Company. The common stock of Nationwide Life Insurance
Company is owned by Nationwide Corporation. Nationwide Corporation is a holding
company. All of the common stock of Nationwide Corporation is held by Nationwide
Mutual Insurance Company (95.3%) and Nationwide Mutual Fire Insurance Company
(4.7%).
SERVICES
The Company, which has responsibility for administration of the Contracts
and the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of the
underlying Mutual Funds.
The financial statements have been included herein in reliance upon the
report 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").
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, an affiliate of the Company. No underwriting commissions have been
paid by the Company to NFS.
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
1
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<PAGE> 37
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 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 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
1.45% Mortality, Expense Risk and Administration Charge. 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 $10,000. 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 standardized average annual total return and nonstandardized average
annual total return quotations will be current to the last day of the calendar
quarter preceding the date on which an advertisement is submitted for
publication. Both the standardized average annual return and the nonstandardized
average annual 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 held in the sub-account has been in existence, if the
underlying Mutual Fund has not been in existence for one of the prescribed
periods. For those underlying Mutual Funds which have not been held as
sub-accounts within the Variable Account for one of the quoted periods, the
average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Funds 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 average annual total return and 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.
2
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<PAGE> 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Financial Horizons Life Insurance Company:
We have audited the accompanying balance sheets of Financial Horizons Life
Insurance Company (a wholly owned subsidiary of Nationwide life Insurance
Company) as of December 31,1994 and 1993, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31,1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Financial Horizons Life
Insurance Company as of December 31,1994 and 1993, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31,1994, in conformity with generally accepted accounting
principles.
As discussed in note 2 to the financial statements, in 1994 the Company adopted
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1995
3
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<PAGE> 39
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Assets 1994 1993
------ --------------- -------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $427,874 in 1994) $413,764 -
Equity securities (cost $9,543 in 1994; $527 in 1993) 9,411 585
Fixed maturities held-to-maturity, at amortized cost (fair value $78,690
in 1994; $479,587 in 1993) 82,631 456,539
Mortgage loans on real estate 95,281 91,463
Real estate 1,802 1,211
Policy loans 79 -
Short-term investments (note 13) 365 1,772
--------------- -------------
603,333 551,570
--------------- -------------
Accrued investment income 8,041 7,291
Deferred policy acquisition costs 41,540 32,651
Deferred Federal income tax 1,923 -
Other assets 270 144
Assets held in Separate Accounts (note 8) 177,933 134,383
--------------- -------------
$833,040 726,039
=============== =============
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 583,188 527,231
Accrued Federal income tax (note 7):
Current 10 264
Deferred - 334
--------------- -------------
10 598
--------------- -------------
Other liabilities 4,663 5,168
Liabilities related to Separate Accounts (note 8) 177,933 134,383
--------------- -------------
765,794 667,380
--------------- -------------
Shareholder's equity (notes 3, 4 and 12):
Capital shares, $40 par value. Authorized 66 shares (100 shares in 1993),
issued and outstanding 66 shares 2,640 2,640
Paid-in additional capital 52,960 43,960
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $8,546 ($0 in 1993) and deferred
Federal income tax benefit of $1,994 ($20 expense in 1993) (3,703) 38
Retained earnings 15,349 12,021
--------------- -------------
67,246 58,659
Commitments (note 9) --------------- -------------
$833,040 726,039
=============== =============
</TABLE>
See accompanying notes to financial statements.
39 of 79
<PAGE> 40
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ------------- ----------
<S> <C> <C> <C>
Revenues (note 14):
Traditional life insurance premiums $ 311 85 93
Universal life and investment product policy charges 3,601 2,345 1,055
Net investment income (note 5) 45,030 40,477 32,726
Realized gains (losses) on investments (note 5) (625) 420 374
--------------- ------------- -----------
48,317 43,327 34,248
--------------- ------------- -----------
Benefits and expenses:
Benefits and claims 29,870 29,439 25,242
Amortization of deferred policy acquisition costs 6,940 4,128 1,737
Other operating costs and expenses 6,320 5,424 4,264
--------------- ------------- -----------
43,130 38,991 31,243
--------------- ------------- -----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 5,187 4,336 3,005
--------------- ------------- -----------
Federal income tax (note 7):
Current expense 2,103 1,982 504
Deferred (benefit) expense (244) (630) 501
--------------- ------------- -----------
1,859 1,352 1,005
--------------- ------------- -----------
Income before cumulative effect of changes in
accounting principles 3,328 2,984 2,000
Cumulative effect of changes in accounting principles,
net of tax (note 3) - (514) -
--------------- ------------- -----------
Net income $ 3,328 2,470 2,000
=============== ============= ===========
</TABLE>
See accompanying notes to financial statements.
40 of 79
<PAGE> 41
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
------------- ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 2,640 43,960 - 7,551 54,151
Net income - - - 2,000 2,000
Unrealized gains on equity
securities, net of deferred
Federal income tax - - 21 - 21
------------- ------------ ---------------- ------------ -----------------
Balance, end of year $ 2,640 43,960 21 9,551 56,172
============= ============ ================ ============ =================
1993:
Balance, beginning of year 2,640 43,960 21 9,551 56,172
Net income - - - 2,470 2,470
Unrealized gains on equity
securities, net of deferred
Federal income tax - - 17 - 17
------------- ------------ ---------------- ------------ -----------------
Balance, end of year $ 2,640 43,960 38 12,021 58,659
============= ============ ================ ============ =================
1994:
Balance, beginning of year 2,640 43,960 38 12,021 58,659
Capital contributions - 9,000 - - 9,000
Net income - - - 3,328 3,328
Adjustment for change in
accounting for certain investments
in debt and equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 4,698 - 4,698
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (8,439) - (8,439)
------------- ------------ ----------------- ------------ -----------------
Balance, end of year $ 2,640 52,960 (3,703) 15,349 67,246
============= ============ ================= ============ =================
</TABLE>
See accompanying notes to financial statements.
41 of 79
<PAGE> 42
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,328 2,470 2,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Capitalization of deferred policy acquisition costs (7,283) (10,351) (11,512)
Amortization of deferred policy acquisition costs 6,940 4,128 1,737
Amortization and depreciation 473 660 (32)
Realized losses (gains) on invested assets, net 625 (420) (374)
Deferred Federal income tax (benefit) expense (244) (784) 501
Increase in accrued investment income (750) (1,078) (1,799)
(Increase) decrease in other assets (126) 326 269
Increase (decrease) in policyholder account balances 926 (202) 288
Decrease (increase) in accrued Federal income tax payable (254) 666 (452)
Decrease (increase) in other liabilities (505) 2,843 1,104
----------------- ------------- -------------
Net cash provided by (used in) operating activities 3,130 (1,742) (8,270)
----------------- ------------- -------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 24,850 - -
Proceeds from sale of securities available-for-sale 13,170 134 -
Proceeds from maturity of fixed maturities held-to-maturity 8,483 28,829 6,734
Proceeds from sale of fixed maturities - 2,136 23,515
Proceeds from repayments of mortgage loans on real estate 5,733 3,804 1,100
Proceeds from repayments of policy loans 2 2 -
Cost of securities available-for-sale acquired (94,130) (661) -
Cost of fixed maturities held-to maturity acquired (15,544) (100,671) (155,804)
Cost of mortgage loans on real estate acquired (11,000) (31,200) (21,000)
Cost of real estate acquired (52) (2) (901)
Policy loans issued (80) (2) -
---------------- ------------ -------------
Net cash used in investing activities (68,568) (97,631) (146,356)
---------------- ------------ -------------
Cash flows form financing activities:
Proceeds from capital contribution 9,000 - -
Increase in universal life and investment product account balances 95,254 127,050 170,818
Decrease in universal life and investment product account balances (40,223) (33,159) (16,778)
---------------- ------------ -------------
Net cash provided by financing activities 64,031 93,891 154,040
---------------- ------------ -------------
Net decrease in cash and cash equivalents (1,407) (5,482) (586)
Cash and cash equivalents, beginning of year 1,772 7,254 7,840
---------------- ------------ -------------
Cash and cash equivalents, end of year $ 365 1,772 7,254
================ ============ =============
</TABLE>
See accompanying notes to financial statements.
42 of 79
<PAGE> 43
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(000's omitted)
(1) Organization and Description of Business
----------------------------------------
Financial Horizons Life Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company is a life insurer licensed in 41 states and the
District of Columbia. The Company sells primarily fixed and
variable rate annuities through banks and other financial
institutions. In addition, the Company sells universal life and other
interest-sensitive life products and is subject to competition from
other insurers throughout the United States. The Company is subject
to regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs for
the insurer beyond those recorded in the financial statements. The
Company mitigates this risk by operating throughout the United
States, thus reducing its exposure to any single jurisdiction, and
also by employing underwriting practices which identify and
minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
sound credit and collection policies and by providing for any
amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The
Company mitigates this risk by charging fees for non-conformance
with certain policy provisions, by offering products that transfer
this risk to the purchaser, and/or by attempting to match the
maturity schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) which differ from
statutory accounting practices prescribed or permitted by regulatory
authorities. See note 4.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
revenues and expenses for the period. Actual results could differ
significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are
adequate.
43 of 79
<PAGE> 44
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(a) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed maturities in
accordance with the then existing accounting standards, and accordingly,
fixed maturity securities were carried at amortized cost, adjusted for
amortization of premium or discount, since the Company had both the ability
and intent to hold these securities until maturity. Equity securities were
carried at fair value with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of shareholder's
equity.
In May 1993, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.115- ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115 requires
fixed maturities and equity securities to be classified as either
held-to-maturity, available-for-sale, or trading. The Company has no
trading securities. The Company adopted SFAS 115 as of January 1, 1994,
with no effect on net income. See note 3 regarding the effect on
shareholder's equity.
Fixed maturity securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity and are stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains
and losses, net of adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs
that would have been required as a charge or credit to operations had such
unrealized amounts been realized.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. Loans in foreclosure and loans considered in-substance
foreclosed as of the balance sheet date are placed on non-accrual status
and written down to the fair value of the existing property to derive a new
cost basis. Real estate is carried at cost less accumulated depreciation
and valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 114 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN (SFAS 114).
SFAS 114, which was amended by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 118 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME
RECOGNITION AND DISCLOSURE in October, 1994, requires the measurement of
impaired loans be based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The impact on the
financial statements of adopting SFAS 114 as amended is not expected to be
material. Previously issued financial statements shall not be restated.
The Company will adopt SFAS 114 as amended in 1995.
(b) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits and
consist primarily of certain annuities with life contingencies. Premiums
for traditional life insurance products are recognized as revenue when due
and collected. Benefits and expenses are associated with earned premiums
so as to result in recognition of profits over the life of the contract.
This association is accomplished by the provision for future policy
benefits.
44 of 79
<PAGE> 45
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual
deferred annuities and immediate annuities without life contingencies.
Revenues for universal life and investment products consist of cost of
insurance, policy administration and surrender charges that have been
earned and assessed against policy account balances during the period.
Policy benefits and claims that are charged to expense include benefits and
claims incurred in the period in excess of related policy account balances
and interest credited to policy account balances.
(c) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable selling expenses have been deferred for universal life and
investment products. Deferred policy acquisition costs are being amortized
with interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest margins,
cost of insurance, policy administration and surrender charges. For years
in which gross profits are negative, deferred policy acquisition costs are
amortized based on the present value of gross revenues. Beginning January
1, 1994, deferred policy acquisition costs are adjusted to reflect the
impact of unrealized gains and losses on fixed maturity securities
available-for-sale. See note 2(a).
(d) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders' funds
which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the statements of income and cash flows except
for the fees the Company receives for administrative services and risks
assumed.
(e) Future Policy Benefits
----------------------
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
(f) Federal Income Tax
------------------
The Company files a consolidated Federal income tax return with Nationwide
Mutual Insurance Company.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change from the
deferred method of accounting for income tax of APB Opinion 11 to the asset
and liability method of accounting for income tax. Under the asset and
liability method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under this method,
the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred
tax assets to the amounts expected to be realized.
Prior to 1993, the Company applied the deferred method of accounting for
income tax which recognized deferred income tax for income and expense
items that are reported in different years for financial reporting purposes
and income tax purposes using the tax rate applicable for the year of
calculation. Under the deferred method, deferred tax is not adjusted for
subsequent changes in tax rates. See note 7.
The Company has reported the cumulative effect of the change in method of
accounting for income tax in the 1993 statement of income. See note 3.
45 of 79
<PAGE> 46
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(g) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on
benefits and claims incurred are deducted from the respective income
and expense accounts.
(h) Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers
all short-term investments with original maturities of three months
or less to be cash equivalents.
(i) Reclassification
----------------
Certain items in the 1993 and 1992 financial statements have
been reclassified to conform to the 1994 presentation.
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of a new accounting standard by the FASB as described
in Note 2(a). As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $380,974 and
$399,556, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994, has been recorded
as a direct credit to shareholder's equity as follows:
<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 7) $ (79)
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $234), (note 11) (435)
Net cumulative effect of changes in accounting -------
principles $ (514)
=======
</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
publicationsof the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed. The Company has no material
permitted statutory accounting practices.
46 of 79
<PAGE> 47
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The following reconciles the statutory net income (loss) as reported to
regulatory authorities to net income as shown in the accompanying
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
----------- --------- ----------
<S> <C> <C> <C>
Statutory net income (loss) $ 6,173 3,539 (2,092)
Adjustments to restate to the basis of GAAP:
Increase in deferred policy acquisition costs, net 343 6,223 9,775
Future policy benefits (3,587) (7,401) (5,217)
Deferred Federal income tax benefit (expense) 244 630 (501)
Valuation allowances and other than temporary
declines accounted for directly in surplus (553) (440) (266)
Interest maintenance reserve 84 476 301
Cumulative effect of changes in accounting principles, net of tax - (514) -
Other, net 624 (43) -
----------- ---------- ---------
Net income per accompanying statements of income $ 3,328 2,470 2,000
=========== ========== =========
</TABLE>
The following reconciles the statutory capital shares and surplus as
reported to regulatory authorities to shareholder's equity as shown in
the accompanying financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Statutory capital shares and surplus $ 48,947 35,875 33,723
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 41,540 32,651 26,428
Nonadmitted assets - 2 13
Asset valuation reserve 3,516 2,152 1,166
Interest maintenance reserve 629 545 69
Future policy benefits (15,106) (11,518) (4,117)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 1,923 (334) (1,110)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (669) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (14,110) - -
Other, net (93) (45) -
----------- ---------- ---------
Shareholder's equity per accompanying balance sheets $67,246 58,659 56,172
=========== ========== =========
</TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 36,720 - -
Equity securities 16 13 -
Fixed maturities held-to-maturity 540 34,023 28,107
Mortgage loans on real estate 8,437 7,082 4,831
Real estate 175 167 101
Short-term 207 295 398
Other 19 - 20
----------- ---------- ---------
Total investment income 46,114 41,580 33,457
Less: investment expenses 1,084 1,103 731
----------- ----------- ---------
Net investment income $ 45,030 40,477 32,726
=========== =========== =========
</TABLE>
47 of 79
<PAGE> 48
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $(32,692) - -
Equity securities (190) 26 32
Fixed maturities held-to-maturity (8,407) 5,710 (1,906)
--------- --------- ---------
$(41,289) 5,736 (1,874)
========= ========= =========
</TABLE>
An analysis of realized gains (losses) on investments by investment type
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $ 260 - -
Fixed maturities - 856 736
Mortgage loans on real estate (332) 4 (96)
--------- ---------- ----------
(72) 860 640
--------- ---------- ----------
Valuation allowances:
Mortgage loans on real estate (500) (250) (110)
Real estate and other (53) (190) (156)
--------- ---------- ----------
(553) (440) (266)
--------- ---------- ----------
$ (625) 420 374
========= ========== ==========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
were as follow as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 4,442 92 - 4,534
Obligations of states and political
subdivisions 273 - (21) 252
Debt securities issued by foreign governments 8,517 15 (452) 8,080
Corporate securities 214,332 518 (7,903) 206,947
Mortgage-backed securities 200,310 1,291 (7,650) 193,951
------------- ---------- ---------- --------------
Total fixed maturities 427,874 1,916 (16,026) 413,764
Equity securities 9,543 45 (177) 9,411
------------- ---------- ---------- --------------
$437,417 1,961 (16,203) 423,175
============= ========== =========== ==============
</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 are unrealized
on these securities.
48 of 79
<PAGE> 49
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amortized cost and estimated fair value of investments in fixed maturity
securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 12,630 1,315 - 13,945
Obligations of states and political subdivisions 275 5 - 280
Debt securities issued by foreign governments 8,606 393 (19) 8,980
Corporate securities 252,000 13,725 (411) 265,314
Mortgage-backed securities 183,028 8,757 (717) 191,068
----------- ----------- ----------- -----------
$456,539 24,195 (1,147) 479,587
=========== =========== =========== ===========
</TABLE>
As of December 31, 1993 unrealized gain on equity securities was $58 before
providing for deferred Federal income tax.
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale and fixed maturity securities held-to-maturity as of
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---------- ----------
Fixed maturity securities available-for-sale
--------------------------------------------
<S> <C> <C>
Due in one year or less $ 25,898 25,970
Due after one year through five years 171,126 164,870
Due after five years through ten years 30,540 28,973
---------- ----------
227,564 219,813
Mortgage-backed securities 200,310 193,951
---------- ----------
$427,874 413,764
========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 7,000 6,923
Due after one year through five years 41,563 40,381
Due after five years through ten years 32,524 30,003
Due after ten years 1,544 1,383
---------- ----------
$ 82,631 78,690
========== ==========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1994 were
$13,170, while proceeds from sales of investments in fixed maturity securities
during 1993 were $2,136 ($23,515 in 1992). Gross gains of $373 ($205 in 1993
and $706 in 1992) and gross losses of $73 (none in 1993 and 1992) were realized
on those sales.
Real estate is presented at cost less accumulated depreciation of $97 in 1994
($58 in 1993) and valuation allowancesof $472 in 1994 ($420 in 1993). Other
valuation allowances are $860 in 1994 ($360 in 1993) on mortgage loans on real
estate.
The Company generally initiates foreclosure proceedings on all mortgage loans
on real estate delinquent sixty days. Foreclosures of mortgage loans on real
estate were $631 in 1994 ($0 in 1993). No mortgage loans on real estate were
in process of foreclosure or in-substance foreclosed as of December 31, 1994
and 1993.
Investments with an amortized cost of $2,786 and $2,785 as of December 31, 1994
and 1993, respectively, were on deposit with various regulatory agencies as
required by law.
49 of 79
<PAGE> 50
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(6) Future Policy Benefits
----------------------
The liability for future policy benefits for investment products has been
established based on policy terms, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 5.3%, 6.0% and 6.9% for the years ended December 31, 1994,
1993 and 1992, respectively.
(7) Federal Income Tax
------------------
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109 -
ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993. See note
3. The 1992 financial statements have not been restated to apply the
provisions of SFAS 109.
The significant components of deferred income tax benefit for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $(244) (666)
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 36
---------- ----------
$(244) (630)
========== ==========
</TABLE>
For the year ended December 31, 1992, deferred income tax expense results
from timing differences in the recognition of income and expense for
income tax and financial reporting purposes. The primary sources of those
timing differences were deferred policy acquisition costs (deferred
expense of $2,688) and reserves for future policy benefits (deferred
benefit of $2,746).
Total Federal income tax expense for the years ended December 31, 1994,
1993 and 1992 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $1,815 35.0 $1,518 35.0 $1,022 34.0
Tax exempt interest and dividends
received deduction (50) (1.0) (206) (4.7) (20) (0.7)
Current year increase in U.S. Federal
income tax rate - - 36 0.8 - -
Other, net 94 1.8 4 0.1 3 (0.1)
---------- ----- ---------- ----- ---------- -----
Total (effective rate of each year) $1,859 35.8 $1,352 31.2 $1,005 33.4
========== ===== ========== ===== ========== =====
</TABLE>
Total Federal income tax paid was $2,357, $1,316 and $956 during the years
ended December 31, 1994, 1993 and 1992, respectively.
50 of 79
<PAGE> 51
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31 are
as follows:
<TABLE>
<CAPTION>
1994 1993
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 5,879 6,096
Securities available-for-sale 4,985 -
Liabilities in Separate Accounts 3,111 2,688
Mortgage loans on real estate and real estate 458 268
Other assets and other liabilities 101 668
--------------- ---------------
Total gross deferred tax assets 14,534 9,720
--------------- ---------------
Deferred tax liabilities:
Deferred policy acquisition costs 12,611 9,603
Fixed maturities and equity securities - 451
--------------- ---------------
Total gross deferred tax liabilities 12,611 10,054
--------------- ---------------
Net deferred tax asset (liability) $ 1,923 (334)
=============== ===============
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date
of adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could
offset capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires
disclosure of fair value information about existing on and off-balance
sheet financial instruments. In cases where quoted market prices are
not available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flow.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could
cause these estimates to vary materially. In that regard, the derived
fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in the
immediate settlement of the instruments. SFAS 107 excludes certain
assets and liabilities from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the
underlying value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically
exempted from SFAS 107 disclosures, estimated fair value of policy
reserves on insurance contracts are provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company
in estimatingits fair value disclosures:
SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the balance sheets for these instruments approximate
their fair value.
51 of 79
<PAGE> 52
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity securities is
based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair value is estimated using values
obtained from independent pricing services or, in the case of private
placements, is estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality
and maturity of the investments. The fair value for equity securities
is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The fair
value of liabilities related to Separate Accounts is the amount
payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses, using
interest currently being offered for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations. Fair value for mortgages
in default is valued at the estimated fair value of the underlying
collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: The estimated fair value is
the amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
Carrying amount and estimated fair value of financial instruments subject to
SFAS 107 and policy reserves on insurance contracts were as follows as of
December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $413,764 413,764 - -
Equity securities 9,411 9,411 585 585
Fixed maturities held-to-maturity 82,631 78,690 456,539 479,587
Mortgage loans on real estate 95,281 92,340 91,463 96,168
Policy loans 79 79 - -
Short-term investments 365 365 1,772 1,772
Assets held in Separate Accounts 177,933 177,933 134,383 134,383
Liabilities
-----------
Investment contracts 579,903 563,331 524,362 505,926
Policy reserves on insurance contracts 3,285 3,141 2,869 2,811
Liabilities related to Separate Accounts 177,933 168,749 134,383 126,407
</TABLE>
52 of 79
<PAGE> 53
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
----------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on
the balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate of
$6,000 extending into 1995 were outstanding as of December 31, 1994.
SIGNIFICANT CONCENTRATIONS OF CREKIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no
more than 27% (34% in 1993) in any geographic area and no more than
8.2% (9.8% in 1993) with any one borrower. The summary below depicts
loans by remaining principal balance as of each December 31:
<TABLE>
<Caption
Apartment
Office Warehouse Retail & other Total
----------- ------------ ---------- ----------- -----------
<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 40,675 96,175
=========== ============ ============ ============
Less valuation allowances and unamortized discount 894
-------------
Total mortgage loans on real estate, net $95,281
=============
1993:
East North Central $1,929 2,381 10,340 4,973 19,263
East South Central - - 1,925 7,968 9,893
Middle Atlantic 882 1,916 1,929 - 4,727
New England - 943 2,000 - 2,943
Pacific 1,978 2,988 6,385 4,964 16,315
South Atlantic 1,977 - 11,338 17,600 30,915
West North Central - 1,500 - - 1,500
West South Central 1,949 986 - 3,000 5,935
---------- ------------ ------------ ------------ ------------
$8,175 10,714 33,917 38,505 91,851
========== ============ ============ ============
Less valuation allowances and unamortized discount 388
------------
Total mortgage loans on real estate, net $91,463
============
</TABLE>
53 of 79
<PAGE> 54
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated
companies, in a pension plan covering all employees who have completed
at least one thousand hours of service within a twelve-month period
and who have met certain age requirements. Plan contributions
are invested in a group annuity contract with NLIC. Benefits are
based upon the highest average annual salary of any three consecutive
years of the last ten years of service. The Company funds an
allocation of pension costs accrued for employees of affiliates whose
work efforts benefit the Company.
Pension costs charged to operations by the Company during the
years ended December 31, 1994, 1993 and 1992 were $265, $131, and $91,
respectively.
The net periodic pension cost for the plan as a whole for the
years ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
---------- ---------- ----------
Net periodic pension cost $ 55,046 34,067 25,970
========== ========== ==========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
<TABLE>
Information regarding the funded status of the plan as a whole as
of December 31, 1994 and 1993 follows:
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
54 of 79
<PAGE> 55
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company
participates with other affiliated companies in life and health care
defined benefit plans for qualifying retirees. Postretirement life
and health care benefits are contributory and available to full time
employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement life
insurance contributions are based on age and coverage amount of each
retiree. Postretirement health care benefit contributions are
adjusted annually and contain cost-sharing features such as
deductibles and coinsurance. The accounting for the health care plan
anticipates future cost-sharing changes to the written plan that are
consistent with the Company's expressed intent to increase the retiree
contribution amount annually for expected health care inflation. The
Company's policy is to fund the cost of health care benefits in
amounts determined at the discretion of management. The Company began
funding in 1994. Plan assets are invested in group annuity contracts
of NLIC.
Effective January 1, 1993, the Company adopted the provisions
of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992,
which was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $669 ($435 net of related income tax benefit) was
recorded on the statement of income as a cumulative effect of a change
in accounting principle. See note 3. The adoption of SFAS 106,
including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $739
to $761 in 1993. Net periodic postretirement benefit cost for 1994
was $119. The Company's accrued postretirement benefit obligation as
of December 31, 1994 and 1993 was $771 and $739, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
---------- ----------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
---------- ----------
Plan assets less than accumulated postretirement benefit obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
---------- ----------
Accrued postretirement benefit obligation $(150,264) (184,120)
========== ==========
</TABLE>
55 of 79
<PAGE> 56
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
---------- ----------
Net periodic postretirement benefit cost $22,597 21,018
========== ==========
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point increase in the assumed
health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866
and $2,377, respectively.
(12) Regulatory Risk-Based Capital and Dividend Restriction
------------------------------------------------------
Ohio, the Company's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas
for determining the amount of risk-based capital specify various
weighting factors that are applied to financial balances or various
levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of the company's regulatory total
adjusted capital, as defined by the NAIC, to its authorized control
level risk-based capital, as defined by the NAIC. Companies below
specific trigger points or ratios are classified within certain
levels, each of which requires specified corrective action. The
Company exceeds the minimum risk-based capital requirements.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $58,823
of shareholder's equity, as presented in the accompanying financial
statements, is restricted as to dividend payments in 1995.
(13) Transactions With Affiliates
----------------------------
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts
on deposit with NCMC and CCMC were $365 and $1,772 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying balance sheets.
56 of 79
<PAGE> 57
FINANCIAL HORIZONS LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(14) Major Lines of Business
-----------------------
The Company operates in the life insurance line of business in the
life insurance industry. Life insurance operations include
universal life, variable universal life and annuity contracts issued
to individuals.
The following table summarizes the revenues and income (losses) before
Federal income tax and cumulative effect of changes in accounting
principles for the years ended December 31, 1994, 1993 and 1992 and
assets as of December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Life insurance $ 45,407 39,871 30,878
Investment income allocated to capital and surplus 2,910 3,456 3,370
------------ ------------ ------------
Total $ 48,317 43,327 34,248
============ ============ ============
Income (losses) before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 2,743 880 (365)
Investment income allocated to capital and surplus 2,444 3,456 3,370
------------ ------------ ------------
Total $ 5,187 4,336 3,005
============ ============ ============
Assets:
Life insurance 765,794 667,380 494,221
Capital and surplus 67,246 58,659 56,172
------------ ------------ ------------
Total $ 833,040 726,039 550,393
============ ============ ============
</TABLE>
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized losses allocable to policyholders in
1994 were $41,495 and $42, respectively.
(15) Subsequent Event
----------------
On January 30, 1995, the Company received approval from the Ohio
Secretary of State to change its name to Nationwide Life and Annuity
Insurance Company.
57 of 79
<PAGE> 58
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
PAGE
<S> <C>
(a) Financial Statements:
(1) Financial statements and schedule included
in Prospectus
(Part A): N/A
(2) Financial statements and schedule included
in Part B as required:
Financial Horizons VA Separate Account-2: N/A
Financial Horizons Life Insurance Company:
Independent Auditors' Report. 38
Balance Sheets as of December 39
31, 1994 and 1993.
Statements of Income for the years ended 40
December 31, 1994, 1993 and 1992.
Statements of Shareholder's Equity for 41
the years ended December 31, 1994,
1993 and 1992.
Statements of Cash Flows for 42
the years ended December 31, 1994, 1993 and 1992.
Notes to Financial Statements. 43
</TABLE>
58 of 79
<PAGE> 59
Item 24. (b) Exhibits
<TABLE>
<CAPTION>
<S> <C>
(1) Resolution of the Depositor's Board of *
Directors authorizing the establishment of
the Registrant.
(2) Not Applicable *
(3) Underwriting or Distribution of contracts *
between the Registrant and Principal
Underwriter.
(4) The form of the variable annuity contract *
(5) Variable Annuity Application *
(6) Articles of Incorporation of Depositor - *
(7) Not Applicable *
(8) Not Applicable *
(9) Opinion of Counsel *
(10) Not Applicable *
(11) Not Applicable *
(12) Not Applicable *
(13) Performance Advertising Calculation *
Schedule.
</TABLE>
*Filed previously in connection with this registration statement
(SEC File No. 33-86408) on November 14, 1994, and hereby incorporated
by reference.
59 of 79
<PAGE> 60
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
60 of 79
<PAGE> 61
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health, and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales
One Nationwide Plaza Financial Services
Columbus, OH 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
61 of 79
<PAGE> 62
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
<TABLE>
<S> <C>
* 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
</TABLE>
62 of 79
<PAGE> 63
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
(Casualty)
Nationwide Mutual Fire Insurance Company Ohio Insurance Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Colonial Insurance Company of California California Insurance Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Property & Casualty Insurance Ohio Insurance Company
Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Neckura Insurance Group
SVM Sales GMBH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
</TABLE>
63 of 79
<PAGE> 64
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Company Texas Insurance Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Redevelopment Ohio Redevelopment of blighted
Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York New York Workers Compensation Claims
Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
64 of 79
<PAGE> 65
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Corporation Ohio Organized for the purpose
of acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts
of other persons,
associations, corporations,
domestic or foreign and to
form or acquire the control
of other corporations
Nationwide Health Care Corporation Ohio Develops and operates
Managed Care Delivery
System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery
System
** West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance
Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
65 of 79
<PAGE> 66
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
* Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer in
Deferred Compensation
Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and
Corporation Administration of Deferred
Employee Compensation Plans
for Public Employees
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
</TABLE>
66 of 79
<PAGE> 67
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health
and Medicare Supplement
Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and Reinsurance
Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
</TABLE>
67 of 79
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance Services of California Insurance Broker
California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan
administration, record
keeping and consulting and
compensation consulting
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent
for Policies placed through
Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
</TABLE>
68 of 79
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Nationwide Financial Institution Oklahoma Life Insurance Agency
Distributors Agency of Oklahoma, Inc.
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Institution Ohio Insurance Agency
Distributors Agency of Ohio, Inc.
Landmark Financial Services of New York, New York Life Insurance Agency
Inc.
Nationwide Financial Institution Alabama Life Insurance Agency
Distributors Agency of Alabama, Inc.
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Nationwide Financial Institution Texas Life Insurance Agency
Distributors Agency of Texas, Inc.
Colonial General Insurance Agency, Inc. Arizona Insurance Agency
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Video Eagle, Inc. Ohio Operates Several Video
Cable Systems
</TABLE>
69 of 79
<PAGE> 70
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED CHART)
STATE OF UNLESS OTHERWISE
COMPANY ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-II Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide DC Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-5 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Issuer of Annuity Contracts
Account Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
</TABLE>
70 of 79
<PAGE> 71
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. (AMU) |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | (WISCONSIN) | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares | | Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | |______| |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | CASH MANAGEMENT |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
| |
| _____________________________ | __________________________
| | NATIONWIDE | | | THE BEAK AND |
| | COMMUNICATIONS INC. | | | WIRE CORPORATION |
| | | | | |
| | Common Stock: 14,750 Shares | | | Common Stock: 750 Shares |
|___| ------------- |__|___| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
71 of 79
<PAGE> 73
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENCY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
December 31, 1994
Page 2
72 of 79
<PAGE> 76
Item 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Financial Services, Inc. ("NFS") acts as
general distributor for the Nationwide Multi-Flex Variable
Account, Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B,
Nationwide VA Separate Account-C, Nationwide VL Separate
Account-A, Nationwide VLI Separate Account-2, Nationwide VLI
Separate Account-3, NACo Variable Account and the Nationwide
Variable Account, all of which are separate investment
accounts of the Company or its affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide Investing
Foundation II, which are open-end management investment
companies.
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<PAGE> 77
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 E. Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
</TABLE>
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<PAGE> 78
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Peter F. Frenzer Vice Chairman, President
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Director
1247 Stafford Road
Darlington, MD 21034
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
D. Richard McFerson President and
One Nationwide Plaza Chief Executive Officer--Nationwide
Columbus, OH 43215 Insurance Enterprise and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Chairman of the Board of Directors
14282 King Road
Bowling Green, OH 43402
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
</TABLE>
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<PAGE> 79
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager and Treasurer
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
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<PAGE> 80
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Gary E. Berndt
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, is issued by the
Registrant in reliance upon, and in compliance with, the
Securities and Exchange Commission's no-action letter to the
American Council of Life Insurance (publicly available November
28, 1988) which permits withdrawal restrictions to the extent
necessary to comply with IRC Section 403(b)(11).
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<PAGE> 81
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
July 1, 1995
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<PAGE> 82
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VA SEPARATE ACCOUNT-B, certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and has caused this Registration Statement to be signed
on its behalf in the City of Columbus, and State of Ohio, on this 4th day of
January, 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 Registration Statement has
been signed by the following persons in the capacities indicated on the 4th day
of January, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -------------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- -------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------
Fred C. Finney
PETER F. FRENZER President/Chief Operating
- ------------------------------- Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- ------------------------------- and Director
Henry S. Holloway
D. RICHARD MCFERSON Chief Executive Officer and Director
- -------------------------------
D. Richard McFerson
DAVID O. MILLER Director
- -------------------------------
David O. Miller
C. RAY NOECKER Director
- -------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------- -----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ROBERT H. RICKEL Director
- -------------------------------
Robert H. Rickel
ARDEN L. SHISLER Director
- -------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------
Harold W. Weihl
</TABLE>
79 of 79
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the MFS Variable Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Fidelity Advisor Variable Account and Nationwide Multi-Flex Variable Account;
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; and the registration of Group Flexible Fund Retirement Contracts in
connection with the Nationwide DC Variable Account and the NACo Variable
Account; and the registration of Group Common Stock Variable Annuity Contracts
in connection with Separate Account No.1; and the registration of variable life
insurance policies in connection with the Nationwide VU Separate Account,
Nationwide VU Separate Account-2 and Nationwide VU Separate Account-3 of
Nationwide Life Insurance Company, hereby constitutes and appoints D. Richard
McFerson, Peter F. Frenzer, Gordon E. McCutchan, W. Sidney Druen, and Joseph P.
Rath, and each of them with power to act without the others, his/her attorney,
with full power of substitution and resubstitution, for and in his/her name,
place and stead, in any and all capacities, to approve, and sign such
Registration Statements and any and all amendments thereto, with power to affix
the corporate seal of said corporation thereto and to attest said seal and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting unto
said attorneys, and each of them, full power and authority to do and perform
all and every act and thing requisite to all intents and purposes as he/she
might or could do in person, hereby ratifying and confirming that which said
attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this fifth day of April, 1995.
/s/ Lewis J. Alphin /s/ C. Ray Noecker
- ------------------------------------- --------------------------------------
Lewis J. Alphin, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------- --------------------------------------
Willard J. Engel, Director Robert A. Oakley, Senior Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director --------------------------------------
James F. Patterson, Director
/s/ Peter F. Frenzer
- ------------------------------------- /s/ Robert H. Rickel
Peter F. Frenzer, President/Chief -------------------------------------
Operating Officer and Director Robert H. Rickel, Director
/s/ Charles L. Fuellgraf, Jr. /s/ Arden L. Shisler
- ------------------------------------- --------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Henry S. Holloway /s/ Robert L. Stewart
- ------------------------------------- --------------------------------------
Henry S. Holloway, Chairman of the Robert L. Stewart, Director
Board, Director
/s/ Nancy C. Thomas
/s/ D. Richard McFerson --------------------------------------
- ------------------------------------- Nancy C. Thomas, Director
D. Richard McFerson, Chief Executive
Officer and Director /s/ Harold W. Weihl
-------------------------------------
/s/ David O. Miller Harold W. Weihl, Director
- -------------------------------------
David O. Miller, Director
