<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VA SEPARATE ACCOUNT-B
(Exact Name of Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
The Registrant elects to register an indefinite number of securities in
accordance with Rule 24f-2 under the Investment Company Act of 1940. Pursuant to
Paragraph (a)(3) thereof, a non-refundable fee in the amount of $500 accompanies
this registration.
Approximate date of proposed public offering: (Upon the effective date of
this Registration Statement-October 1, 1996 requested).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NATIONWIDE VA SEPARATE ACCOUNT-B
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
- -------- ----
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page.......................................................................................3
Item 2. Definitions......................................................................................5
Item 3. Synopsis or Highlights..........................................................................12
Item 4. Condensed Financial Information................................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies...........................13
Item 6. Deductions and Expenses.........................................................................14
Item 7. General Description of Variable Annuity Contracts...............................................16
Item 8. Annuity Period..................................................................................20
Item 9. Death Benefit and Distributions.................................................................22
Item 10. Purchases and Contract Value....................................................................24
Item 11. Redemptions.....................................................................................27
Item 12. Taxes...........................................................................................29
Item 13. Legal Proceedings...............................................................................32
Item 14. Table of Contents of the Statement of Additional Information....................................33
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page......................................................................................42
Item 16. Table of Contents...............................................................................42
Item 17. General Information and History.................................................................42
Item 18. Services........................................................................................42
Item 19. Purchase of Securities Being Offered............................................................42
Item 20. Underwriters....................................................................................43
Item 21. Calculation of Performance Information..........................................................43
Item 22. Annuity Payments................................................................................44
Item 23. Financial Statements............................................................................45
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits...............................................................65
Item 25. Directors and Officers of the Depositor.........................................................67
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant..................69
Item 27. Number of Contract Owners.......................................................................78
Item 28. Indemnification.................................................................................78
Item 29. Principal Underwriter...........................................................................78
Item 30. Location of Accounts and Records................................................................80
Item 31. Management Services.............................................................................80
Item 32. Undertakings....................................................................................80
</TABLE>
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
INDIVIDUAL 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"). The Contracts are sold to individuals for use in retirement
plans which may qualify for special federal tax treatment under the Internal
Revenue Code (the "Code"). Annuity payments under the Contracts are deferred
until a selected later date.
Purchase Payments are allocated to the Nationwide VA Separate Account-B,
a separate account of Nationwide Life and Annuity Insurance Company (the
"Company"). The Variable Account is divided into Sub-Accounts, each of which
invests in shares of one of the underlying Mutual Funds described below:
DREYFUS
Dreyfus Stock Index Fund, Inc.
The Dreyfus Socially Responsible Growth Fund, Inc.
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND
Equity-Income Portfolio Growth Portfolio High Income Portfolio*
Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT)
Capital Appreciation Fund Government Bond Fund Money Market Fund
Small Company Fund Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Growth Portfolio Limited Maturity Bond Portfolio Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG SPECIAL FUND II, INC.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. Strong International Stock Fund II
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund Worldwide Bond Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
* The High Income Portfolio may invest in lower quality debt securities
commonly referred to as junk bonds.
This prospectus provides you with the basic information you should know
about the Individual 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 October 1,
1996, containing further information about the Contracts and the Nationwide VA
Separate Account-B has been filed with the Securities and Exchange Commission.
You can obtain a copy without charge from Nationwide Life and Annuity Insurance
Company by calling the number listed above, or writing P.O. Box 16609, Columbus,
Ohio 43216-6609.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE
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CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED OCTOBER 1, 1996, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 31 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS OCTOBER 1, 1996.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of Contract issuance. The
Annuitant may be changed prior to the Annuitization Date with the consent of the
Company.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Contract Owner as
set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life and Annuity Insurance Company.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named on the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of the
last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. A Contingent Designated Annuitant may not be named for Contracts
issued as Qualified Contracts, Individual Retirement Annuities, or Tax Sheltered
Annuities.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. A Contingent Owner
may not be named for Contracts issued as Qualified Contracts, Individual
Retirement Annuities, or Tax Sheltered Annuities.
CONTRACT- The Individual Deferred Variable Annuity Contract described in this
prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date. The Contract Owner is the person
named as Owner in the application, unless changed.
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant
(or the Contingent Designated Annuitant, if applicable). This benefit does not
apply upon the death of the Contract Owner when the Owner and Designated
Annuitant are not the same person. If the Annuitant dies after the Annuitization
Date, any benefit that may be payable shall be as specified in the Annuity
Payment Option elected.
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DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or any other segregated asset account of the
Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
under the Contract is guaranteed to remain the same. For new Purchase Payments
allocated to the Fixed Account or transfers from the Variable Account, this
period begins upon the date of deposit or transfer and ends at the end of the
calendar quarter at least one year (but not more than 15 months) from deposit or
transfer. At the end of an Interest Rate Guarantee Period, a new interest rate
is declared with an Interest Rate Guarantee Period starting at the end of the
prior period and ending at the end of the calendar quarter one year later.
MUTUAL FUND (FUND)- A registered management investment company in which the
assets of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under Sections 401 and 403(a) (Qualified Plans), 408 (IRAs) or 403(b)
(Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Contract or Tax Sheltered Annuity either through
employer contributions or employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED CONTRACT- A Contract which receives favorable tax treatment under the
provisions of the Code, including those described in Sections 401 and 403(a).
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading of underlying Mutual Fund shares held by the Variable Account,
such that the current value of Variable Account Accumulation Units might be
materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide VA Separate Account - B, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in shares of a separate underlying Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.......................................................................................3
SUMMARY OF CONTRACT EXPENSES....................................................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..........................................................................7
SYNOPSIS.......................................................................................................10
CONDENSED FINANCIAL INFORMATION...............................................................................N/A
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY..................................................................11
THE VARIABLE ACCOUNT...........................................................................................11
Underlying Mutual Fund Options........................................................................11
Voting Rights.........................................................................................11
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS .............................................12
Mortality Risk Charge.................................................................................12
Expense Risk Charge...................................................................................12
Contingent Deferred Sales Charge......................................................................12
Elimination of Contingent Deferred Sales Charge.......................................................13
Contract Maintenance Charge and Administration Charge.................................................14
Premium Taxes.........................................................................................14
Expenses of Variable Account..........................................................................14
Investments of the Variable Account...................................................................14
Right to Revoke.......................................................................................15
Transfers.............................................................................................15
Assignment............................................................................................15
Loan Privilege........................................................................................16
Ownership Provisions..................................................................................17
Contingent Owner and Beneficiary Provisions...........................................................17
Substitution of Securities............................................................................18
Contract Owner Inquiries..............................................................................18
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT........................................................................18
Value of an Annuity Unit..............................................................................18
Assumed Investment Rate...............................................................................18
Frequency and Amount of Annuity Payments..............................................................19
Annuity Commencement Date.............................................................................19
Change in Annuity Commencement Date...................................................................19
Change in Form of Annuity.............................................................................19
Annuity Payment Options...............................................................................19
Death of Contract Owner...............................................................................20
Death of Designated Annuitant Prior to the Annuitization Date ........................................20
Death Benefit After the Annuitization Date............................................................21
Required Distribution for Qualified Plans or Tax Sheltered Annuities .................................21
Required Distributions for Individual Retirement Annuities............................................22
Generation-Skipping Transfers.........................................................................22
GENERAL INFORMATION............................................................................................22
Contract Owner Services...............................................................................22
Statements and Reports................................................................................23
Allocation of Purchase Payments and Contract Value....................................................24
Value of a Variable Account Accumulation Unit.........................................................24
Net Investment Factor.................................................................................24
Valuation of Assets...................................................................................25
Determining the Contract Value........................................................................25
Surrender (Redemption)................................................................................25
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract ..................................26
Taxes.................................................................................................27
Non-Qualified Contracts...............................................................................27
Diversification.......................................................................................28
Charge for Tax Provisions.............................................................................29
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and
Tax Sheltered Annuities...............................................................................29
Advertising...........................................................................................29
LEGAL PROCEEDINGS..............................................................................................30
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................................31
APPENDIX A.....................................................................................................32
APPENDIX B.....................................................................................................34
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1)...................... 7%
- --------------------------------------------------------------------------------
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
Number of Completed Years from Contingent Deferred Sales Load
Date of Purchase Payment Percentage
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- --------------------------------------------------------------------------------
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE(2)........................... $30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges............................... 1.25%
Administration Charge............................................ 0.05%
Total Variable Account Annual Expenses......................... 1.30%
(1) Starting with the second year after a Purchase Payment has been made,
10% of that Purchase Payment may be withdrawn without imposition of a
Contingent Deferred Sales Charge. This free withdrawal privilege is
non-cumulative and must be used in the year available. Under current
Company administrative practice the Contingent Deferred Sales Charge is
waived for: (1) first year withdrawals of up to 10% of each Purchase
Payment under Individual Retirement Annuity Contracts (IRAs as defined
under Section 408 of the Code), or (2) for Distributions required for
the Contract to meet minimum Distribution rules under the Code.
Withdrawals may be restricted for Contracts issued pursuant to the
terms of a Tax Sheltered Annuity Plan or other Qualified Plan. The
Contingent Deferred Sales Charge is imposed only against Purchase
Payments (see "Contingent Deferred Sales Charge").
(2) The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and on the date of surrender in any year in which the
entire Contract Value is surrendered (see "Contract Maintenance Charge
and Administration Charge").
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund, Inc. 0.27% 0.12% 0.39%
- --------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.69% 0.58% 1.27%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas Portfolio 0.76% 0.15% 0.91%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.25% 1.25%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
- --------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.84% 0.10% 0.94%
Management Trust-Growth Portfolio
- --------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.65% 0.10% 0.75%
Management Trust-Limited Maturity Bond Portfolio
- --------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.85% 0.30% 1.15%
Management Trust-Partners Portfolio
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 0.75% 0.05% 0.80%
Oppenheimer Bond Fund
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 0.74% 0.15% 0.89%
Oppenheimer Global Securities Fund
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 0.74% 0.03% 0.77%
Oppenheimer Multiple Strategies Fund
- --------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- --------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- Strong 1.00% 0.31% 1.31%
Discovery Fund II, Inc.
- --------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- Strong 1.00% 0.97% 1.97%
International Stock Fund II
- --------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Balanced 1.00% 0.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 1.00% 0.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI International 1.50% 0.00% 1.50%
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Gold and 0.79% 0.15% 0.94%
Natural Resources Fund
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide 0.80% 0.16% 0.96%
Bond Fund
- --------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.90% 2.90%
Trust-Real Estate Securities Fund
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity 1.00% 0.44% 1.44%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth 0.90% 0.35% 1.25%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) 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. The management fees
and other expenses, some of which are subject to fee waivers or expense
reimbursements are more fully described in the prospectus for each
individual underlying Mutual Fund. The information relating to the
underlying Mutual Fund expenses was provided by the underlying Mutual
Fund and was not independently verified by the Company.
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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. The expense amounts presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing Contracts. Since
the average Contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index 89 103 126 214 19 58 99 214 * 58 99 214
Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 98 130 172 308 28 85 145 308 * 85 145 308
Responsible Growth
Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity- 91 110 138 239 21 65 111 239 * 65 111 239
Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 92 112 143 248 22 67 116 248 * 67 116 248
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High 94 119 154 271 24 74 127 271 * 74 127 271
Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund- 92 113 143 249 22 68 116 249 * 68 116 249
Overseas Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset 93 115 147 258 23 70 120 258 * 70 120 258
Manager Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II- 92 113 144 250 22 68 117 250 * 68 117 250
Contrafund Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT-Capital 90 107 134 231 20 62 107 231 * 62 107 231
Appreciation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond 90 106 132 228 20 61 105 228 * 61 105 228
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT-Money Market 90 107 133 229 20 62 106 229 * 62 106 229
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT - Small Company 98 130 171 306 28 85 144 306 * 85 144 306
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 90 106 132 228 20 61 105 228 * 61 105 228
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 94 120 155 274 24 75 128 274 * 75 128 274
Advisers Management
Trust-Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 92 114 145 254 22 69 118 254 * 69 118 254
Advisers Management
Trust-Limited Maturity
Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 97 127 166 295 27 82 139 295 * 82 139 295
Advisers Management
Trust- Partners Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<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>
Oppenheimer Variable 93 116 148 259 23 71 121 259 * 71 121 259
Account Funds-
Oppenheimer Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 94 118 153 268 24 73 126 268 * 73 126 268
Account Funds-
Oppenheimer Global
Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 93 115 146 256 23 70 119 256 * 70 119 256
Account Funds-
Oppenheimer Multiple
Strategies Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, 97 128 169 301 27 83 142 301 * 83 142 301
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 98 132 175 312 28 87 148 312 * 87 148 312
Funds, Inc.- Strong
Discovery Fund II, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 105 152 208 376 35 107 181 376 * 107 181 376
Funds, Inc. - Strong
International Stock Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 95 122 158 280 25 77 131 280 * 77 131 280
TCI Balanced
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 95 122 158 280 25 77 131 280 * 77 131 280
TCI Growth
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.- 100 138 184 331 30 93 157 331 * 93 157 331
TCI International
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 94 120 155 274 24 75 128 274 * 75 128 274
Insurance Trust-Gold and
Natural Resources Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 95 121 156 276 25 76 129 276 * 76 129 276
Insurance Trust-
Worldwide Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen American 115 181 254 460 45 136 227 460 * 136 227 460
Capital Life Investment
Trust - Real Estate
Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 100 136 181 325 30 91 154 325 * 91 154 325
International Equity
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 98 130 171 306 28 85 144 306 * 85 144 306
Small Company Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of the
Nationwide VA Separate Account - B as well as those of the underlying Mutual
Fund options are reflected in the Example. For more complete descriptions of the
expenses of the Variable Account, see "Variable Account Charges, Purchase
Payments, and Other Deductions." For more complete information regarding
expenses paid out of the assets of the underlying Mutual Fund options, see the
underlying Mutual Fund prospectuses. Deductions for premium taxes may also apply
but are not reflected in the Example shown above (see "Premium Taxes").
9
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<PAGE> 12
SYNOPSIS
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct from
the Contract Owner's Contract Value a Contingent Deferred Sales Charge not to
exceed 7% of the lesser of the total of all Purchase Payments made within 84
months prior to the date of the request to surrender, or the amount surrendered.
This charge, when applicable, is imposed to permit the Company to recover sales
expenses which have been advanced by the Company (see "Contingent Deferred Sales
Charge").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge from the Contract Value of the Contracts. The
Company will also assess an Administration Charge equal to an annual rate of
0.05% of the daily net assets of the Variable Account. These charges are to
reimburse the Company for administrative expenses related to the issue and
maintenance of the Contracts. The Company does not expect to recover from
these charges an amount in excess of accumulated administrative expenses
(see "Contract Maintenance Charge and Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the daily net assets 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 assets of the Variable Account as compensation for the
Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. The cumulative total of all Purchase Payments under
Contracts issued on the life of any one Designated Annuitant may not exceed
$1,000,000 without the prior consent of the Company (see "Allocation of Purchase
Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $500, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20. In no event, however, will annuity payments be made less
frequently than annually (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged
against the Contracts. If any such premium taxes are payable by the Company at
the time Purchase Payments are made, an equal premium tax deduction may be made
from the Contract prior to the allocation of any Purchase Payment to any
underlying Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the 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").
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<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide Life and Annuity Insurance Company, formerly Financial
Horizons Life Insurance Company, is a stock life insurance company organized
under the laws of the State of Ohio and was established in February, 1981. The
Company is a member of the "Nationwide Insurance Enterprise" with its Home
Office at One Nationwide Plaza, Columbus, Ohio, 43216. The Company offers
certain life insurance products and annuities.
THE VARIABLE ACCOUNT
The Variable Account was established as Financial Horizons VA Separate
Account - 2 by the Company on March 6, 1991, pursuant to the provisions of Ohio
law. The name of the Variable Account was subsequently changed to Nationwide VA
Separate Account - B pursuant to a resolution by the Company's Board of
Directors. The Company has caused the Variable Account to be registered with the
Securities and Exchange Commission as a unit investment trust pursuant to the
provisions of the Investment Company Act of 1940. Such registration does not
involve supervision of the management of the Variable Account or the Company by
the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company
and as such, is not chargeable with liabilities arising out of any other
business the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains, or losses of the Company.
Purchase Payments are allocated within the Variable Account among one
or more Sub-Accounts made up of shares in the underlying Mutual Fund option(s)
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, Individual Retirement Annuities, and Tax Sheltered Annuities 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 option.) 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 Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect Contract
Owners and variable annuity payees, including withdrawal of the Variable Account
from participation in the underlying Mutual Fund 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.
These shares will be voted in accordance with instructions received from
Contract
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<PAGE> 14
Owners who have an interest in the Variable Account. If the Investment Company
Act of 1940 or any Regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares attributable to each Contract Owner is
determined by dividing the Contract Owner's interest in each respective
Sub-Account of the Variable Account by the underlying Mutual Fund's Net Asset
Value of the applicable share of the underlying Mutual Fund corresponding to the
Sub-Account.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund 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 a voting interest will receive periodic reports
relating to the underlying Mutual Fund, proxy material, and a form with which to
give such voting instructions.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated in the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis, and
is equal to an annual rate of 0.80% of the daily net assets 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 assets of the Variable Account. The Company expects to generate a profit
through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions (see "Elimination of
Contingent Deferred Sales Charge" section), deduct a Contingent Deferred Sales
Charge not to exceed 7% of the lesser of the total of all Purchase Payments made
within 84 months prior to the date of the request to surrender, or the amount
surrendered. The Contingent Deferred Sales Charge, when it is applicable, will
be used to cover expenses relating to the sale of the Contracts, including
commissions paid to sales personnel, the costs of preparation of sales
literature and other promotional activity. The Company attempts to recover its
distribution costs relating to the sale of the Contracts from the Contingent
Deferred Sales Charge. Any shortfall will be made up from the General Account of
the Company, which may indirectly include portions of the Mortality and Expense
Risk Charges, since the Company expects to generate a profit from these charges.
The maximum amount that may be paid to a selling agent on the sale of these
Contracts is 5.25% of Purchase Payments.
For purposes of the Contingent Deferred Sales Charge, surrenders under
a Contract come first from the Purchase Payments which have been on deposit
under the Contract for the longest time period. For tax purposes, a surrender is
usually treated as a withdrawal of earnings first. This charge will apply in the
amounts set forth below to Purchase Payments within the time periods set forth.
In no event will any Contingent Deferred Sales Charge be deducted against any
values which have been held under the Contract for at least 84 months, or to
commencement of an annuity payout under Contracts which have been in effect for
at least two years or upon the death of the Designated Annuitant.
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<PAGE> 15
The Contingent Deferred Sales Charge applies to Purchase Payments as follows:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
Starting with the second year after a Purchase Payment has been made
under the Contract, 10% of that Purchase Payment may be withdrawn each year
without imposition of the Contingent Deferred Sales Charge. This free withdrawal
privilege is non-cumulative and will not exceed 10% of the Purchase Payment in
any year. The Contingent Deferred Sales Charge is waived for either: (1) first
year withdrawals of up to 10% of each Purchase Payment under Individual
Retirement Annuity Contracts or (2) for Distributions required for the Contract
to meet minimum Distribution rules under the Code. Withdrawals may be restricted
for Contracts issued pursuant to the terms of a Tax Sheltered Annuity Plan or
other Qualified Plan. No sales charges are deducted on redemption proceeds that
are transferred to the Fixed Account option of this annuity. The Contract Owner
may be subject to a tax penalty if withdrawals are taken prior to age 59-1/2.
When a Contract is held by a Charitable Remainder Trust, the amount
which may be withdrawn from this Contract without application of a Contingent
Deferred Sales Charge, shall be the larger of (a) or (b), where (a) is:
The amount which would otherwise be available for withdrawal without
application of a Contingent Deferred Sales Charge;
and where (b) is:
The difference between the total Purchase Payments made to the Contract
as of the date of the withdrawal (reduced by previous withdrawals of
such Purchase Payments), and the Contract Value at the close of the day
prior to the date of the withdrawal.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For Tax Sheltered Annuity Contracts, Qualified Contracts sold in
conjunction with 401 cases, and SEP-IRA Contracts, the Company will waive the
Contingent Deferred Sales Charge when:
A. the Plan Participant experiences a case of hardship (as
provided in Code Section 403(b) and as defined for purposes of
Code Section 401(k));
B. the Plan Participant becomes disabled (within the meaning of
Code Section 72(m)(7));
C. the Plan Participant attains age 59-1/2 and has participated
in the Contract for at least 5 years, as determined from the
Contract Anniversary date;
D. the Plan Participant has participated in the Contract for at
least 15 years as determined from the Contract Anniversary
date;
E. the Plan Participant dies; or
F. the Contract is annuitized after 2 years from the inception of
the Contract.
For Non-Qualified Contracts and IRA Contracts, the Company will waive
the Contingent Deferred Sales Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this prospectus is exchanged for another
Contract issued by the Company, or any of its affiliated insurance companies, of
the type and class which the Company determined is eligible for such exchange,
the Company will waive the Contingent Deferred Sales Charge on the first
Contract. Contingent Deferred Sales Charges may apply to the Contract received
in the exchange.
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<PAGE> 16
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by state law.
CONTRACT MAINTENANCE CHARGE AND ADMINISTRATION CHARGE
Each year on the Contract Anniversary, (and on the date of surrender in
any year in which the entire Contract Value is surrendered) the Company deducts
a Contract Maintenance Charge from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. The Contract Maintenance Charges are as follows:
- --------------------------------------------------------------------------------
AMOUNT TYPE OF CONTRACT ISSUED
- --------------------------------------------------------------------------------
$30.00 - Non-Qualified Contracts
- Individual Retirement Annuities
- --------------------------------------------------------------------------------
$12.00 to $0.00(1) - Qualified Contracts
- Tax Sheltered Annuity Contracts
- --------------------------------------------------------------------------------
(1) The charge is determined based on Company underwriting guidelines.
All Contract Maintenance Charge reductions shall be based on objective
underwriting guidelines which shall be applied in a non-discriminatory manner.
The Contract Maintenance Charge will be allocated between the Fixed
Account and Variable Account in the same percentages as the Purchase Payment
investment allocations are to the Fixed Account and Variable Account. The
Company also assesses an Administration Charge equal on an annual basis to 0.05%
of the daily net assets 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. In any Contract Year
when a Contract is surrendered for its full value on any date other than the
Contract Anniversary, the Contract Maintenance Charge will be deducted at the
time of such surrender. The amount of the Contract Maintenance Charge may not be
increased by the Company. In no event will reduction or elimination of the
Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The method
used to recoup premium tax expense will be determined by the Company at its sole
discretion and in compliance with applicable state law. The Company currently
deducts such charges from a Contract Owner's Contract Value either: (1) at the
time the Contract is surrendered, (2) at Annuitization, or (3) at such earlier
date as the Company may become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of
expenses: (1) administrative expenses relating to the issuance and maintenance
of the Contracts; (2) mortality risk charge associated with guaranteeing the
annuity purchase rates at issue for the life of the Contracts; and (3) expense
risk charge associated with guaranteeing that the Mortality Risk, Expense Risk,
Contract Maintenance and Administration Charges described in this prospectus
will not change regardless of actual expenses. If these charges are insufficient
to cover these expenses, the loss will be borne by the Company.
Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each underlying Mutual Fund prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have Purchase
Payments attributable to his or her participation in the Variable Account
allocated among one or more of the Sub-Accounts which consist of shares in the
underlying Mutual Fund options. Shares of the respective underlying Mutual Fund
options specified by the Contract Owner are purchased at underlying Mutual
Fund's Net Asset Value for the respective Sub-Account(s) and converted into
Accumulation Units. At the time of application, the Contract Owner designates
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<PAGE> 17
the underlying Mutual Funds to which he or she desires to have Purchase Payments
allocated. The Contract Owner may change the election as to allocation of
Purchase Payments or may elect to exchange amounts among the Sub-Account
options pursuant to such terms and conditions applicable to such transactions as
may be imposed by each of the underlying Mutual Funds, in addition to those set
forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the date
of application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless otherwise required by state and/or federal
law. All Individual Retirement Annuity refunds will be return of Purchase
Payments. In order to revoke the Contract, it must be mailed or delivered to the
Home Office of the Company at the mailing address shown on page 1 of this
prospectus. Mailing or delivery must occur on or before 10 days after receipt of
the Contract for revocation to be effective. In order to revoke the Contract, if
it has not been received, written notice must be mailed or delivered to the Home
Office of the Company at the mailing address shown on page 1 of this prospectus.
The liability of the Variable Account under this provision is limited
to the Contract Value in each Sub-Account on the date of revocation. Any
additional amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Owner may request a transfer of up to 100% of the Contract Value
from the Variable Account to the Fixed Account, without penalty or adjustment.
All amounts transferred to the Fixed Account must remain on deposit in the Fixed
Account until the expiration of the current Interest Rate Guarantee Period. In
addition, transfers from the Fixed Account may not be made prior to the end of
the then current Interest Rate Guarantee Period. The Interest Rate Guarantee
Period expires on the final day of a calendar quarter during which the one year
anniversary of the allocation to the Fixed Account occurs. Transfers must also
be made prior to the Annuitization Date. The Owner's value in each Sub-Account
will be determined as of the date the transfer request is received in the Home
Office in good order. The Company reserves the right to restrict transfers from
the Variable Account to the Fixed Account to 25% of the Contract Value for any
12 month period.
The Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The amount that may be transferred from the Fixed Account to the Variable
Account will be determined by the Company, at its sole discretion, but will not
be less than 10% of the total value of the portion of the Fixed Account that is
maturing. The amount that may be transferred will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. Transfers
from the Fixed Account must be made within 45 days after the expiration date of
the guarantee period. Owners who have entered into a Dollar Cost Averaging
agreement with the Company (see "Dollar Cost Averaging") may transfer from the
Fixed Account to the Variable Account under the terms of that agreement.
Transfers 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 Owners 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; or 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 some or all rights under
the Contract at any time during the lifetime of the Designated 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. Where necessary for the proper administration of the terms of
the Contract, an assignment will not be recorded until the Company has received
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<PAGE> 18
sufficient direction from the Contract Owner and assignee as to the proper
allocation of Contract rights under the assignment. Individual Retirement
Annuities, Tax Sheltered Annuities, and Qualified Contracts may not be assigned,
pledged or otherwise transferred except under such conditions as may be allowed
by applicable law.
If this Contract is a Non-Qualified Contract, any portion of Contract
Value attributable to Purchase Payments 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. Assignments of the entire Contract Value may
cause the portion of the Contract Value which exceeds the total investment in
the Contract to be included in gross income each year that the assignment is in
effect.
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 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. Additional loans are subject to the
Contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated in this provision.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other named
collateral where the loan from a Contract exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal to
the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in each
option until the required balance is reached or all such variable units are
exhausted. The remaining required collateral will next be transferred from the
Fixed Account. No withdrawal charges are deducted at the time of the loan, or on
the transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the collateral
fixed account will never be less than 3.0%. Specific loan terms are disclosed at
the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less
frequently than quarterly, within five years. Loans used to purchase the
principal residence of the Contract Owner must be repaid within 15 years. During
the loan term, the outstanding balance of the loan will continue to earn
interest at an annual rate as specified in the loan agreement. Loan repayments
will consist of principal and interest in amounts set forth in the loan
agreement. Loan repayments will be allocated between the Fixed and Variable
Accounts in the same proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to
accrue. A grace period may be available under the terms of the loan agreement.
If a loan payment is not made when due, or by the end of the
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<PAGE> 19
applicable grace period, then that payment, which may be a single periodic
payment or payment of the entire loan, will be treated as a deemed Distribution,
as permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty. Interest which subsequently accrues on defaulted
amounts may also be treated as additional deemed Distributions each year. Any
defaulted amounts, plus accrued interest, will be deducted from the Contract
when the Participant becomes eligible for a Distribution of at least that
amount, and this amount may again be treated as a Distribution where required by
law. Additional loans may not be available while a previous loan remains in
default.
Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract may
still be taxable in whole or part if the Participant has additional loans from
other plans or contracts. The Company will calculate the maximum nontaxable loan
based on the information provided by the Participant or the employer.
Loan repayments must be identified as such or else they will be treated
as Purchase Payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures 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.
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 the Owner dies prior to
the Annuitization Date, Contract ownership will be determined in accordance with
the "Death of Contract Owner" provision. If the Designated Annuitant does not
survive the Contract Owner or if the Designated Annuitant and the Owner are the
same person, Contract ownership will be determined in accordance with the "Death
Of Designated Annuitant Prior To The Annuitization Date" provision. After the
Annuitization Date ownership will be based on the Annuity Payment Option
selected. Ownership rights under this Contract may be restricted under the
provisions of the retirement or deferred compensation plan under which this
Contract may be issued.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner at any time, but such change may be subject to state and federal
gift taxes and may be treated as an assignment of the Contract for income tax
purposes. Such an assignment would result in a deemed Distribution of the value
of the Contract. Any new choice of Contract Owner will automatically revoke any
prior choice of Contract Owner. Any request for change must be: (1) made in
writing; and (2) received by the Company at its Home Office. A request for
change of Contract Owner must be a "proper written application" and may include
a signature guarantee as specified in the "Surrender" section. The change will
become effective as of the date the written request is signed. A new choice of
Contract Owner will not apply to any payment made or action taken by the Company
prior to the time it was received.
A change in the Designated Annuitant will have the following
conditions: (1) request for such change must be made by the Contract Owner; (2)
request must be made in writing on a form acceptable to the Company; (3) request
must be signed by the Contract Owner; and (4) such change is subject to
underwriting and approval by the Company.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person (or persons) who may receive certain
benefits under the Contract if the Contract Owner dies before the Annuitization
Date. If more than one Contingent Owner survives the Contract Owner, each will
share equally unless otherwise specified in the Contingent Owner designation. If
a Contingent Owner is not named or predeceases the Contract Owner, all rights
and interest of the Contingent Owner will vest in the Contract Owner's estate.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner from time to time prior to the Annuitization Date by
written notice to the Company. The change, upon receipt and recording by the
Company at its Home Office, will take effect as of the time the written notice
was signed, whether or not the Contract Owner is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change. Unless the Contingent Owner is also
the named Beneficiary (or Contingent Beneficiary, if applicable), the Contingent
Owner shall have no rights in the Contract if the Contract Owner/Annuitant dies.
If a Contract Owner/Annuitant dies, disposition of the Contract shall be
determined based on the "Death of Designated Annuitant Prior to the
Annuitization Date" provisions.
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The Beneficiary is the person or persons who may receive certain
benefits under the Contract in the event the Designated Annuitant dies prior to
the Annuitization Date. If more than one Beneficiary survives the Designated
Annuitant, each will share equally unless otherwise specified in the Beneficiary
designation. If no Beneficiary survives the Designated Annuitant, all rights and
interest of the Beneficiary shall vest in the Contingent Beneficiary, and if
more than one Contingent Beneficiary survives, each will share equally unless
otherwise specified in the Contingent Beneficiary designation. If a Contingent
Beneficiary is not named or predeceases the Designated Annuitant, all rights and
interest of the Contingent Beneficiary will vest with the Contract Owner or the
Contract Owner's estate. Subject to the terms of any existing assignment, the
Contract Owner may change the Beneficiary or Contingent Beneficiary from time to
time during the lifetime of the Designated Annuitant, by written notice to the
Company. The change, upon receipt by the Company at its Home Office, will take
effect as of the time the written notice was signed, whether or not the
Designated Annuitant is living at the time of recording, but without further
liability as to any payment or settlement made by the Company before receipt of
such change.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options described in this
prospectus should no longer be available for investment by the Variable Account
or if, in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate in view of the
purposes of the Contract, the Company may eliminate Sub-Accounts, combine two or
more Sub-Accounts, or substitute shares of another underlying Mutual Fund for
underlying Mutual Fund shares already purchased or to be purchased in the future
with 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 and the amount of the first such
payment shall be determined in accordance with the Annuity Table in the
Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an Annuity
Unit for a Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
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.
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FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$500, the Company shall have the right to pay such amount in one lump sum in
lieu of the payments otherwise provided for. In addition, if the payments
provided for would be or become less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20. In no event will the Company make payments under an annuity
option less frequently than annually.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date 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, 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 75th 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 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, computed 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.
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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 Code.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts, in the event the Contract Owner dies, the
following rules will apply:
(1) If the Contract Owner dies prior to the Annuitization Date, the entire
interest in the Contract, less any applicable deductions (which may
include a Contingent Deferred Sales Charge), must be distributed within
5 years unless the recipient of the Distribution is the Contract
Owner's spouse. Such Distribution will be paid to the Designated
Annuitant unless the Owner has named a Contingent Owner or his or her
estate to receive the Distribution. In the alternative, the Designated
Annuitant or Contingent Owner (where one is named) may elect to receive
Distribution in the form of a life annuity or an annuity for a period
certain not exceeding the Designated Annuitant's (Contingent Owner's)
life expectancy and such annuity must begin within one year following
the date of the Contract Owner's death. In the event the Designated
Annuitant or Contingent Owner is the Contract Owner's spouse, the
Contract may be continued by such Designated Annuitant or Contingent
Owner, treating the spouse as the Contract Owner. In the event the
Designated Annuitant does not survive the Contract Owner, or if the
Designated Annuitant and the Contract Owner are the same person, a
Distribution will be made in accordance with the "Death of Designated
Annuitant Prior To The Annuitization Date" provision below; provided,
however, that all Distributions made as a result of the death of the
Contract Owner shall be made within the time limits set forth in this
paragraph. If the Contract Owner and the Designated Annuitant are not
the same, no Death Benefit is payable upon the death of the Contract
Owner, but Distribution must be made as discussed above.
(2) 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.
B. If the Contract Owner is not a natural person, the death of the
Designated Annuitant (or a change of the Designated Annuitant) will be
treated like a death of the Contract Owner and will result in a
Distribution pursuant to Section (1), regardless of whether a
Contingent Designated Annuitant has also been named. The Distribution
will take the form of either:
(a) the Death Benefit described below (if the Designated Annuitant
has died and there is no Contingent Designated Annuitant), or,
in all other cases,
(b) the benefit described in Section (1), of this provision,
except that in the event of a change of Designated Annuitant,
the benefit will be paid to the Contract Owner if the
Designated Annuitant is living, or as a Death Benefit to the
Beneficiary upon the death of the Designated Annuitant (and
the Contingent Designated Annuitant, if any) prior to the
expiration of the period described in Section (1) of this
provision.
DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
A Death Benefit is payable to the Beneficiary unless the Owner has
named a Contingent Designated Annuitant. In such case, the Death Benefit is
payable to the Beneficiary upon the death of the last survivor of the Designated
Annuitant and Contingent Designated Annuitant. The value of the Death Benefit
will be determined as of the Valuation Date coincident with or next following
the date the Company receives both (1) due proof of death and (2) an election
for (a) a single sum payment or (b) Annuity Payment Option.
Contracts issued in connection with Qualified Plans, Individual
Retirement Annuities, or Tax Sheltered Annuities will be subject to specific
rules, set forth in the Plan, Contract, or Code concerning distributions upon
the death of the Owner or Designated Annuitant (see the "Required Distribution
For Qualified Plans or Tax Sheltered Annuities" provision).
If a single sum settlement is requested, payment will be made in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is desired, election may be made by
the Beneficiary during the 90-day period commencing with the date written notice
is received by the Company. If no election has been made by the end of such
90-day period, the Death Benefit will be paid to the Beneficiary in a single
sum. The amount of the Death Benefit will be the greater of (i) the sum of all
Purchase Payments, less any amounts surrendered, or (ii) the Contract Value.
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If the Contract Owner has (1) requested an Annuity Commencement Date
later than the first day of the calendar month after the Designated Annuitant's
75th birthday, (2) the Company has approved the request, and (3) the Designated
Annuitant dies after his or her 75th birthday, the dollar amount of 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 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 provided
that, for Tax Sheltered Annuity Contracts, no Distributions
will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another
Tax Sheltered Annuity Contract of the Annuitant.
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 (as defined in Code Section 414(d)), or
church plan (as defined in Code Section 401(a)(9)(C)), the Required Beginning
Date will be the later of the dates determined under the preceding sentence or
April 1 of the calendar year following the calendar year in which the Annuitant
retires.
If the 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:
(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/Annuitant dies after Distribution has commenced,
Distribution must continue at least as rapidly as under the schedule being used
prior to his or her death, except that a surviving spouse may treat a Tax
Sheltered Annuity as his or her own to the extent permitted by law.
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.
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REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70-1/2, provided that, for Individual Retirement Annuity Contracts,
no Distributions will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another Individual
Retirement Annuity Contract or Individual Retirement Account of the Annuitant.
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 life expectancy of the
Owner or the joint life expectancy of the Owner and the Owner's designated
Beneficiary.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year in 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 that a surviving spouse may treat the Individual Retirement
Annuity as his or her own, in the same manner as is described in section (a)(i)
of this provision.
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 contributions exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Owner of an Individual Retirement Annuity must annually report
the amount of non-deductible contributions, the amount of any Distribution, the
amount by which non-deductible contributions for all years exceed non-taxable
Distributions for all years, and the total balance of all Individual Retirement
Accounts and Annuities.
Individual Retirement Annuity Distributions will not receive the
benefit of the tax treatment of a lump sum Distribution from a Qualified Plan.
If the 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
Code, and the amount of the tax on the generation-skipping transfer resulting
from such direct skip. If applicable, such payment will be reduced by any tax
the Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday or any other day
when the New York Stock
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Exchange is closed, the Asset Rebalancing exchange will occur on the last
business day before that day. An Asset Rebalancing request must be 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 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 the use of
Asset Rebalancing in his or her Contract.
The Company reserves the right to discontinue offering Asset
Rebalancing upon 30 days written notice; such discontinuation will not affect
Asset Rebalancing programs which have already commenced. The Company also
reserves the right to assess a processing fee for this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer from the Money Market Sub-Account, Limited Maturity Bond
Portfolio Sub-Account or the Fixed Account to any other Sub-Account within the
Variable Account on a monthly basis. This service is intended to allow the
Contract Owner to utilize Dollar Cost Averaging, a long-term investment program
which provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect against
loss in a declining market. To qualify for Dollar Cost Averaging, there must be
a minimum total Contract Value of $15,000. Transfers for purposes of Dollar Cost
Averaging can only be made from the Money Market Sub-Account, Limited Maturity
Bond Portfolio Sub-Account or the Fixed Account. The minimum monthly Dollar Cost
Averaging transfer is $100. In addition, Dollar Cost Averaging monthly transfers
from the Fixed Account must be equal to or less than 1/30th of the Fixed Account
value when the Dollar Cost Averaging program is requested. Transfers out of the
Fixed Account, other than for Dollar Cost Averaging, may be subject to certain
additional restrictions (see "Transfers"). A written election of this service,
on a form provided by the Company, must be completed by the Contract Owner in
order to begin transfers. Once elected, transfers from the Money Market
Sub-Account, Limited Maturity Bond Portfolio Sub-Account or the Fixed Account
will be processed monthly until either the value in the Money Market
Sub-Account, Limited Maturity Bond Portfolio Sub-Account or the Fixed Account is
completely depleted or the Contract Owner instructs the Company in writing to
cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days written notice; such discontinuation will not affect
Dollar Cost Averaging programs which have already commenced. The Company also
reserves the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all Sub-Accounts in
which the Contract Owner has an interest, and the Fixed Account. A Contingent
Deferred Sales Charge may also apply to Systematic Withdrawals in accordance
with the considerations set forth in the "Contingent Deferred Sales Charge"
section. Each Systematic Withdrawal is subject to federal income taxes on the
taxable portion. In addition, a 10% federal penalty tax may be assessed on
Systematic Withdrawals if the Contract Owner is under age 59-1/2. If directed by
the Contract Owner, the Company will withhold federal income taxes from each
Systematic Withdrawal. 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; such discontinuation will not affect
any Systematic Withdrawal 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 accurately reported on quarterly statements or
confirmation
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statements unless the Contract Owner notifies the Company otherwise
within 30 days after receipt of the statement. The Company will also send to
Contract Owners each year an annual report and a semi-annual report containing
financial statements for the Variable Account, as of December 31 and June 30,
respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. Purchase Payments, if any, after the first Contract
Year must be at least $10 each. The Company, however, reserves the right to
lower this $10 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. The
Company may, however, retain the Purchase Payment for up to 5 business days
while attempting to complete an incomplete application. If the application
cannot be made complete within 5 days, the prospective purchaser will be
informed of the reasons for the delay and the Purchase Payment will be returned
immediately unless the prospective purchaser specifically consents to the
Company retaining the Purchase Payment until the application is made complete.
Thereafter, subsequent Purchase Payments will be priced on the basis of the
Accumulation Value next computed for the appropriate Sub-Account after the
additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-Account
was arbitrarily set initially at $10 when underlying Mutual Fund shares in that
Sub-Account were available for purchase. The value for any subsequent Valuation
Period is determined by multiplying the Accumulation Unit value for each
Sub-Account for the immediately preceding Valuation Period by the Net Investment
Factor for the Sub-Account during the subsequent Valuation Period. The value of
an Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the underlying Mutual Fund's Net Asset Value per share of the
underlying Mutual Fund held in the Sub-Account determined at
the end of the current Valuation Period, plus
(2) the per share amount of any dividend or capital gain
Distributions made by the underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period.
(b) is the net of:
(1) the underlying Mutual Fund's Net Asset Value per share of the
underlying Mutual Fund held in the Sub-Account determined at
the end of the immediately preceding Valuation Period, plus or
minus
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(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period (see "Charge
For Tax Provisions").
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account.
Such factor is equal to an annual rate of 1.30% of the daily underlying
Mutual Fund's Net Asset Value of the Variable Account.
For underlying Mutual Fund options that credit dividends on a daily
basis and pay such dividends once a month (the 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 underlying Mutual Fund's Net Asset Value of underlying Mutual
Fund shares, because of the deduction for Mortality Risk Charge, Expense Risk
Charge and Administration Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their underlying Mutual Fund's Net Asset Value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each Sub-Account
are determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit Value for the Sub-Account for the Valuation Period during
which the Purchase Payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and the Fixed Account bears to the total Contract Value.
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 spouse), the
Company will require additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (see "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all Sub-Accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each Sub-Account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the Sub-Accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be
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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.
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 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 Section A. above also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to 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 and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification of a Tax Sheltered Annuity in the event of
a ten-day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code 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 Code tax provisions when the Contract is issued to fund a
Qualified Plan.
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INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE
OF A PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for: (1) Qualified Contracts; (2) Individual
Retirement Annuities and Individual Retirement Accounts; (3) Tax Sheltered
Annuities; or (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to Participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned
by Individual Retirement Accounts are also generally taxed when received. The
portion of each such payment which is excludable is based on the ratio between
the amount by which nondeductible Purchase Payments to all such Contracts
exceeds prior non-taxable Distributions from such Contracts, and the total
account balances in such Contracts, at the time of the Distribution. The Owner
of such Individual Retirement Annuities or the Annuitant under Contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service the amount of nondeductible Purchase Payments, the amount of any
Distribution, the amount by which nondeductible Purchase Payments for all years
exceed non-taxable Distributions for all years, and the total balance in all
Individual Retirement Annuities and Accounts. Owners should consult a financial
consultant, legal counsel or tax advisor to discuss in detail the taxation and
use of the Contracts.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion
of each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the 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 Annuitization Date
are taxable to the Contract Owner to the extent that the cash value of the
Contract exceeds the Contract Owner's investment at the time of the
Distribution. Distributions, for this purpose, include partial surrenders,
dividends, loans, or any portion of the Contract which is assigned or pledged;
or for Contracts issued after April 22, 1987, any portion of the Contract
transferred by gift. For these purposes, a transfer by gift may occur upon
Annuitization if the Contract Owner and the Designated Annuitant are not the
same individual. In determining the taxable amount of a Distribution, all
annuity contracts issued after October 21, 1988, by the same company to the same
Contract Owner during any 12 month period, will be treated as one annuity
contract. (Additional limitations on the use of multiple contracts may be
imposed by Treasury regulations). Distributions prior to the Annuitization Date
with respect to that portion of the Contract invested prior to August 14, 1982,
are treated first as a recovery of the investment in the Contract as of that
date. A Distribution in excess of the amount of the investment in the Contract
as of August 14, 1982, will be treated as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for Qualified Contracts, Individual Retirement Annuities and Tax Sheltered
Annuities; immediate annuities; and certain Contracts owned for the benefit of
an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase. If
this Contract is issued as a result of an exchange described in Section 1035 of
the Code, it will generally be considered to have been purchased on the purchase
date of the contract give up in the exchange.
Code Section 72 also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59-1/2, 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
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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 or Owner selects an annuity
for life or life expectancy, or begins a pre-defined series of withdrawals based
on life expectancy, and changes the method of payment before the expiration of 5
years and the attainment of age 59-1/2, the early withdrawal penalty will apply.
The penalty will be equal to that which would have been imposed had no exception
applied from the outset, and the 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. If the Contract Owner is not an individual, the death of the
Designated Annuitant (or a change in the Designated Annuitant) will result in a
Distribution pursuant to these rules, regardless of whether a Contingent
Designated Annuitant has been named (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 paid, through withholding estimated payments.
Generally, the taxable portion of any Distribution from a Contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
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 Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the Owner or the Company pays an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the Owner if the income, for the period the contract was
not diversified, had been received by the Owner. If the failure to diversify is
not corrected in this manner, the Owner of an annuity contract will be deemed
the Owner of the underlying securities and will be taxed on the earnings of his
or her account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the Internal Revenue Service have suggested, from
time to time, that the number of underlying Mutual Funds available or the number
of transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in the area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of underlying
Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual Funds such
that the Contract would no longer qualify as an annuity under Section 72 of the
Code, the Company will take whatever steps are available to remain in
compliance.
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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 Code permits the rollover of most Distributions from Qualified
Plans to other Qualified Plans, Individual Retirement Accounts, or Individual
Retirement Annuities. Most Distributions from Tax Sheltered Annuities may be
rolled into another Tax Sheltered Annuity, an Individual Retirement Account, or
an Individual Retirement Annuity. Distributions which may not be rolled over are
those which are:
1. one of a series of substantially equal annual (or more
frequent) payments made: a) over the life (or life expectancy)
of the employee, b) the joint lives (or joint life
expectancies) of the employee and the employee's designated
Beneficiary, or c) for a specified period of ten years or
more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred directly
to an appropriate plan as described in this provision.
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 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-Accounts of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual fund options with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to
certain market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2-1/2 Year CD Rates;
and Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., 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
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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
Fund options 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 option held in the Sub-Account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation reflects the deduction of all
applicable charges made to the Contracts except for premium taxes, which may be
imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner
and for the same time periods as the average annual total return except total
return will assume an initial investment of $10,000 and will not reflect the
deduction of any applicable Contingent Deferred Sales Charge, which, if
reflected, would decrease the level of performance shown. The Contingent
Deferred Sales Charge is not reflected because the Contracts are designed for
long term investment. An assumed initial investment of $10,000 will be used
because that figure more closely approximates the size of a typical Contract
than does the $1,000 figure used in calculating the standardized average annual
total return quotations. The amount of the hypothetical initial investment
assumed affects performance because the Contract Maintenance Charge is a fixed
per Contract charge.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE COMPANY
IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE FUTURE
RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR LESS
THAN ORIGINAL COST.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History......................................... 1
Services................................................................ 1
Purchase of Securities Being Offered.................................... 1
Underwriters............................................................ 2
Calculations of Performance............................................. 2
Annuity Payments........................................................ 3
Financial Statements.................................................... 4
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APPENDIX A
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which support insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which related to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Nationwide VA Separate Account - B and any other
segregated asset account. Fixed Account Purchase Payments will be allocated to
the Fixed Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts
will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. The Company assumes this
"mortality risk" by virtue of annuity rates incorporated in the Contract which
cannot be changed. In addition, the Company guarantees that it will not increase
charges for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum rate
as stated in the contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New Purchase Payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money transferred from the Variable Sub-Accounts to the Fixed Account and
amounts maturing in the Fixed Account at the expiration of an Interest Rate
Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the Purchase Payments allocated to the
Fixed Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The maximum percentage that may be transferred will be determined by
the Company at its sole discretion, but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing and will be declared
upon the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter.
Transfers under this provision must be made within 45 days after the expiration
date of the guarantee period. Owners who have entered into a Dollar Cost
Averaging Agreement with the Company (see "Dollar Cost Averaging") may transfer
from the Fixed Account to the Variable Account under the terms of that
agreement. Any Group Annuity Contract offered in conjunction with the
prospectus, the assets of which are invested in the
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general account of the Company, may be subject to restrictions or surrender of a
plan's or a participant's interest in the Annuity Contract, and may require that
such a surrender be completed over a period of 5 years.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES AND ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 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
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on January
24, 1989 and commenced operations on September 29, 1989. The Dreyfus Corporation
("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index manager.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 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 Fund's
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. Fidelity Management & Research Company ("FMR")
is the Fund's manager.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily
in income-producing equity securities. In choosing these securities FMR
also will consider the potential for capital appreciation. The
Portfolio's goal is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
- - GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent
in other 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
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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 five separate Mutual Funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide 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.
- - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with the preservation of capital. It seeks to achieve its
objective by investing in a diversified portfolio of securities issued
or backed by the U.S. Government, its agencies or instrumentalities.
- - MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
- - SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less than $1 billion at the
time of purchase. Nationwide Financial Services, Inc. ("NFS"), the
Fund's adviser, has employed a group of sub-advisers, each of which
will manage a portion of the Fund's portfolio. These sub-advisers are
the Dreyfus Corporation, Neuberger & Berman, L. P., Pictet
International Management Limited, Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg, Pincus Counsellors, Inc.
The
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sub-advisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
a number of investment styles, NFS hopes to increase prospects for
investment return and to reduce market risk and volatility.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested
capital from a flexible combination of current return and capital gains
through investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide
investors with above average potential for capital appreciation. To
maximize this potential, the investment adviser may also utilize, from
time to time, securities convertible into common stocks, warrants and
options to purchase such stocks.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its
objectives through investments in a diversified portfolio of limited
maturity debt securities.
- - PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This Portfolio will seek
to achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed
to be undervalued based on fundamentals such as low price-to-earnings
ratios, consistent cash flows, and support from asset values. The
objective of the Partners Portfolio is not fundamental and can be
changed by the Trustees of the Trust without shareholder approval.
Shareholders will, however, receive at least 30 days 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. OppenheimerFunds, Inc. is
the Funds' investment adviser.
- - OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the fund seeks capital growth when consistent with its primary
objective.
- - OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by
investing a substantial portion of assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special
situations which are considered to be speculative.
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- - OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds
and other debt securities, and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Special Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. (the "Advisor")
is the investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments
in a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series and classes of series of common stock.
The International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds")
are offered by the Corporation to insurance company separate accounts for the
purpose of funding variable life insurance policies and variable annuity
contracts. Strong Capital Management, Inc. is the investment advisor to the
Funds.
- - DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks,
preferred stocks and securities convertible into common or preferred
stocks. Although the Fund normally emphasizes investment in equity
securities, the Fund has the flexibility to invest in any type of
security that the Advisor believes has the potential for capital
appreciation including up to 100% of its total assets in debt
obligations, including intermediate to long-term corporate or U.S.
government debt securities.
- - INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
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
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of at least three years continuous operation. There can be no assurance
that the Fund will achieve its investment objective.
- - TCI INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to
achieve its investment objective by investing primarily in securities
of foreign companies that meet certain fundamental and technical
standards of selection and, in the opinion of the investment manager,
have potential for appreciation. Under normal conditions, the Fund will
invest at least 65% of its assets in common stocks or other equity
securities of issuers from at least three countries outside the United
States. Securities of United States issuers may be included in the
portfolio from time to time. Although the primary investment of the
Fund will be common stocks (defined to include depository receipts for
common stocks), the Fund may also invest in other types of securities
consistent with the Fund's objective. When the manager believes that
the total return potential of other securities equals or exceeds the
potential return of common stocks, the Fund may invest up to 35% of its
assets in such other securities. There can be no assurance that the
Fund will achieve its objectives.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc., refers to redemptions of securities in kind under
certain conditions, all surrendering or redeeming Contract Owners will
receive cash from the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment
company organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
- - WORLDWIDE 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.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate funds which are sold
only to insurance companies to provide funding for variable life insurance
policies and variable annuity contracts. Van Kampen American Capital Asset
Management, Inc. serves as the Fund's investment adviser.
- - REAL ESTATE SECURITIES FUND
Investment Objective: To seek long-term capital growth by investing in
a portfolio of securities of companies operating in the real estate
industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities,
including common stocks and convertible securities, as well as
non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to
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insurance companies for allocation to separate accounts for the purpose of
funding variable annuity and variable life contracts. Trust portfolios are
managed by Warburg, Pincus Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by
investing primarily in a broadly diversified portfolio of equity
securities of companies, wherever organized, that in the judgment of
"Counsellors" have their principal business activities and interests
outside the United States. The Portfolio will ordinarily invest
substantially all of its assets, but no less than 65% of its total
assets, in common stocks, warrants and securities convertible into or
exchangeable for common stocks. The Portfolio intends to invest
principally in the securities of financially strong companies with
opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a
portfolio of equity securities of small-sized domestic companies. The
Portfolio ordinarily will invest at least 65% of its total assets in
common stocks or warrants of small-sized companies (i.e., companies
having stock market capitalizations of between $25 million and $1
billion at the time of purchase) that represent attractive
opportunities for capital growth. The Portfolio intends to invest
primarily in companies whose securities are traded on domestic stock
exchanges or in the over-the-counter market. The Portfolio's
investments will be made on the basis of their equity characteristics
and securities ratings generally will not be a factor in the selection
process.
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STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1996
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 in some respects more detailed than set
forth in the prospectus and should be read in conjunction with the prospectus
dated October 1, 1996. The prospectus may be obtained from Nationwide Life and
Annuity Insurance Company by writing P. O. Box 16609, Columbus, Ohio 43216-6609,
or calling 1-800-848-6331, TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History.................................1
Services........................................................1
Purchase of Securities Being Offered............................1
Underwriters....................................................2
Calculations of Performance.....................................2
Annuity Payments................................................3
Financial Statements............................................4
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account - B (formerly Financial Horizons VA
Separate Account - 2) is a separate investment account of Nationwide Life and
Annuity Insurance Company ("Company") (formerly Financial Horizons Life
Insurance Company). On April 7, 1988, ownership of the Company changed from
Nationwide Mutual Insurance Company to Nationwide Life Insurance Company. The
Company is a member of the Nationwide Insurance Enterprise and all of the
Company's common stock is owned entirely by Nationwide Life Insurance Company.
The common stock of Nationwide Life Insurance Company is 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 Company, or affiliates of the Company may have
entered into agreements with either the investment adviser or distributor for
several of the underlying Mutual Funds. The agreements relate to administrative
services furnished by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular underlying Mutual Funds.
These fees in no way affect the underlying Mutual Funds' Net Asset Value
or fees paid by the Contract Owner.
The financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may transfer up to 100% of the Contract Value from
the Variable Account to the Fixed Account. However, the Company, at its sole
discretion, reserves the right to limit such transfers to 25% of
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the Contract Value for any 12 month period. Contract Owners may at the maturity
of an Interest Rate Guarantee Period transfer a portion of the Contract Value of
the Fixed Account to the Variable Account. Such portion will be determined by
the Company at its sole discretion (but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing), and will be
declared upon the expiration date of the then current Interest Rate Guarantee
Period. The Interest Rate Guarantee Period expires on the final day of a
calendar quarter. Transfers under this provision must be made within 45 days
after the termination date of the guarantee period. Owners who have entered into
a Dollar Cost Averaging agreement with the Company may transfer from the Fixed
Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to
the first Contract Anniversary. Transfers from the Fixed Account may not be made
within 12 months of any prior Transfer. Transfers must also be made prior to the
Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, a wholly owned subsidiary of Nationwide Life Insurance Company.
During the fiscal years ended December 31, 1995, 1994 and 1993, no underwriting
commissions were 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 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 underlying Mutual Fund's
Net Asset Values will remain constant. It should be noted that a Contract
Owner's investment in the Nationwide Separate Account Trust Money Market Fund
Sub-Account is not guaranteed or insured. Yield of other money market funds may
not be comparable if a different base period or another method of calculation is
used.
All performance advertising shall also include quotations of
standardized average annual total return, calculated in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission,
to facilitate comparison with standardized average annual total return
advertised for a specific period is found by first taking a hypothetical $1,000
investment in each of the Sub-Accounts' units on the first day of the period at
the offering price, which is the Accumulation Unit Value per unit ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and this quotient is taken to the Nth root (N
represents the number of years in the period) and 1 is subtracted from the
result which is then expressed as a percentage, carried to at least the nearest
hundredth of a percent. Standardized average annual total return reflects the
deduction of a maximum $30 Contract Maintenance Charge and a 1.30% Mortality,
Expense Risk and Administration Charge. The redeemable value also reflects the
effect of any applicable Contingent Deferred Sales Charge that may be imposed at
the end of the period (see "Contingent Deferred Sales Charge" located in the
prospectus). No deduction is made for premium taxes which may be assessed by
certain states. Nonstandardized 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 and does not reflect the deduction of any applicable
Contingent Deferred Sales Charge. Reflecting
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the Contingent Deferred Sales Charge would decrease the level of the performance
advertised. The Contingent Deferred Sales Charge is not reflected because the
Contract is designed for long term investment. An assumed initial investment of
$10,000 will be used because that figure more closely approximates the size of a
typical Contract than does the $1,000 figure used in calculating the
standardized average annual total return quotations. The amount of the
hypothetical initial investment used affects performance because the Contract
Maintenance Charge is fixed per Contract charge.
The standardized average annual total return and nonstandardized
average annual total return quotations will be current to the last day of the
calendar quarter preceding the date on which an advertisement is submitted for
publication. Both the standardized average annual 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 Annnuity Payments" located in the
Prospectus.
3
44 of 83
<PAGE> 45
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and
Annuity Insurance Company (formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company) as of December
31, 1995 and 1994, and the related statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Life and Annuity
Insurance Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
Assets 1995 1994
------ -------- --------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $539,214 in 1995; $427,874 in 1994) $555,751 413,764
Equity securities (cost $10,256 in 1995; $9,543 in 1994) 11,407 9,411
Fixed maturities held-to-maturity, at amortized cost (fair value $78,690 in 1994) -- 82,631
Mortgage loans on real estate 104,736 95,281
Real estate 1,117 1,802
Policy loans 94 79
Short-term investments (note 13) 4,844 365
-------- --------
677,949 603,333
-------- --------
Accrued investment income 8,464 8,041
Deferred policy acquisition costs 23,405 41,540
Deferred Federal income tax -- 1,923
Other assets 208 270
Assets held in Separate Accounts (note 8) 257,556 177,933
-------- --------
$967,582 833,040
======== ========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 621,280 583,188
Accrued Federal income tax (note 7):
Current 708 10
Deferred 2,830 --
-------- --------
3,538 10
-------- --------
Other liabilities 5,031 4,663
Liabilities related to Separate Accounts (note 8) 257,556 177,933
-------- --------
887,405 765,794
-------- --------
Shareholder's equity (notes 3, 4, 5 and 12):
Capital shares, $40 par value. Authorized, issued and outstanding 66 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 20,123 15,349
Unrealized gains (losses) on securities available-for-sale, net 4,454 (3,703)
-------- --------
80,177 67,246
-------- --------
Commitments (note 9)
$967,582 833,040
======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues (note 14):
Traditional life insurance premiums $ 674 311 85
Universal life and investment product policy charges 4,322 3,601 2,345
Net investment income (note 5) 49,108 45,030 40,477
Realized (losses) gains on investments (note 5) (702) (625) 420
-------- -------- --------
53,402 48,317 43,327
-------- -------- --------
Benefits and expenses:
Benefits and claims 34,180 29,870 29,439
Amortization of deferred policy acquisition costs 5,508 6,940 4,128
Other operating costs and expenses 6,567 6,320 5,424
-------- -------- --------
46,255 43,130 38,991
-------- -------- --------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 7,147 5,187 4,336
-------- -------- --------
Federal income tax expense (benefit) (note 7):
Current 2,012 2,103 1,982
Deferred 361 (244) (630)
-------- -------- --------
2,373 1,859 1,352
-------- -------- --------
Income before cumulative effect of changes in accounting principles 4,774 3,328 2,984
Cumulative effect of changes in accounting principles, net (note 3) -- -- (514)
-------- -------- --------
Net income $ 4,774 3,328 2,470
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
-------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 2,640 43,960 9,551 21 56,172
Net income -- -- 2,470 -- 2,470
Unrealized gains on equity securities, net -- -- -- 17 17
------- ------- ------- ------
-------
Balance, end of year $ 2,640 43,960 12,021 38 58,659
======= ======= ======= ====== =======
1994:
Balance, beginning of year 2,640 43,960 12,021 38 58,659
Capital contribution -- 9,000 -- -- 9,000
Net income -- -- 3,328 -- 3,328
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 4,698 4,698
Unrealized losses on securities available-
for-sale, net -- -- -- (8,439) (8,439)
------- ------- ------- ------- -------
Balance, end of year $ 2,640 52,960 15,349 (3,703) 67,246
======= ======= ======= ======= =======
1995:
Balance, beginning of year 2,640 52,960 15,349 (3,703) 67,246
Net income -- -- 4,774 -- 4,774
Unrealized gains on securities available-
for-sale, net -- -- -- 8,157 8,157
------- ------- ------- ------- -------
Balance, end of year $ 2,640 52,960 20,123 4,454 80,177
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1994 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,774 3,328 2,470
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Capitalization of deferred policy acquisition costs (6,754) (7,283) (10,351)
Amortization of deferred policy acquisition costs 5,508 6,940 4,128
Amortization and depreciation 878 473 660
Realized losses (gains) on invested assets, net 702 625 (420)
Deferred Federal income tax expense (benefit) 361 (244) (784)
Increase in accrued investment income (423) (750) (1,078)
Decrease (increase) in other assets 62 (126) 326
Increase (decrease) in policy liabilities 627 926 (202)
Increase (decrease) in accrued Federal income tax payable 698 (254) 666
Increase (decrease) in other liabilities 368 (505) 2,843
-------- -------- --------
Net cash provided by (used in) operating activities 6,801 3,130 (1,742)
-------- -------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 41,729 24,850 --
Proceeds from sale of securities available-for-sale 3,070 13,170 134
Proceeds from maturity of fixed maturities held-to-maturity 11,251 8,483 28,829
Proceeds from sale of fixed maturities -- -- 2,136
Proceeds from repayments of mortgage loans on real estate 8,673 5,733 3,804
Proceeds from sale of real estate 655 -- --
Proceeds from repayments of policy loans 50 2 2
Cost of securities available-for-sale acquired (79,140) (94,130) (661)
Cost of fixed maturities held-to maturity acquired (8,000) (15,544) (100,671)
Cost of mortgage loans on real estate acquired (18,000) (11,000) (31,200)
Cost of real estate acquired (10) (52) (2)
Policy loans issued (66) (80) (2)
-------- -------- --------
Net cash used in investing activities (39,788) (68,568) (97,631)
-------- -------- --------
Cash flows form financing activities:
Proceeds from capital contribution -- 9,000 --
Increase in universal life and investment product account balances 79,523 95,254 127,050
Decrease in universal life and investment product account balances (42,057) (40,223) (33,159)
-------- -------- --------
Net cash provided by financing activities 37,466 64,031 93,891
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,479 (1,407) (5,482)
Cash and cash equivalents, beginning of year 365 1,772 7,254
-------- -------- --------
Cash and cash equivalents, end of year $ 4,844 365 1,772
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company, formerly Financial
Horizons Life Insurance Company, (the Company) is a wholly owned
subsidiary of Nationwide Life Insurance Company (NLIC).
The Company is a life insurer licensed in 42 states and the District of
Columbia. The Company sells primarily fixed and variable rate annuities
through banks and other financial institutions. In addition, the
Company sells universal life and other interest-sensitive life
insurance products and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by
the Insurance Departments of states in which it is licensed, and
undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Legal/Regulatory Risk is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs
for the insurer beyond those currently recorded in the financial
statements. The Company mitigates this risk by operating
throughout the United States, thus reducing its exposure to any
single jurisdiction, and also by employing underwriting practices
which identify and minimize the adverse impact of this risk.
Credit Risk is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
sound credit and collection policies and by providing for any
amounts deemed uncollectible.
Interest Rate Risk is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which differ from
statutory accounting practices prescribed or permitted by regulatory
authorities. See note 4.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses for the reporting period. Actual
results could differ significantly from those estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(a) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as held-to-maturity, available-for-sale or
trading. Fixed maturity securities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity and are stated at
amortized cost. Fixed maturity securities not classified as
held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred Federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1995.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
In March, 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121 -
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (SFAS 121). SFAS 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be
disposed of. The statement is effective for fiscal years beginning
after December 15, 1995 and earlier application is permitted.
Previously issued financial statements shall not be restated. The
Company will adopt SFAS 121 in 1996 and the impact on the
financial statements is not expected to be material.
(b) Revenues and Benefits
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of certain annuities with life
contingencies. Premiums for traditional life insurance products
are recognized as revenue when due. Benefits and expenses are
associated with earned premiums so as to result in recognition of
profits over the life of the contract. This association is
accomplished by the provision for future policy benefits.
Universal Life and Investment Products: Universal life products
include universal life, variable universal life and other
interest-sensitive life insurance policies. Investment products
consist primarily of individual deferred annuities and immediate
annuities without life contingencies. Revenues for universal life
and investment products consist of asset fees, cost of insurance,
policy administration and surrender charges that have been earned
and assessed against policy account balances during the period.
Policy benefits and claims that are charged to expense include
benefits and claims incurred in the period in excess of related
policy account balances and interest credited to policy account
balances.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(c) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable selling expenses have been deferred for
universal life and investment products. Deferred policy
acquisition costs are being amortized with interest over the lives
of the policies in relation to the present value of estimated
future gross profits from projected interest margins, asset fees,
cost of insurance, policy administration and surrender charges.
For years in which gross profits are negative, deferred policy
acquisition costs are amortized based on the present value of
gross revenues. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(a).
(d) Separate Accounts
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
statements of income and cash flows except for the fees the
Company receives for administrative services and risks assumed.
(e) Future Policy Benefits
Future policy benefits for annuity policies in the accumulation
phase, universal life and variable universal life policies have
been calculated based on participants' contributions plus interest
credited less applicable contract charges.
(f) Federal Income Tax
The Company files a consolidated Federal income tax return with
Nationwide Mutual Insurance Company (NMIC).
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes, which required a
change from the deferred method of accounting for income tax of
APB Opinion 11 to the asset and liability method of accounting for
income tax. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
The Company has reported the cumulative effect of the change in
method of accounting for income tax in the 1993 statement of
income. See note 3.
(g) Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all short-term investments with original maturities of
three months or less to be cash equivalents.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(h) Reclassification
Certain items in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 presentation.
(3) Changes in Accounting Principles
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of Statement of Financial Accounting Standards No.
115 - Accounting for Certain Investments in Debt and Equity Securities.
As of January 1, 1994, the Company classified fixed maturity securities
with amortized cost and fair value of $380,974 and $399,556,
respectively, as available-for-sale and recorded the securities at fair
value. Previously, these securities were recorded at amortized cost.
The effect as of January 1, 1994, has been recorded as a direct credit
to shareholder's equity as follows:
<TABLE>
<S> <C>
Excess of fair value over amortized cost of fixed maturity securities
available-for-sale $ 18,582
Adjustment to deferred policy acquisition costs (11,355)
Deferred Federal income tax (2,529)
--------
$ 4,698
========
</TABLE>
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in the
1993 statement of income as the cumulative effect of changes in
accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 2(f)) $ (79)
Accrual method of recognizing postretirement benefits other than
pensions (net of tax benefit of $234) (note 11) (435)
-----
$(514)
=====
</TABLE>
(4) Basis of Presentation
The financial statements have been prepared in accordance with GAAP. An
Annual Statement, filed with the Department of Insurance of the State
of Ohio (the Department), is prepared on the basis of accounting
practices prescribed or permitted by such regulatory authority.
Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed. The Company has no material
permitted statutory accounting practices.
The statutory capital shares and surplus of the Company as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$54,978, $48,947 and $35,875, respectively. The statutory net income of
the Company as reported to regulatory authorities for the years ended
December 31, 1995, 1994 and 1993 was $8,023, $6,173 and $3,539,
respectively.
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Investments
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $35,093 36,720 --
Equity securities 713 16 13
Fixed maturities held-to-maturity 4,530 540 34,023
Mortgage loans on real estate 9,106 8,437 7,082
Real estate 273 175 167
Short-term investments 348 207 295
Other 41 19 --
------- ------- -------
Total investment income 50,104 46,114 41,580
Less: investment expenses 996 1,084 1,103
------- ------- -------
Net investment income $49,108 45,030 40,477
======= ======= =======
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $(822) 260 --
Fixed maturities -- -- 856
Mortgage loans on real estate 110 (832) (246)
Real estate and other 10 (53) (190)
----- ----- -----
$(702) (625) 420
===== ===== =====
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Gross unrealized gains (losses) $ 17,688 (14,242)
Adjustment to deferred policy acquisition costs (10,836) 8,545
Deferred Federal income tax (2,398) 1,994
-------- --------
$ 4,454 (3,703)
======== ========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 30,647 (32,692) --
Equity securities 1,283 (190) 26
Fixed maturities held-to-maturity 3,941 (8,407) 5,710
-------- -------- --------
$ 35,871 (41,289) 5,736
======== ======== ========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follow as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 3,492 18 -- 3,510
Obligations of states and political subdivisions 271 -- (1) 270
Debt securities issued by foreign governments 6,177 301 -- 6,478
Corporate securities 332,425 10,116 (925) 341,616
Mortgage-backed securities 196,849 7,649 (621) 203,877
-------- -------- -------- --------
Total fixed maturities 539,214 18,084 (1,547) 555,751
Equity securities 10,256 1,151 -- 11,407
-------- -------- -------- --------
$549,470 19,235 (1,547) 567,158
======== ======== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale were as follow as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 4,442 92 -- 4,534
Obligations of states and political subdivisions 273 -- (21) 252
Debt securities issued by foreign governments 8,517 15 (452) 8,080
Corporate securities 214,332 518 (7,903) 206,947
Mortgage-backed securities 200,310 1,291 (7,650) 193,951
-------- -------- -------- --------
Total fixed maturities 427,874 1,916 (16,026) 413,764
Equity securities 9,543 45 (177) 9,411
-------- -------- -------- --------
$437,417 1,961 (16,203) 423,175
======== ======== ======== ========
</TABLE>
The amortized cost and estimated fair value of fixed maturity corporate
securities held-to-maturity as of December 31, 1994 are $82,631 and
$78,690, respectively. Gross gains of $130 and gross losses of $4,071
were unrealized on those securities.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1995, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
-------- --------
<S> <C> <C>
Due in one year or less $ 39,072 39,427
Due after one year through five years 224,262 231,200
Due after five years through ten years 75,380 77,726
Due after ten years 3,651 3,521
-------- --------
342,365 351,874
Mortgage-backed securities 196,849 203,877
-------- --------
$539,214 555,751
======== ========
</TABLE>
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Proceeds from the sale of securities available-for-sale during
1995 and 1994 were $3,070 and $13,170, respectively, while proceeds
from sales of investments in fixed maturity securities during 1993 were
$2,136. Gross gains of $64 ($373 in 1994 and $205 in 1993) and gross
losses of $6 ($73 1994 and none in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $2,000 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $600.
As permitted by the FASB's Special Report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities, issued in November, 1995, the Company transferred all of
its fixed maturity securities previously classified as held-to-maturity
to available-for-sale. As of December 14, 1995, the date of transfer,
the fixed maturity securities had amortized cost of $77,405, resulting
in a gross unrealized gain of $1,709.
Fixed maturity securities that were non-income producing for the twelve
month period preceding December 31, 1995 had a carrying value of $996
(none in 1994).
Real estate is presented at cost less accumulated depreciation of $81
in 1995 ($97 in 1994) and valuation allowances of $229 in 1995 ($472 in
1994).
As of December 31, 1995, the recorded investment of mortgage loans on
real estate considered to be impaired (under Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of
a Loan as amended by Statement of Financial Accounting Standards No.
118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure) was $966, for which there was no valuation
allowance. During 1995, the average recorded investment in impaired
mortgage loans on real estate was approximately $242 and no interest
income was recognized on those loans.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Allowance, beginning of year $ 860
Reduction of the allowance credited to operations (110)
-----
Allowance, end of year $ 750
=====
</TABLE>
Foreclosures of mortgage loans on real estate were $631 in 1994. No
mortgage loans on real estate were in process of foreclosure or
in-substance foreclosed as of December 31, 1994 .
Fixed maturity securities with an amortized cost of $2,806 and $2,786
as of December 31, 1995 and 1994, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits
The liability for future policy benefits for investment products has
been established based on policy terms, interest rates and various
contract provisions. The average interest rate credited on investment
product policies was approximately 5.6%, 5.3% and 6.0% for the years
ended December 31, 1995, 1994 and 1993, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(7) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 5,249 5,879
Securities available-for-sale -- 4,985
Liabilities in Separate Accounts 3,445 3,111
Mortgage loans on real estate and real estate 338 458
Other assets and other liabilities 708 101
-------- --------
Total gross deferred tax assets 9,740 14,534
-------- --------
Deferred tax liabilities:
Securities available-for-sale 6,308 --
Deferred policy acquisition costs 6,262 12,611
-------- --------
Total gross deferred tax liabilities 12,570 12,611
-------- --------
$ (2,830) 1,923
======== ========
</TABLE>
The Company has determined that valuation allowances are not necessary
as of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that
some portion of the total gross deferred tax assets will not be
realized. All future deductible amounts can be offset by future taxable
amounts or recovery of Federal income tax paid within the statutory
carryback period. In addition, for future deductible amounts for
securities available-for-sale, affiliates of the Company which are
included in the same consolidated Federal income tax return hold
investments that could be sold for capital gains that could offset
capital losses realized by the Company should securities
available-for-sale be sold at a loss.
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------- --------------------- ---------------------
Amount % Amount % Amount %
------------ ------- ------------ ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 2,501 35.0 $ 1,815 35.0 $ 1,518 35.0
Tax exempt interest and dividends
received deduction (150) (2.1) (50) (1.0) (206) (4.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 36 0.8
Other, net 22 0.3 94 1.8 4 0.1
------- ---- ------- ---- ------- ----
Total (effective rate of each year $ 2,373 33.2 $ 1,859 35.8 $ 1,352 31.2
======= ==== ======= ==== ======= ====
</TABLE>
Total Federal income tax paid was $1,314, $2,357 and $1,316 during the
years ended December 31, 1995, 1994 and 1993, respectively.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(8) Disclosures about Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 - Disclosures about
Fair Value of Financial Instruments (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet
financial instruments. SFAS 107 defines the fair value of a financial
instrument as the amount at which the financial instrument could be
exchanged in a current transaction between willing parties. In cases
where quoted market prices are not available, fair value is based on
estimates using present value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Short-term investments and policy loans: The carrying amount
reported in the balance sheets for these instruments approximates
their fair value.
Fixed maturity and equity securities: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Separate Account assets and liabilities: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
Mortgage loans on real estate: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
Investment contracts: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Policy reserves on life insurance contracts: The estimated
fair value is the amount payable on demand. Also included are
disclosures for the Company's limited payment policies, which the
Company has used discounted cash flow analyses similar to those
used for investment contracts with known maturities to estimate
fair value.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------ ----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $555,751 555,751 413,764 413,764
Equity securities 11,407 11,407 9,411 9,411
Fixed maturities held-to-maturity -- -- 82,631 78,690
Mortgage loans on real estate 104,736 111,501 95,281 92,340
Policy loans 94 94 79 79
Short-term investments 4,844 4,844 365 365
Assets held in Separate Accounts 257,556 257,556 177,933 177,933
Liabilities
-----------
Investment contracts 616,984 601,582 579,903 563,331
Policy reserves on life insurance contracts 4,296 4,520 3,285 3,141
Liabilities related to Separate Accounts 257,556 246,996 177,933 168,749
</TABLE>
(9) Additional Financial Instruments Disclosures
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 80% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $8,500 extending into
1996 were outstanding as of December 31, 1995.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 28% (27% in 1994) in any geographic area and no more than 14.8%
(8.2% in 1994) with any one borrower.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------ --------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 1,854 878 8,263 3,940 14,935
East South Central -- -- 1,877 11,753 13,630
Mountain -- -- -- 1,964 1,964
Middle Atlantic 882 1,820 901 -- 3,603
New England -- 895 1,963 -- 2,858
Pacific 1,923 8,600 8,211 8,838 27,572
South Atlantic 3,953 -- 9,928 15,797 29,678
West North Central -- 1,500 -- -- 1,500
West South Central 3,881 969 -- 4,932 9,782
-------- -------- -------- -------- --------
$ 12,493 14,662 31,143 47,224 105,522
======== ======== ======== ======== ========
Less valuation allowances and unamortized discount 786
--------
Total mortgage loans on real estate, net $104,736
========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------ --------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 1,921 2,254 10,290 4,959 19,424
East South Central -- -- 1,921 9,876 11,797
Mountain -- -- -- 1,986 1,986
Middle Atlantic 882 1,872 1,909 -- 4,663
New England -- 921 1,983 -- 2,904
Pacific 1,952 6,873 6,310 4,910 20,045
South Atlantic 1,965 -- 10,049 13,970 25,984
West North Central -- 1,500 -- -- 1,500
West South Central 1,921 978 -- 4,973 7,872
------- ------ ------ ------ -------
$ 8,641 14,398 32,462 40,674 96,175
======= ====== ====== ======
Less valuation allowances and unamortized discount 894
-------
Total mortgage loans on real estate, net $95,281
=======
</TABLE>
(10) Pension Plan
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds an allocation of pension
costs accrued for employees of affiliates whose work efforts benefit
the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance
Companies and Affiliates Retirement Plan was merged with the Farmland
Mutual Insurance Company Employees' Retirement Plan and the Wausau
Insurance Companies Pension Plan to form the Nationwide Insurance
Enterprise Retirement Plan. Immediately prior to the merger, the plans
were amended to provide consistent benefits for service after January
1, 1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1995, 1994 and 1993 were $214, $265 and $131,
respectively.
The net periodic pension cost for the Nationwide Insurance Companies
and Affiliates Retirement Plan as a whole for the years ended December
31, 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and Employers Life
Insurance Company of Wausau, a wholly owned subsidiary of NLIC. Prior
to the merger, the assets of the Nationwide Insurance Companies and
Affiliates Retirement Plan were invested in a group annuity contract of
NLIC.
(11) Postretirement Benefits Other Than Pensions
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106 - Employers'
Accounting for Postretirement Benefits Other Than Pensions (SFAS 106),
which requires the accrual method of accounting for postretirement life
and health care insurance benefits based on actuarially determined
costs to be recognized over the period from the date of hire to the
full eligibility date of employees who are expected to qualify for such
benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $669 ($435 net of related income tax benefit) was
recorded in the 1993 statement of income as a cumulative effect of a
change in accounting principle. See note 3. The adoption of SFAS 106,
including the cumulative effect of the change in accounting principle,
increased the expense for postretirement benefits by $739 to $761 in
1993. Certain affiliated companies elected to amortize their initial
transition obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1995 and 1994 was $808 and $771, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1995 and 1994 was $66 and $119,
respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Information regarding the funded status of the plan as a whole
as of December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) Regulatory Risk-Based Capital and Dividend Restriction
Ohio, the Company's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. The Company exceeds the
minimum risk-based capital requirements.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $70,034
of shareholder's equity, as presented in the accompanying financial
statements, is so restricted as to dividend payments in 1996.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(formerly Financial Horizons Life Insurance Company)
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(13) Transactions With Affiliates
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,844 and $365 as of December 31, 1995
and 1994, respectively, and are included in short-term investments on
the accompanying balance sheets.
Certain annuity products are sold through an affiliated company, which
is a subsidiary of Nationwide Corporation. Total commissions paid to
the affiliate for the three years ended December 31, 1995 were $6,638,
$6,935 and $10,041, respectively.
(14) Segment Information
The Company operates in the long-term savings and life insurance lines
of business in the life insurance industry. Long-term savings
operations include both qualified and non-qualified individual annuity
contracts. Life insurance operations include universal life and
variable universal life issued to individuals. Corporate primarily
includes investments, and the related investment income, which are not
specifically allocated to one of the two operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in
accounting principles for the years ended December 31, 1995, 1994 and
1993 and assets as of December 31, 1995, 1994 and 1993, by business
segment.
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 50,669 45,234 39,684
Life insurance 179 173 187
Corporate 2,554 2,910 3,456
--------- --------- ---------
$ 53,402 48,317 43,327
========= ========= =========
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 4,514 3,739 2,134
Life insurance (387) (996) (1,254)
Corporate 3,020 2,444 3,456
--------- --------- ---------
$ 7,147 5,187 4,336
========= ========= =========
Assets:
Long-term savings 931,939 789,147 693,915
Life insurance 2,565 2,393 2,027
Corporate 33,078 41,500 30,097
--------- --------- ---------
$ 967,582 833,040 726,039
========= ========= =========
</TABLE>
<PAGE> 46
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements and schedule included PAGE
in Prospectus
(Part A):
Condensed Financial Information. N/A
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 45
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide VA Separate Account - B: N/A
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 45
Balance Sheets as of December 46
31, 1995 and 1994.
Statements of Income for the 47
years ended December 31, 1995, 1994 and
1993.
Statements of Shareholder's 48
Equity for the years ended December 31,
1995, 1994 and 1993.
Statements of Cash Flows for 49
the years ended December 31, 1995, 1994
and 1993.
Notes to Financial Statements. 50
65 of 83
<PAGE> 47
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant -
Filed previously in connection with Registration
Statement (SEC File No. 33-86408) on November 14,
1994 and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between
the Registrant and Principal Underwriter - Filed
previously in connection with Registration
Statement (SEC File No. 33-86408) on November 14,
1994 and hereby incorporated by reference.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application - Attached hereto
(6) Articles of Incorporation of Depositor - Filed
previously in connection with Registration
Statement (SEC File No. 33-86408) on November 14,
1994 and hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Attached hereto.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule -
Filed previously in connection with Registration
Statement (SEC File No. 33-86408) on November 14,
1994 and hereby incorporated by reference.
66 of 83
<PAGE> 48
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
67 of 83
<PAGE> 49
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
Robert J. Woodward Executive Vice President-
One Nationwide Plaza Chief Investment Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
68 of 83
<PAGE> 50
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
69 of 83
<PAGE> 51
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Florida Underwriting Manager
Inc.
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management California Investment Securities Agent
Company
Colonial County Mutual insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage Germany Insurance Broker
and Service GMBH
Companies Agency Insurance California Insurance Broker
Services of California
Companies Agency of Alabama, Alabama Insurance Broker
Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies
placed through Brokers
Companies Agency of Kentucky, Kentucky Insurance Broker
Inc.
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
Companies Agency of New York, New York Insurance Broker
Inc.
Companies Agency of Pennsylvania Insurance Broker
Pennsylvania, Inc.
Companies Agency of Phoenix, Arizona Insurance Broker
Inc.
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas Insurance Broker
Texas, Inc.
Countrywide Services Delaware Products Liability, Investigative
Corporation and Claims
Management Services
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
** Employers Life Insurance Wisconsin Life Insurance Company
Company of Wausau
F & B, Inc. Iowa Insurance Agency
</TABLE>
70 of 83
<PAGE> 52
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C> <C>
Farmland Mutual Insurance Iowa Insurance Company
Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Massachusetts Investment Company
Trust
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Self-Insurance Administration Claims
Nevada Examinations and Data Processing
Services
Gates, McDonald & Company of New York Workers Compensation Claims
New York, Inc. Administration
Greater La Crosse Health Plans, Wisconsin Writes Commercial Health and Medicare
Inc. Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Ohio Develops and operates Managed Care
Inc. Delivery System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New York Life Insurance Agency
New York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski
Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of Great Britain Insurance Company
America, Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Iowa Insurance Company
Insurance Company
Nationwide Cash Management Ohio Investment Securities Agent
Company
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within
Redevelopment Corporation the City of Columbus, Ohio
</TABLE>
71 of 83
<PAGE> 53
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<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 Development Ohio Owns, leases and manages commercial
Company real estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
** Nationwide Financial Services, Ohio Registered Broker-Dealer, Investment
Inc. Manager and Administrator
Nationwide General Insurance Ohio Insurance Company
Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Ohio Membership Non-Profit Corporation
Charities, Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer
Corporation
Nationwide Investors Services, Ohio Stock Transfer Agent
Inc.
** Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
** Nationwide Life Insurance Ohio Life Insurance Company
Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Ohio Insurance Company
Company
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
** Nationwide Property Ohio Owns, leases, manages and deals in Real
Management, Inc. Property
* Nationwide Separate Account Massachusetts Investment Company
Trust
NEA Valuebuilder Investor Alabama Life Insurance Agency
Services of Alabama, Inc.
NEA Valuebuilder Investor Arizona Life Insurance Agency
Services of Arizona, Inc.
</TABLE>
72 of 83
<PAGE> 54
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C> <C>
NEA Valuebuilder Investor Massachusetts Life Insurance Agency
Services of Massachusetts, Inc.
NEA Valuebuilder Investor Montana Life Insurance Agency
Services of Montana, Inc.
NEA Valuebuilder Investor Nevada Life Insurance Agency
Services of Nevada, Inc.
NEA Valuebuilder Investor Ohio Life Insurance Agency
Services of Ohio, Inc.
NEA Valuebuilder Investor Oklahoma Life Insurance Agency
Services of Oklahoma, Inc.
NEA Valuebuilder Investor Texas Life Insurance Agency
Services of Texas, Inc.
NEA Valuebuilder Investor Wyoming Life Insurance Agency
Services of Wyoming
NEA Valuebuilder Investor Delaware Life Insurance Agency
Services, Inc.
NEA Valuebuilder Services Massachusetts Life Insurance Agency
Insurance Agency, Inc.
Neckura General Insurance Germany Insurance Company
Company
Neckura Holding Company Germany Administrative Service for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Massachusetts Markets and Administers Deferred
Insurance Agency, Inc. Compensation Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred
Compensation Plans for Public Employees
Pension Associates of Wausau, Wisconsin Pension plan administration, record
Inc. keeping and consulting and compensation
consulting
Public Employees Benefit Delaware Marketing and Administration of Deferred
Services corporation Employee Compensation Plans for Public
Employees
Public Employees Benefit Alabama Markets and Administers Deferred
Services Corporation of Alabama Compensation Plans for Public Employees
Public Employees Benefit Arkansas Markets and Administers Deferred
Services Corporation of Arkansas Compensation Plans for Public Employees
Public Employees Benefit Montana Markets and Administers Deferred
Services Corporation of Montana Compensation Plans for Public Employees
Public Employees Benefit New Mexico Markets and Administers Deferred
Services Corporation of New Compensation Plans for Public Employees
Mexico
</TABLE>
73 of 83
<PAGE> 55
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF Chart) unless
COMPANY ORGANIZATION otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C> <C>
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura Insurance
Insurance Group Group
Wausau Business Insurance Illinois Insurance Company
Company
Wausau General Insurance Illinois Insurance Company
Company
Wausau Insurance Company United Kingdom Insurance and Reinsurance Company
(U.K.) Limited
Wausau International California Special Risks, Excess and Surplus Lines
Underwriters Insurance Underwriting Manager
** Wausau Preferred Health Wisconsin Insurance and Reinsurance Company
Insurance Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Wisconsin Insurance Company
Company
** West Coast Life Insurance California Life Insurance Company
Company
</TABLE>
74 of 83
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(see Attached Chart)
STATE unless otherwise
OF indicated
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Account- Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
A Separate Account
* Nationwide VA Separate Account- Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
B Separate Account
Nationwide VA Separate Account- Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
C Separate Account
* Nationwide VA Separate Account- Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Q Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Ohio Nationwide Life Separate Issuer of Annuity Contracts
Variable Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-2 Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-3 Account Contracts
* Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
75 of 83
<PAGE> 57
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| NATIONWIDE CORPORATION (NW Corp) |
| Common Stock: Control: |
| ------------- ------- |
| 13,642,432 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2
</TABLE>
<PAGE> 62
Item 27. NUMBER OF CONTRACT OWNERS
N/A.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by the Company of any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that such person
is or was a director, officer or employee of the Company, against
expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law of the
State of Ohio. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide DCVA II, Nationwide
Variable Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-8, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C, Nationwide VL Separate Account-A, Nationwide VLI
Separate Account-2, Nationwide VLI Separate Account-3, NACo
Variable Account and the Nationwide Variable Account, all of
which are separate investment accounts of the Company or its
affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, Ohio 43215
D. Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief
One Nationwide Plaza Financial Officer and Director
Columbus, Ohio 43215
78 of 83
<PAGE> 63
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
Robert J. Woodward Executive Vice President - Chief
One Nationwide Plaza Investment Officer and Director
Columbus, Ohio 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
<TABLE>
<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>
79 of 83
<PAGE> 64
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Code is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
no-action letter to the American Council of Life Insurance
(publicly available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with Section
403(b)(11) of the Code.
80 of 83
<PAGE> 65
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
October 1, 1996
81 of 83
<PAGE> 66
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company
(formerly Financial Horizons Life Insurance Company):
We consent to the use of our report included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
July 12, 1996
82 of 83
<PAGE> 67
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE VA
SEPARATE ACCOUNT - B, has caused this Registration Statement to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 12th day of July,
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 12th day of
July, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- -----------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- -----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -----------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -----------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -----------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- -----------------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- -----------------------------------------
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer - Nationwide
- ----------------------------------------- Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- -----------------------------------------
David O. Miller
C. RAY NOECKER Director
- -----------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ----------------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ----------------------------------------- -----------------------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -----------------------------------------
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>
83 of 83
<PAGE> 68
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
NATIONWIDE VA SEPARATE ACCOUNT-B
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY
EXHIBITS TO FORM N-4
SEC FILE NO. _______________
<PAGE> 69
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the Nationwide VA Separate Account-A, the Nationwide VA Separate Account-B,
the Nationwide VA Separate Account-C and the Nationwide VA Separate Account-Q
and the registration of fixed interest rate options subject to a market value
adjustment offered under some or all of the aforementioned Individual Variable
Annuity contracts in connection with the Nationwide Multiple Maturity Separate
Account-A; and the registration of variable life insurance policies in
connection with the Nationwide VL Separate Account-A of Nationwide Life and
Annuity Insurance Company, hereby constitutes and appoints D. Richard McFerson,
Joseph J. Gasper, Gordon E. McCutchan, W. Sidney Druen, and Joseph P. Rath, and
each of them with power to act without the others, his/her attorney, with full
power of substitution and resubstitution, for and in his/her name, place and
stead, in any and all capacities, to approve, and sign such Registration
Statements and any and all amendments thereto, with power to affix the corporate
seal of said corporation thereto and to attest said seal and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and seals
as of this 4th day of April, 1996.
<TABLE>
<S> <C>
/s/ LEWIS J. ALPHIN /s/ DAVID O. MILLER
- ------------------------------------------------------ ------------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ KEITH W. ECKEL /s/ C. RAY NOECKER
- ------------------------------------------------------ ------------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ WILLARD J. ENGEL /s/ ROBERT A. OAKLEY
- ------------------------------------------------------ ------------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President
and Chief Financial Officer
/s/ FRED C. FINNEY
- ------------------------------------------------------ /s/ JAMES F. PATTERSON
Fred C. Finney, Director ------------------------------------------------------
James F. Patterson, Director
/s/ CHARLES L. FUELLGRAF, JR.
- ------------------------------------------------------ /s/ ARDEN L. SHISLER
Charles L. Fuellgraf, Jr., Director ------------------------------------------------------
Arden L. Shisler, Director
/s/ JOSEPH J. GASPER
- ------------------------------------------------------ /s/ ROBERT L. STEWART
Joseph J. Gasper, President and ------------------------------------------------------
Chief Operating Officer and Director Robert L. Stewart, Director
/s/ HENRY S. HOLLOWAY /s/ NANCY C. THOMAS
- ------------------------------------------------------ ------------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ D. RICHARD MCFERSON /s/ HAROLD W. WEIHL
- ------------------------------------------------------ ------------------------------------------------------
D. Richard McFerson, Chairman and Harold W. Weihl, Director
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
</TABLE>
<PAGE> 1
EXHIBIT NO. 4
THE VARIABLE ANNUITY CONTRACT FORM
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
1-800-533-5622
(Hereinafter called the Company)
- -------------------------------------------------------------------------------
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY will make annuity payments to the
Annuitant starting on the Annuitization Date, as set forth in the Contract.
This Contract is provided in return for: (1) the application, a copy of which is
attached to and made a part of this Contract; and (2) the purchase payments made
as required in the Contract.
TEN DAY LOOK
To be sure that the Owner is satisfied with this Contract, the Owner has ten
days to examine the Contract and return it to the Home Office or the agent
through whom it was purchased for any reason. When the Contract is received in
the Home Office, the Company will return the Purchase Payment to the Owner,
without deduction for any sales charges or administration fees as of the date of
cancellation, where permitted by state law.
Executed for the Company on the Date of Issue.
/s/ Gordon E. McCutcheon /s/ Jospeh J. Gasper
Secretary President
READ YOUR CONTRACT CAREFULLY
Individual Flexible Purchase Payment Deferred Variable Annuity,
Non-Participating.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE, MAY INCREASE OR
DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE NET INVESTMENT FACTOR, AND
ARE NOT GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
NOTICE - The details of the variable provisions in the
Contract may be found on Pages 9, 10, 11, 12, and 14.
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
DATA PAGE INSERT
<S> <C>
DEFINITIONS
The Company................................................................................................... 1
Accumulation Unit............................................................................................. 1
Annuitant..................................................................................................... 1
Annuitization Date............................................................................................ 1
Annuity Commencement Date..................................................................................... 1
Annuity Payment Option........................................................................................ 1
Annuity Unit.................................................................................................. 1
Beneficiary................................................................................................... 1
Contingent Beneficiary........................................................................................ 1
Contingent Designated Annuitant............................................................................... 1
Contingent Owner.............................................................................................. 1
Contract Anniversary.......................................................................................... 1
Contract Owner (Owner)........................................................................................ 1
Contract Value................................................................................................ 1
Contract Year................................................................................................. 2
Date of Issue................................................................................................. 2
Designated Annuitant.......................................................................................... 2
Distribution.................................................................................................. 2
Fixed Account................................................................................................. 2
Fixed Annuity................................................................................................. 2
Home Office................................................................................................... 2
Non-Qualified Contract........................................................................................ 2
Non-Qualified Plan............................................................................................ 2
Purchase Payment Anniversary.................................................................................. 2
Purchase Payment Year......................................................................................... 2
Qualified Contract............................................................................................ 2
Qualified Plan................................................................................................ 2
Valuation Date................................................................................................ 2
Valuation Period.............................................................................................. 2
Variable Account.............................................................................................. 2
Variable Annuity.............................................................................................. 2
GENERAL PROVISIONS
Contract Maintenance Charge................................................................................... 3
Deduction For Premium Taxes................................................................................... 3
Mortality And Expense Risk Charge............................................................................. 3
Administration Charge......................................................................................... 3
Beneficiary Provisions........................................................................................ 3
Contract Ownership Provisions................................................................................. 3
Death Of Designated Annuitant................................................................................. 4
Death Of Annuitant............................................................................................ 4
Death Of Owner................................................................................................ 4
Alteration Or Modification.................................................................................... 5
Assignment.................................................................................................... 5
Entire Contract............................................................................................... 5
Misstatement Of Age Or Sex.................................................................................... 6
Evidence Of Survival.......................................................................................... 6
Protection Of Proceeds........................................................................................ 6
Reports....................................................................................................... 6
Incontestability.............................................................................................. 6
Contract Settlement........................................................................................... 6
Number And Gender............................................................................................. 6
Non-Participating............................................................................................. 6
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ACCUMULATION PROVISIONS
Surrender..................................................................................................... 7
Contingent Deferred Sales Charge.............................................................................. 7
Reduction Or Elimination Of Contingent Deferred Sales Charge.................................................. 7
Surrenders Without Charge..................................................................................... 8
Surrender Value............................................................................................... 8
Suspension Or Delay In Payment Of Surrender................................................................... 8
Flexible Purchase Payments.................................................................................... 8
First Purchase Payment........................................................................................ 9
No Default.................................................................................................... 9
Change In Purchase Payments................................................................................... 9
Allocation Of Purchase Payments............................................................................... 9
Contract Value................................................................................................ 9
Fixed Account Contract Value.................................................................................. 9
Interest To Be Credited....................................................................................... 9
Variable Account Contract Value............................................................................... 9
The Variable Account.......................................................................................... 10
Investments Of The Variable Account........................................................................... 10
Sub-Accounts.................................................................................................. 10
Valuation Of Assets........................................................................................... 10
Variable Account Accumulation Units........................................................................... 10
Variable Account Accumulation Unit Value...................................................................... 10
Net Investment Factor......................................................................................... 10
Fixed Account Provisions...................................................................................... 11
Transfer Provisions........................................................................................... 11
Distribution Provisions....................................................................................... 11
Exchange Privilege............................................................................................ 12
ANNUITIZATION PROVISIONS
General....................................................................................................... 13
Annuitization................................................................................................. 13
Change Of Annuity Commencement Date........................................................................... 13
Change Of Annuity Payment Option.............................................................................. 13
Annuity Payment Options....................................................................................... 13
Supplementary Agreement....................................................................................... 13
Frequency And Amount Of Payments.............................................................................. 13
Fixed Annuity Provisions...................................................................................... 14
Variable Annuity.............................................................................................. 14
Determination Of First Variable Annuity Payment............................................................... 14
Annuity Unit Value............................................................................................ 14
Variable Annuity Payments After The First Payment............................................................. 14
ANNUITY PAYMENT OPTIONS
General....................................................................................................... 14
Life Annuity.................................................................................................. 14
Joint And Last Survivor Annuity............................................................................... 14
Life Annuity With 100 Or 240 Monthly Payments................................................................. 14
ANNUITY TABLES...................................................................................................... 15
</TABLE>
<PAGE> 5
DEFINITIONS
THE COMPANY - The Company is the Nationwide Life and Annuity Insurance Company.
ACCUMULATION UNIT - An Accumulation Unit is an accounting unit of measure. It is
used to calculate the Variable Account Contract Value prior to the
Annuitization Date.
ANNUITANT - The Annuitant is the person actually receiving annuity payments and
upon whose continuation of life any annuity payment involving life
contingencies depends.
ANNUITIZATION DATE - The Annuitization Date is the date annuity payments
actually begin.
ANNUITY COMMENCEMENT DATE - The Annuity Commencement Date is the date on which
annuity payments are to commence. Such date is the date shown on the Data
Page, unless changed.
ANNUITY PAYMENT OPTION - The Annuity Payment Option is the method for making
annuity payments. Several options are available under this Contract. The
Annuity Payment Option is the form named in the application, unless
changed.
ANNUITY UNIT - An Annuity Unit is an accounting unit of measure used to
calculate the value of Variable Annuity payments.
BENEFICIARY - The Beneficiary is the person named in the application and is
subject to change by the Owner. The Beneficiary may be the recipient of
certain benefits under this Contract when the Owner, Annuitant, or
Designated Annuitant dies.
CONTINGENT BENEFICIARY - The Contingent Beneficiary is the person named in the
application and is subject to change by the Owner. The Contingent
Beneficiary may be the recipient of certain benefits under this Contract if
the Beneficiary is not living when the Owner, Annuitant, or Designated
Annuitant dies.
CONTINGENT DESIGNATED ANNUITANT - The Contingent Designated Annuitant is named
in the application and [is] subject to change by the Owner. If the Owner
wishes to name a Contingent Designated Annuitant he must do so in the
application. The Contingent Designated Annuitant may be the recipient of
certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named in the application, all provisions of the Contract which
are based on the death of the Designated Annuitant will be based on the
death of the last survivor of the Designated Annuitant and the Contingent
Designated Annuitant. The Owner's right to name a Contingent Designated
Annuitant may be restricted under the provisions of the retirement or
deferred compensation plan for which this Contract is issued.
CONTINGENT OWNER - The Contingent Owner is named in the application and is
subject to change by the Owner. If the Owner wishes to name a Contingent
Owner, he must do so in the application. The Contingent Owner may be the
recipient of certain rights or benefits under this Contract when the Owner
dies before the Annuitization Date. The Owner's right to name a Contingent
Owner may be restricted under the provisions of the retirement or deferred
compensation plan for which this Contract is issued.
CONTRACT ANNIVERSARY - A Contract Anniversary is an anniversary of the Contract
Issue Date as shown on the Data Page.
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, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date. The Owner is the person named in
the application, unless changed.
CONTRACT VALUE - The Contract Value is the sum of the value of all Variable
Account Accumulation Units attributable to the Contract plus any amount
held under the Contract in the Fixed Account.
1
<PAGE> 6
DEFINITIONS
(CONTINUED)
CONTRACT YEAR - A Contract Year is each Contract Anniversary.
DATE OF ISSUE - The Date of Issue is shown on the Data Page.
DESIGNATED ANNUITANT - The Designated Annuitant is the person named, prior to
the Annuitization Date, to receive annuity payments. The Designated
Annuitant is named on the Data Page, unless changed. The Company reserves
the right to reject any change of the Designated Annuitant which has been
made without the prior consent of the Company.
DISTRIBUTION - A Distribution is any payment of part or all of the Contract
Value.
FIXED ACCOUNT - The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ANNUITY - A Fixed Annuity is a series of payments which are guaranteed by
the Company as to dollar amount during the Annuitization period.
HOME OFFICE - The Home Office is the main office of the Company located in
Columbus, Ohio.
NON-QUALIFIED CONTRACT - A Non-Qualified Contract is a Contract issued to fund a
Non-Qualified Plan.
NON-QUALIFIED PLAN - A Non-Qualified Plan is a retirement program which does not
receive favorable tax treatment under the provisions of the Internal
Revenue Code.
PURCHASE PAYMENT ANNIVERSARY - A Purchase Payment Anniversary is an anniversary
of the date a purchase payment is made under the Contract.
PURCHASE PAYMENT YEAR - A Purchase Payment Year is each year starting with the
date a purchase payment is made and each Purchase Payment Anniversary
thereafter.
QUALIFIED CONTRACT - A Qualified Contract is a Contract issued to fund a
Qualified Plan.
QUALIFIED PLAN - A Qualified Plan is a retirement program which receives
favorable tax treatment under the provisions of the Internal Revenue Code.
VALUATION DATE - A Valuation Date is each day the New York Stock Exchange and
the Company's Home Office are open for business. It may also be any other
day during which there is a sufficient degree of trading of the Variable
Account's Mutual Fund shares such that the current net asset value of its
Accumulation Units might be materially affected.
VALUATION PERIOD - A Valuation Period is the interval of time between one
Valuation Date and the next Valuation Date. It is measured from the closing
of business of the New York Stock Exchange and ending at the close of
business for the next succeeding Valuation Date.
VARIABLE ACCOUNT - The Variable Account is named on the Data Page. It is a
separate investment account of the Company designated as the Nationwide
Variable Account-II into which Variable Account purchase payments are
allocated.
VARIABLE ANNUITY - A Variable Annuity is a series of payments which: (1) are not
predetermined or guaranteed as to dollar amount; and (2) vary in amount
with the investment experience of the Variable Account.
2
<PAGE> 7
GENERAL PROVISIONS
CONTRACT MAINTENANCE CHARGE
This charge is a deduction of $30.00 made on each Contract Anniversary, and on
any date that full Contract Value is surrendered if such Surrender occurs on any
date other than a Contract Anniversary. This charge will be allocated between
the Fixed and Variable Accounts in the same percentages as the purchase payment
investment allocations are to the Fixed and Variable Accounts.
DEDUCTION FOR PREMIUM TAXES
Any premium taxes levied by a state or other governmental entity will be charged
against the Contract Value. The Company will deduct such taxes from the Contract
Value at the time of Annuitization, except in those states which require such
taxes to be paid when purchase payments are made.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a Mortality and Expense Risk Charge equal, on an annual
basis, to 1.25% of the daily net asset value of the Variable Account. This
deduction is made to compensate the Company for assuming the mortality risks and
expense risks under this Contract. The deduction will be: (1) made from each
Sub-Account; (2) computed on a daily basis; and (3) made in the same proportion
that the Contract Value in each Sub-Account bears to the total Contract Value in
the Variable Account.
ADMINISTRATION CHARGE
The Company will deduct an Administration Charge equal, on an annual basis, to
0.05% of the daily net asset value of the Variable Account. This deduction is
made to reimburse the Company for expense incurred in the administration of the
Contract and of the Variable Account. The deduction will be: (1) made from each
Sub-Account; (2) computed on a daily basis; and (3) made in the same proportion
that the Contract Value in each Sub-Account bears to the total Contract Value in
the Variable Account.
BENEFICIARY PROVISIONS
The Beneficiary and any Contingent Beneficiary are named in the application,
unless changed. If the Beneficiary dies prior to the death of the Designated
Annuitant or Annuitant, the Contingent Beneficiary becomes the Beneficiary.
Unless the Owner has provided otherwise, if there are two or more Beneficiaries,
they will receive equal shares. If there is no named Beneficiary or Contingent
Beneficiary when the Designated Annuitant or Annuitant has died, all rights and
interests of the Beneficiary will vest in the Contract Owner or the Contract
Owner's estate.
Subject to the terms of any existing assignment, the Owner may name a new
Beneficiary or a new Contingent Beneficiary at any time. Any new choice of
Beneficiary or Contingent Beneficiary will automatically revoke any prior choice
of Beneficiary or Contingent Beneficiary. Any request for change must be: (1)
made in writing; and (2) received at the Home Office. The change will become
effective as of the date the written request is signed, whether or not the
Designated Annuitant or the Annuitant is living at the time of receipt. A new
choice of Beneficiary or Contingent Beneficiary will not apply to any payment
made or action taken by the Company prior to the time it was received.
CONTRACT OWNERSHIP PROVISIONS
The Owner has all rights under the Contract, unless otherwise provided. If the
purchaser names someone other than himself as Owner, the purchaser would have no
rights under the Contract. The Owner, during the lifetime of the Designated
Annuitant and prior to the Annuitization Date, is the person named in the
application, unless changed. If the Owner dies before the Annuitization Date, a
Distribution will be made in accordance with the Death of Owner provision.
The Owner may name a new Owner or Contingent Owner at any time prior to the
Annuitization Date. (However, a new Owner may not be named after one of the
events under the Distribution Provisions has occurred.) Any new choice of Owner
or Contingent Owner will automatically revoke any prior choice of Owner or
Contingent Owner. Any request for change must be: (1) made in writing; and (2)
received at the Home Office. The request for change must be a "Proper Written
Application" and include a signature guarantee as specified in the "Surrender"
section. The change will become effective as of the date the written request is
signed. A new choice of Owner or Contingent Owner will not apply to any payment
made or action taken by the Company prior to the time it is received.
3
<PAGE> 8
GENERAL PROVISIONS
(CONTINUED)
CONTRACT OWNERSHIP PROVISIONS (CONTINUED)
The Designated Annuitant becomes the Annuitant and becomes the Owner on the
Annuitization Date. The Annuitant's rights regarding ownership may be restricted
under the provisions of the retirement or deferred compensation plan for which
this Contract is issued.
A change in the Designated Annuitant or Contingent Designated Annuitant must be
received before the Annuitization Date and meet the following conditions: (1)
the request for such change must be made by the Owner; (2) the request must be
made in writing on a form acceptable to the Company; (3) the request must be
signed by the Owner and the person to be named as Designated Annuitant or
Contingent Designated Annuitant; and (4) such change is subject to underwriting
and approval by the Company.
DEATH OF DESIGNATED ANNUITANT
A death benefit may be payable to the Beneficiary when the Designated Annuitant
has died.
If the Designated Annuitant dies prior to the Annuitization Date, the value of
the death benefit will be determined as of the Valuation Date on or next after
the date on which the following are received at the Home Office.
1. Proof of the death of the Designated Annuitant; and
2. Written request for either a lump sum payment or an Annuity Payment
Option.
Proof of death is:
1. a copy of a certified death certificate
2. a copy of a certified decree of a court of a competent jurisdiction as to
the finding of death
3. a written statement by a medical doctor who attended the deceased; or
4. any other proof satisfactory to the Company.
The death benefit is payable to the Beneficiary unless:
The Owner has named a Contingent Designated Annuitant. In such case, the
death benefit is payable upon the death of the last survivor of the
Designated Annuitant and Contingent Designated Annuitant.
If a lump sum payment is selected by the Beneficiary, payment will be made
within seven days of receipt of such request and proof of death. If an Annuity
Payment Option is desired, such option must be selected within a ninety day
period. The ninety day period starts with the date of receipt of notice of the
Designated Annuitant's death.
If neither a lump sum payment nor an Annuity Payment Option is selected, the
death benefit will be paid in lump sum to the payee at the end of such ninety
day period.
If the Designated Annuitant dies prior to the first day of the calendar month
after his 75th birthday the dollar amount of the death benefit will be the
greater of: (1) the Contract Value; or, (2) the sum of all purchase payments,
less any amounts surrendered.
If: (1) the Contract Owner has requested an Annuity Commencement Date later than
the first day of the calendar month after the Designed Annuitant's 75th
birthday; (2) the Company has approved the request; and (3) the Designated
Annuitant dies after such date; the dollar amount of the death benefit will be
equal to the Contract Value.
DEATH OF ANNUITANT
If the Annuitant dies after the Annuitization Date, the death benefit payable,
if any, will be based on the Annuity Payment Option selected.
DEATH OF OWNER
In the event the Owner dies, the following rules will apply in those situations
where the Contract was not issued in connection with a Qualified Plan.
4
<PAGE> 9
GENERAL PROVISIONS
(CONTINUED)
DEATH OF OWNER (CONTINUED)
1. In the event the Contract Owner dies prior to the Annuitization Date, the
entire interest [less any applicable deductions (which may include a
Contingent Deferred Sales Charge),] must be distributed within five years
after the death of the Contract Owner, unless the payee elects to receive
Distribution in the form of a life annuity or an annuity for a period
certain not exceeding his life expectancy. If the payee does elect to
receive such annuity, payments must begin within one year from the date of
the Owner's death. Any Distribution will be paid in accordance with one of
the following three elections:
(a) If the Contract Owner elects in the application, he may have the
Distribution paid to his estate. If the Owner wishes to have the
Distribution paid to his estate, he must make the election in the
application. If such election is made in the application, the
Distribution must be distributed to the estate within five years after
the death of the Owner.
(b) In lieu of and as an alternative to naming his estate to receive the
Distribution, the Owner may name a Contingent Owner. If the Contract
Owner names a Contingent Owner, the Distribution will be paid to the
Contingent Owner.
(c) If neither the Owner's estate nor a Contingent Owner has been named to
receive the Distribution, or if the Contingent Owner predeceases the
Owner, the death benefit will be paid to the Designated Annuitant. If
the Owner is the Designated Annuitant, the Distribution will be paid
to the Beneficiary under the Death of Designated Annuitant provisions.
If the Contract Owner and the Designated Annuitant are not the same
person, no Death Benefit is payable upon the death of the Contract
Owner, although a Distribution is still payable.
2. In the event the recipient of the Distribution is the Contract Owner's
spouse, the Contract may be continued by such spouse without compliance
with the Distribution rules set forth herein.
3. In the event the Contract Owner dies on or after the Annuitization Date,
and before the entire interest has been distributed, any remaining portion
of such interest 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.
ALTERATION OR MODIFICATION
All changes in or to the terms of the Contract must be: (1) made in writing; and
(2) signed by the President or Secretary of the Company. No other person can
alter or change any of the terms or conditions of this Contract.
ASSIGNMENT
Unless otherwise provided, the Owner may assign all rights under this Contract
at any time during the lifetime of the Designated Annuitant, prior to the
Annuitization Date. The Company will not be bound by any assignment until
written notice is received and recorded at the Home Office. The Company is not
responsible for the validity or tax consequences of any assignment. An
assignment will not apply to any payment made or action taken by the Company
prior to the time it was recorded.
If this Contract is a Non-Qualified Contract, the value of any portion of the
Contract which is assigned or pledged may be treated like a cash withdrawal for
federal tax purposes.
If this Contract is issued to fund a retirement plan pursuant to Internal
Revenue Code Sections 401, 403, 404, or 408, it may not be assigned, pledged or
otherwise transferred except as allowable by applicable law.
ENTIRE CONTRACT
This document is the whole Contract between the Owner and the Company. This
Contract, Data Page and Endorsement(s) (if any), make up the entire Contract.
5
<PAGE> 10
GENERAL PROVISIONS
(CONTINUED)
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant or Designated Annuitant has been misstated,
all payments and benefits under this Contract will be adjusted. Payments and
benefits will be made, based on the correct information. Proof of age of an
Annuitant or Designated Annuitant may be required at any time, on a form
satisfactory to the Company. When the age or sex of an Annuitant or Designated
Annuitant has been misstated, the dollar amount of any overpayment will be
deducted from the next payment or payments due under this Contract. The dollar
amount of any underpayment made by the Company as a result of any such
misstatement will be paid in full with the next payment due under this Contract.
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, proof that such person is living may be required by the Company.
Such proof may be required prior to making the payments.
PROTECTION OF PROCEEDS
Payments under this Contract are not assignable by any Beneficiary prior to the
time they are due. Payments are not subject to the claims of creditors or to
legal process, except as mandated by applicable laws.
REPORTS
At least once each year, prior to the Annuitization Date, a Report showing the
Contract Value will be provided to the Owner.
INCONTESTABILITY
This Contract will not be contested.
CONTRACT SETTLEMENT
The Company may require this Contract to be returned to the Home Office prior to
making any payments. All sums payable to or by the Company under this Contract
are payable at the Home Office.
NUMBER AND GENDER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular; and all references in the male gender will include the
female and neuter genders.
NON-PARTICIPATING
This Contract is non-participating. It will not share in the surplus of the
Company.
6
<PAGE> 11
ACCUMULATION PROVISIONS
SURRENDER
The Owner may Surrender part or all of the Contract Value at any time this
Contract is in force and prior to the earlier of the Annuitization Date or the
death of the Designated Annuitant. For the purpose of calculating the Contingent
Deferred Sales Charge, and in order to minimize the applicable Contingent
Deferred Sales Charge, all amounts withdrawn are deemed to be withdrawn on a
first-in first-out basis i.e., all withdrawals are deemed to come from the
oldest purchase payments first. (Note - for tax purposes, withdrawals might be
treated differently.) All Surrenders will have the following conditions:
1. The request for Surrender must be in writing.
2. The Surrender Value will be paid to the Owner when proper written
application and the Contract are received at the Home Office.
3. The Company reserves the right to require that the signature(s) be
guaranteed by a member firm of a major stock exchange, Commercial Bank or
a Savings & Loan. Payment of the Variable Account Contract Value will be
made within seven days of receipt of both proper written application and
the Contract. Payment of the Fixed Account Contract Value may be deferred
up to six months following receipt of application.
4. When written application and the Contract are received, the Company will
Surrender a number of Variable Account Accumulation Units and an amount
from the Fixed Account needed to equal: (a) the dollar amount requested;
plus (b) any Contingent Deferred Sales Charge which applies; plus (c) any
Contract Maintenance Charge which applies.
5. Unless the Owner has instructed otherwise, if a partial Surrender is
requested, the Surrender will be made as follows: (a) from the Variable
Account Contract Value; and (b) from the Fixed Account Contract Value. The
amounts surrendered from the Fixed Account and the Variable Account, will
be in the same proportion that the Owner's interest in the Fixed Account
and Variable Account bears to the total Contract Value.
CONTINGENT DEFERRED SALES CHARGE
If part or all of the Contract Value is surrendered, a Contingent Deferred Sales
Charge may be applied at the time of a Surrender. The Contingent Deferred Sales
Charge will be equal to no more than 7% of the lesser of: (1) the total of all
purchase payments made within 84 months prior to the date of the request for
Surrender; or (2) the amount surrendered.
The Contingent Deferred Sales Charge applies to purchase payments as follows:
CONTINGENT DEFERRED SALES CHARGE
TABLE FOR CONTRACTS ISSUED ON OR AFTER JULY, 1988
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE SALES CHARGE YEARS FROM DATE OF SALES CHARGE
OF PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
- ------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
A Contingent Deferred Sales Charge will not be assessed against any values which
have been held under the Contract for at least 84 months or any values applied
to purchase an annuity.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The amount of Contingent Deferred Sales Charges on the Contracts may be reduced
when sales of the Contracts are made to a trustee, employer or similar entity
pursuant to a retirement plan or when sales are made in a similar arrangement
where offering the Contracts to a group of individuals under such a program
results in savings of sales expenses. The entitlement to such a reduction in
Contingent Deferred Sales Charges will be determined by the Company.
7
<PAGE> 12
ACCUMULATION PROVISIONS
(CONTINUED)
SURRENDERS WITHOUT CHARGE
Once each year, starting with the second Purchase Payment Year of a purchase
payment, the Owner may Surrender, without a Contingent Deferred Sales Charge, an
amount equal to 10% of the purchase payment at the time of surrender. This free
withdrawal privilege is non-cumulative and must be used in the year available.
After a purchase payment's seventh eighth Purchase Payment Anniversary, the
Owner may Surrender without charge: (1) 100% of the purchase payment amount,
less (2) any amount of the purchase payment previously surrendered.
SURRENDER VALUE
The Surrender Value is the amount that will be paid if the full Contract Value
is surrendered. The Surrender Value at any time will be:
1. The Contract Value; less
2. Any Contingent Deferred Sales Charge which applies; less
3. Any Contract Maintenance Charge which applies.
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER
The Company has the right to suspend or delay the date of any Surrender payment
from the Variable Account for any period:
1. When the New York Stock Exchange is closed;
2. When trading on the New York Stock Exchange is restricted;
3. When an emergency exists as a result of which: (a) disposal of securities
held in the Variable Account is not reasonably practicable; or (b) it is
not reasonably practicable to fairly determine the value of the net assets
of the Variable Account;
4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders; or
5. When the request for Surrender is not made in writing or when the
signature(s) of the Owner are not properly guaranteed.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth in numbers 2,3, and 4 above exist.
The Company further reserves the right to delay payment of a total Surrender of
Fixed Account Contract Value for up to six months in those states where
applicable law requires the Company to reserve such right.
FLEXIBLE PURCHASE PAYMENTS
The Contract is bought for: (1) The First Purchase Payment; and (2) purchase
payments made after the First, if any. The cumulative total of all purchase
payments under this and any other annuity contract(s) issued by the Company
having the same Designated Annuitant may not exceed $1,000,000 without the prior
consent of the Company.
8
<PAGE> 13
ACCUMULATION PROVISIONS
(CONTINUED)
FIRST PURCHASE PAYMENT
The First Purchase Payment is due on the Date of Issue. The initial First Year
Purchase Payment may not be less than $1,500 for Non-Qualified Contracts.
However, if periodic payments are expected by the Company, this initial first
year minimum may be satisfied by purchase payments made on an annualized basis.
For Qualified Contracts issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403, 404 or 408 of
the Internal Revenue Code, the Company will accept purchase payments, on an
annualized basis. Purchase payments, if any, after the first Contract Year must
be a least $10 each. The Company reserves the right to reject any purchase
payment which does not meet this minimum payment requirement.
NO DEFAULT
There are no penalties for failure to continue purchase payments. Unless
surrendered for the full Contract Value, if any purchase payment after the First
is not paid when due, the Contract will continue in full force until the
Annuitization Date. This Contract will not be in default, even if no additional
purchase payments are made.
CHANGE IN PURCHASE PAYMENTS
The Owner is not obligated to continue purchase payments in the amount or at the
frequency selected. The Owner may: (1) increase or decrease the amount of
purchase payments, subject to any minimum payment requirements; or (2) change
the frequency of purchase payments. A change in the frequency or amount of
purchase payments does not have to be made by written request.
ALLOCATION OF PURCHASE PAYMENTS
The Owner elects to have the purchase payments allocated among the Fixed Account
and the Sub-Accounts of the Variable Account at the time of application.
CONTRACT VALUE
The Contract Value at any time will be the sum of: (1) the Variable Account
Contract Value; and (2) the Fixed Account Contract Value.
In the event of a partial Surrender, the Company will, unless instructed to the
contrary, surrender accumulation Units from all Sub-Accounts in which the
Contract Owner has an interest and from the Fixed Account. The number of
Accumulation Units surrendered from each such Sub-Account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in these Sub-Accounts and Fixed Account bears to the
total Contract Value.
FIXED ACCOUNT CONTRACT VALUE
The Fixed Account Contract Value at any time will be: (1) the sum of all amounts
credited to the Fixed Account under this Contract; less (2) any amounts canceled
or withdrawn for charges, deductions, or Surrenders. With regard to the Fixed
Account, any paid-up annuity, cash surrender, or death benefits that may become
available, will not be less than the minimum benefits required by any statute of
any state in which this contract is delivered.
INTEREST TO BE CREDITED
The company will credit interest to the Fixed Account Contract Value. Such
interest will be credited at such rate or rates as the Company prospectively
declares from time to time, at the sole discretion of the Company. Such rates
will be declared to the Owner in writing prior to each quarterly period. Any
such rate or rates so determined, for which deposits are received, will remain
in effect for a period of not less than 12 months, and remain at such rate
unless changed. However, the Company guarantees that it will credit interest at
not less than 3.0% per year.
VARIABLE ACCOUNT CONTRACT VALUE
The Variable Account Contract Value is the sum of the value of all Variable
Account Accumulation Units under this Contract.
9
<PAGE> 14
ACCUMULATION PROVISIONS
(CONTINUED)
VARIABLE ACCOUNT CONTRACT VALUE (CONTINUED)
If: (1) part or all of the Variable Account Contract Value is surrendered; or
(2) charges or deductions are made against the Variable Account Contract Value;
then, an appropriate number of Accumulation Units will be canceled or
surrendered to equal such amount.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company. It is
named on the Data Page. The Company has allocated a part of its assets for this
Contract and certain other contracts to the Variable Account. Such assets of the
Variable Account remain the property of the Company. However, they may not be
charged with the liabilities from any other business in which the Company may
take part.
INVESTMENTS OF THE VARIABLE ACCOUNT
The purchase payments applied to the Variable Account will be invested at net
asset value in one or more of the mutual funds shown on the Data Page.
SUB-ACCOUNTS
The Variable Account is divided into Sub-Accounts which invest in shares of
mutual funds. Purchase payments are allocated among one or more of these
Sub-Accounts, as designated by the Owner.
VALUATION OF ASSETS
Mutual fund shares in the Variable Account will be valued at their net asset
value.
VARIABLE ACCOUNT ACCUMULATION UNITS
The number of Accumulation Units for each Sub-Account of the Variable Account is
found by dividing: (1) the net amount allocated to the Sub-Account; by (2) the
Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Company received the purchase payment.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account of the Variable Account
was arbitrarily set at $10 when the first mutual fund shares were bought. The
value for any later Valuation Period is found as follows:
The Accumulation Unit Value for each Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment Factor for the Sub-Account for the
next following Valuation Period. The result is the Accumulation Unit Value. The
value of an Accumulation Unit may increase or decrease from one Valuation Period
to the next. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less that one; therefore, the value of an
Accumulation Unit may increase or decrease.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2) and subtracting (3) from the result, where:
1. is the net result of:
a. the net asset value per share of the mutual fund held in the
Sub-Account, determined at the end of the current Valuation Period;
plus
10
<PAGE> 15
ACCUMULATION PROVISIONS
(CONTINUED)
NET INVESTMENT FACTOR (CONTINUED)
b. the per share amount of any dividend or capital gain distributions
made by the mutual fund held in the Sub-Account, if the
"ex-dividend" date occurs during the current Valuation Period; plus
or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account.
2. is the net result of:
a. the net asset value per share of the mutual fund held in the
Sub-Account, determined at the end of the last prior Valuation
Period; plus or minus
b. the per share charge or credit for any taxes reserved for the last
prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge and the
Administration Charge deducted from the Variable Account. Such factor is
equal, on an annual basis, to 1.30% of the daily net asset value of the
Variable Account.
For funds that credit dividends on a daily basis and pay such dividends once a
month, the Net Investment Factor allows for the monthly reinvestment of these
daily dividends.
FIXED ACCOUNT PROVISIONS
The Fixed Account is the general account of the Company. It is made up of all
assets of the Company other than: (1) those in the Variable Account; and (2)
those in any other segregated asset account.
TRANSFER PROVISIONS
The Owner may annually transfer a portion of the value of the Fixed Account to
the Variable Account and a portion of the Variable Account to the Fixed Account,
without penalty or adjustment. Transfers from the Fixed Account to the Variable
Account will be determined by the Company, but will not be less than 10%, and
will be declared before the termination date of the then current interest rate
guarantee period. Transfers from the Fixed Account must be made within 30 days
after the termination date of the guaranteed period.
The Owner may request a transfer of up to 100% of the Contract Value from the
Variable Account to the Fixed Account. The Owner's value in each Sub-Account
will be determined as of the date the transfer request is received in the Home
Office in good order. The Company reserves the right to restrict transfers to
the Fixed Account to 25% of the Contract Value, depending on the market
conditions at the time of the transfer request.
Transfers from the Fixed Account may not be made prior to the first Contract
Anniversary or within 12 months of any prior Transfer. Transfers must also be
made prior to the Annuitization Date.
DISTRIBUTION PROVISIONS
The following events will give rise to a Distribution:
1. Reaching the Annuitization Date - Distribution will be made pursuant to
the Annuity Payment Option selected.
2. Death of the Designated Annuitant prior to the Annuity Commencement Date -
Distribution to be made in accordance with the options available under the
Death of Designated Annuitant provision of this Contract.
3. Death of the Owner - Distribution to be made in a manner consistent with
the Death of Owner provisions of this Contract.
4. Surrender - Distribution to be made in accordance with the Surrender
provisions of this Contract.
11
<PAGE> 16
ACCUMULATION PROVISIONS
(CONTINUED)
EXCHANGE PRIVILEGE
The Contract Owner may exchange this Contract for an annuity contract which: (1)
is issued by the Company; and (2) is determined by the Company to be the type
and class eligible for such exchange. In determining which contracts may be of
the same type and class as this Contract, the Company shall apply its rules and
regulations applicable thereto. The Contract Owner must request an exchange: (1)
in writing; and (2) at least 45 days prior to the Annuitization Date. Any such
exchange shall be made free from any Contingent Deferred Sales Charge provided
for in this Contract.
ANNUITIZATION PROVISIONS
GENERAL
All of the provisions within this section are subject to the restrictions set
forth in the Section entitled "Death Of Owner."
ANNUITIZATION
This is the process of purchasing an annuity according to the option selected,
during the payout phase of the Contract. As of the Annuitization Date, the
Contract Value is surrendered and applied to the purchase rate then in effect
for the option selected. The purchase rates for all options will be determined
on a basis not less favorable than the 1971 Individual Annuity Mortality Table
(set back one year) with minimum interest at 3.5%. The rates shown in the
Annuity Tables are calculated on this guaranteed basis. Annuitization is
irrevocable once payments have begun.
ANNUITY COMMENCEMENT DATE
Such date: (1) must be the first day of a calendar month; and (2) must be at
least two years after the Date of Issue. The Annuity Commencement Date may not
be later than the first day of the first calendar month after the Annuitant's
75th birthday, unless a later date has: (1) been requested by the Contract
Owner; and (2) approved by the Company. This date is selected by the Owner at
the time of application. Any applicable premium taxes not already deducted will
be deducted from the Contract Value at this time. The remaining Contract Value
will then be applied to the Annuity Payment Option selected by the Owner.
CHANGE OF ANNUITY COMMENCEMENT DATE
The Owner may change the Annuity Commencement Date. A change of Annuity
Commencement Date must be made prior to the Annuitization Date and by written
request. The request must be received at the Home Office prior to the new
Annuity Commencement Date. The date to which such a change may be made must be
the first day of a calendar month.
CHANGE OF ANNUITY PAYMENT OPTION
The Owner may change the Annuity Payment Option prior to the Annuitization Date.
A change of the Annuity Payment Option must be made by written request and must
be received at the Home Office prior to the Annuitization Date. After a change
of Annuity Payment Option is received at the Home Office, it will become
effective as of the date it was requested. A change of Annuity Payment Option
will not apply to any payment made or action taken by the Company before it was
received.
ANNUITY PAYMENT OPTIONS
One Annuity Payment Option or a combination of Annuity Payment Options may be
selected. Any Annuity Payment Option not set forth in the Contract which is
satisfactory to both the Company and the Annuitant may be selected.
SUPPLEMENTARY AGREEMENT
A Supplementary Agreement will be issued within 30 days following the
Annuitization Date. The Supplementary Agreement will set forth the terms of the
Annuity Payment Option selected.
12
<PAGE> 17
FREQUENCY AND AMOUNT OF PAYMENTS
Payments will be made based on the payment option selected and frequency
selected. However, if the net amount to be applied at the Annuitization Date is
less than $500, the Company has the right to pay such amount in one lump sum.
If any payment provided for would be or becomes less than $20, the Company has
the right to change the frequency of payment to an interval that will result in
payments of at least $20.
ANNUITIZATION PROVISIONS
(CONTINUED)
FIXED ANNUITY PROVISIONS
A Fixed Annuity is an annuity with level payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. At the
Annuitization Date, the Contract Value will be applied to the applicable Annuity
Table. This will be done in accordance with the Annuity Payment Option selected.
VARIABLE ANNUITY
A Variable Annuity is an annuity with payments which: (1) are not predetermined
or guaranteed as to dollar amount; and (2) vary in amount with the investment
experience of the Variable Account.
DETERMINATION OF FIRST VARIABLE ANNUITY PAYMENT
At the Annuitization Date, the Variable Account Contract Value will be applied
to the applicable Annuity Table. This will be done in accordance with the
Annuity Payment Option selected. The Annuity Tables are based on the 1971
Individual Annuity Mortality Table (set back one year) with interest at 3.5%.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. The value of
an Annuity Unit for each Sub-Account was arbitrarily set at $10 when the first
mutual funds were bought. The value for any later Valuation Period is found as
follows:
1. The Annuity Unit Value for each Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment Factor for the Sub-Account for
the Valuation Period for which the Annuity Unit Value is being calculated.
2. The result is multiplied by an interest factor. This is done to neutralize
the Assumed Investment Rate of 3.5% per year, which is built into the
Annuity Tables.
VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
Variable Annuity payments after the first vary in amount. The payment amount
changes with the investment performance of the Sub-Accounts within the Variable
Account. The dollar amount of such payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the value of
an Annuity Unit as of the Annuitization Date. This result establishes the
fixed number of Annuity Units for each Sub-Account, for the] monthly
annuity payment after the first. This number of Annuity Units remains
fixed during the annuity payment period.
2. The fixed number of Annuity Units is multiplied by the Annuity Unit Value
for the Valuation Period for which the payment is due. This result
establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in expenses or mortality experience.
13
<PAGE> 18
ANNUITY PAYMENT OPTIONS
GENERAL
All annuity payments will be mailed within 10 working days of the first of the
month in which they are scheduled to be made.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
ANNUITY PAYMENT OPTIONS
(CONTINUED)
JOINT AND LAST SURVIVOR ANNUITY
The amount to be paid under this option will be paid and continued during the
lifetimes of the Annuitant and designated second person. Payments will continue
as long as either is living.
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If the
Annuitant dies prior to the end of this guaranteed period, the Beneficiary may
choose to continue receiving payments until the end of the guaranteed period, or
receive the commuted value of the remaining guaranteed payments in a lump sum.
Such lump sum payment will be equal to the present value of the remaining
guaranteed payments to which the Annuitant would have been entitled had he not
died. The payment will be computed as of the date on which proof of the death of
the Annuitant is received at the Home Office and computed at an assumed
investment rate which is the greater of that used in the Annuity Tables in
effect on the date of the calculation of the lump sum and that used in the
Annuity Tables in effect on the Annuitization Date.
14
<PAGE> 19
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS PER $1,000 APPLIED
Annuitant's Age Last Birthday
Female Age
<TABLE>
<CAPTION>
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
Male Age 50 $3.91 $4.07 $4.21 $4.34 $4.44
55 4.00 4.20 4.41 4.59 4.76
60 4.08 4.32 4.59 4.86 5.12
65 4.42 4.75 5.12 5.50
70 4.89 5.35 5.87
</TABLE>
LIFE ANNUITY MONTHLY ANNUITY PAYMENTS PER $1,000 APPLIED
<TABLE>
<CAPTION>
Male Female
Annuitant's Guaranteed Period Annuitant's Guaranteed Period
Attained Attained
Age Last 120 240 Age Last 120 240
Birthday None Months Months Birthday None Months Months
-------- ---- ------ ------ -------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
40 $3.99 $3.98 $3.91 40 $3.73 $3.72 $3.70
41 4.05 4.03 3.95 41 3.77 3.76 3.73
42 4.11 4.08 4.00 42 3.81 3.80 3.77
43 4.16 4.14 4.04 43 3.86 3.85 3.81
44 4.23 4.20 4.09 44 3.91 3.89 3.85
45 4.29 4.26 4.14 45 3.96 3.94 3.89
46 4.36 4.32 4.19 46 4.01 3.99 3.94
47 4.44 4.39 4.24 47 4.06 4.05 3.98
48 4.51 4.46 4.29 48 4.12 4.10 4.03
49 4.59 4.53 4.35 49 4.18 4.16 4.08
50 4.67 4.60 4.40 50 4.25 4.23 4.13
51 4.76 4.68 4.46 51 4.32 4.29 4.19
52 4.85 4.76 4.51 52 4.39 4.36 4.24
53 4.95 4.85 4.57 53 4.47 4.43 4.30
54 5.05 4.93 4.63 54 4.55 4.51 4.36
55 5.15 5.03 4.69 55 4.64 4.59 4.43
56 5.26 5.12 4.75 56 4.73 4.67 4.49
57 5.38 5.22 4.81 57 4.82 4.76 4.55
58 5.50 5.33 4.87 58 4.93 4.85 4.62
59 5.63 5.44 4.93 59 5.03 4.95 4.69
60 5.77 5.55 4.99 60 5.15 5.05 4.76
61 5.91 5.67 5.05 61 5.27 5.16 4.83
62 6.07 5.80 5.11 62 5.39 5.27 4.90
63 6.23 5.93 5.17 63 5.53 5.39 4.97
64 6.41 6.06 5.23 64 5.67 5.52 5.04
65 6.60 6.21 5.28 65 5.83 5.66 5.11
66 6.81 6.36 5.34 66 6.00 5.80 5.18
67 7.03 6.51 5.38 67 6.19 5.95 5.24
68 7.26 6.67 5.43 68 6.39 6.12 5.30
69 7.51 6.84 5.47 69 6.61 6.29 5.36
70 7.79 7.01 5.51 70 6.85 6.46 5.41
71 8.08 7.19 5.54 71 7.11 6.65 5.46
72 8.40 7.36 5.57 72 7.39 6.85 5.50
73 8.74 7.54 5.60 73 7.70 7.05 5.54
74 9.10 7.73 5.62 74 8.03 7.25 5.57
75 9.50 7.91 5.64 75 8.40 7.46 5.59
</TABLE>
15
<PAGE> 1
EXHIBIT NO. 5
THE VARIABLE ANNUITY APPLICATION FORM
<PAGE> 2
Please make check payable to: Nationwide Life and Annuity Insurance Company
Send Variable Annuity Application and check to:
Individual Investment Products
P.O. Box 182008, Columbus, Ohio 43218-2008
ANNUITY APPLICATION 1-800-533-5622
- --------------------------------------------------------------------------------
DESIGNATED ANNUITANT (Print Name)_____________________________ Sex [ ] M [ ] F
ADDRESS__________________________ BIRTHDATE MO DAY YEAR
--------------------
_________________________________ [ ] [ ] [ ]
OCCUPATION ___________________________________
SOC. SEC. NO. _ _ _ _ _ _ _ _ _ EMPLOYER ___________________________________
- --------------------------------------------------------------------------------
CONTRACT OWNER (Print Name) Tax I.D. or Soc. Sec. No.
ADDRESS________________________________________ _ _ _ _ _ _ _ _ _
__________________________________BIRTHDATE MO DAY YEAR
--------------------
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
BENEFICIARY (Print Name)_____________________ RELATIONSHIP______________________
CONTINGENT BENEFICIARY_______________________ RELATIONSHIP______________________
- --------------------------------------------------------------------------------
ANNUITY PURCHASE PAYMENTS: First Purchase Payment $_________ submitted
herewith. A copy of this application duly signed by the agent will constitute
receipt for such amount. If this application is declined, there will be no
liability on the part of the Company, any sums submitted with this application
will be refunded.
The Contract Owner intends to make subsequent purchase payments in the
amount of $__________ on a [ ] monthly [ ] quarterly [ ] semi-annual
[ ] annual basis. Billing #________________________________
- --------------------------------------------------------------------------------
<TABLE>
PURCHASE PAYMENT ALLOCATION: (whole percentages only, must total 100%) ___%FIXED ACCOUNT
___%Dreyfus Stock Index Fund, Inc.
___%Dreyfus Socially Responsible Growth Fund, Inc.
<S> <C> <C>
FIDELITY VARIABLE NATIONWIDE SEPARATE ACCOUNT STRONG VARIABLE
INS. PRODUCTS FUND ___%Capital Appreciation Fund INS. PRODUCTS FUND
___%Growth Portfolio ___%Money Market Fund ___%Strong Discovery Fund II
___%High Income Portfolio ___%Government Bond Fund ___%Strong International Stock Fund
___%Equity-Income Portfolio ___%Total Return Fund ___%Strong Special Fund II
___%Overseas Portfolio NEUBERGER & BERMAN VAN ECK INVESTMENT TRUST
FIDELITY VARIABLE ADVISERS MANAGEMENT TRUST ___%Worldwide Bond Fund
INS. PRODUCTS FUND II ___%Growth Portfolio ___%Gold and Natural Res. Fund
___%Asset Manager Portfolio ___%Bond Portfolio TCI PORTFOLIOS, INC.
___%Contrafund Portfolio ___%Partners Portfolio ___%TCI Balanced
OPPENHEIMER VARIABLE ACCT. FUNDS ___%TCI Growth
___%Oppenheimer Bond Fund ___%TCI International
___%Oppenheimer Multiple Strategies Fund VAN KAMPEN AMERICAN CAPITAL
___%Oppenheimer Global Securities Fund LIFE INVESTMENT TRUST
___%Real Estate Securities Fund
WARBURG PINCUS TRUST
___%International Equity Portfolio
___%Small Company Growth Portfolio
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ANNUITY COMMENCEMENT DATE: OPTIONAL ANNUITY FORM ELECTED: Unless otherwise indicated,
The First Day of __________________________________________ I hereby elect the Life Annuity Option.
- -----------------------------------------------------------
CHECK CONTRACT TYPE: [ ] NON-QUALIFIED [ ] Life Annuity
[ ] IRA [ ] 401(a) [ ] 457 [ ] ORP 401(a) [ ] 120 or [ ] 240 Monthly Payments and Life.
[ ] SEP IRA [ ] 401(k) [ ] 403(b) [ ] ORP 401(b) [ ] Joint and Last Survivor Annuity.
Second Person ____________________________________________
Year for which contribution applied________________________ Birthdate MO DAY YEAR Relationship
-----------------------
[ ] [ ] [ ] _________________________
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REMARKS Will the annuity applied for replace existing annuity or life
insurance? [ ] Yes [ ] No If yes, explain:
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief and agree that
this application shall be a part of any annuity contract issued by the Company.
I UNDERSTAND THAT ANNUITY PAYMENTS AND SURRENDER VALUES, WHEN BASED UPON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE
AND ARE NOT GUARANTEE AS TO A FIXED DOLLAR AMOUNT. RECEIPT OF A CURRENT VARIABLE ANNUITY PROSPECTUS IS HEREBY ACKNOWLEDGED.
[ ] Please send me a copy of the Statement of Additional Information to the prospectus.
<S> <C>
SIGNED AT_______________________________________________________________ ON _____________________________________________________
(Date)
APPLICANT_______________________________________________________________ WITNESS_________________________________________________
(Signature of Applicant) (Print Agent Name and No.)
AGENT'S PHONE #_________________________________________________________ ________________________________________________________
(Signature of Agent)
AGENT: Do you have reason to believe the Contract applied for is to replace existing annuities or insurance owned by the
annuitant? [ ] Yes [ ] No
General Agent___________________________________________________________ Branch Office Location__________________________________
City_______________________________ State___________ Zip________________ Telephone_______________________________________________
</TABLE>
<PAGE> 1
EXHIBIT NO. 9
OPINION OF COUNSEL
<PAGE> 2
[DRUEN, RATH & DIETRICH LETTERHEAD]
July 10, 1996
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
To the Company:
We have prepared the Registration Statement filed with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, Individual Deferred Variable Annuity Contracts to be sold by
Nationwide Life and Annuity Insurance Company ("NWLAIC") and to be issued and
administered through the Nationwide VA Separate Account-B. In connection
therewith, we have examined the Articles of Incorporation, Code of Regulations
and Bylaws of NWLAIC, minutes of meetings of the Board of Directors, pertinent
provisions of federal and Ohio laws, together with such other documents as we
have deemed relevant for the purposes of this opinion. Based on the foregoing,
it is our opinion that:
1. NWLAIC is a stock life insurance corporation duly organized and
validly existing under the laws of the State of Ohio and duly
authorized to issue and sell life insurance and annuity
contracts.
2. The Nationwide VA Separate Account-B has been properly created
and is a validly existing separate account pursuant to the laws
of the State of Ohio.
3. The issuance and sale of the Individual Deferred Variable
Annuity Contracts have been duly authorized by NWLAIC. When
issued and sold in the manner stated in the prospectus
constituting a part of the Registration Statement, the contracts
will be
<PAGE> 3
Nationwide Life and Annuity Insurance Company
July 10, 1996
Page 2
legal and binding obligations of NWLAIC in accordance with their
terms, except that clearance must be obtained, or the contract
form must be approved, prior to the issuance thereof in certain
jurisdictions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
DRUEN, RATH & DIETRICH
