<PAGE> 1
NATIONWIDE LIFE INSURANCE COMPANY
Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide
Variable Account-9
The date of this prospectus is May 1, 1999.
- -------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.,
A MEMBER OF THE AMERICAN CENTURY(SM) FAMILY OF INVESTMENTS
- - American Century VP Income & Growth
- - American Century VP International
- - American Century VP Value
DREYFUS
- - The Dreyfus Socially Responsible Growth Fund, Inc.
- - Dreyfus Stock Index Fund, Inc.
- - Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
FEDERATED INSURANCE SERIES
- - Federated Quality Bond Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- - VIP Equity-Income Portfolio: Service Class
- - VIP Growth Portfolio: Service Class
- - VIP High Income Portfolio: Service Class*
- - VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- - VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCT FUND III
- - VIP III Growth Opportunities Portfolio: Service Class
MORGAN STANLEY
- - Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging Markets Debt
Portfolio
- - Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- - Capital Appreciation Fund
- - Government Bond Fund
- - Money Market Fund
- - Total Return Fund
- - Nationwide Balanced Fund* (subadviser: Salomon Brothers Asset
Management, Inc.)
- - Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
- - Nationwide Global Equity Fund (subadviser: J.P. Morgan Investment
Management Inc.)
- - Nationwide High Income Bond Fund* (subadviser: Federated Investment
Counseling)
- - Nationwide Multi Sector Bond Fund* (subadviser: Salomon Brothers Asset
Management, Inc. with Salomon Brothers Asset Management Limited)
- - Nationwide Select Advisers Mid Cap Fund (First Pacific Advisors, Inc.,
Pilgrim Baxter & Associates, Ltd., and Rice, Hall, James & Associates)
- - Nationwide Select Advisers Small Cap Growth Fund (subadvisers: Franklin
Advisers, Inc., Miller Anderson & Sherrerd, LLP, Neuberger Berman, LLC)
- - Nationwide Small Cap Value Fund (subadviser: The Dreyfus Corporation)
- - Nationwide Small Company Fund
(subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Lazard
Asset Management, Strong Capital Management, Inc. and Warburg Pincus
Asset
- - Management, Inc.)
- - Nationwide Strategic Growth Fund (subadviser: Strong Capital
Management, Inc.)
<PAGE> 2
- - Nationwide Strategic Value Fund (subadviser: Strong Capital Management,
Inc./Schafer Capital Management, Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- - AMT Guardian Portfolio
- - AMT Mid-Cap Growth Portfolio*
- - AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- - Oppenheimer Aggressive Growth Fund/VA (formerly "Oppenheimer Capital
Appreciation Fund")
- - Oppenheimer Capital Appreciation Fund/VA (formerly "Oppenheimer Growth
Fund")
- - Oppenheimer Main Street Growth & Income Fund/VA (formerly "Oppenheimer
Growth & Income Fund")
VAN ECK WORLDWIDE INSURANCE TRUST
- - Worldwide Emerging Markets Fund
- - Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
- - Growth & Income Portfolio
- - International Equity Portfolio
- - Post-Venture Capital Portfolio
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account-9 ("variable account") may be allocated to the fixed
account or the Guaranteed Term Options (Guaranteed Term Options may not be
available in every jurisdiction - refer to your contract for specific
information).
The Statement of Additional Information (dated May 1, 1999) which contains
additional information about the contracts and the variable account has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 54.
For general information or to obtain FREE copies of the:
- - Statement of Additional Information,
- - prospectus for any underlying mutual fund,
- - prospectus for the Guaranteed Term Options,
- - required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 01-05-P1
COLUMBUS, OHIO 43215
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
WWW.SEC.GOV
Information about this and other Best of America products can be found at:
WWW.BESTOFAMERICA.COM
THIS ANNUITY IS NOT:
- - A BANK DEPOSIT - FEDERALLY INSURED
- - ENDORSED BY A BANK OR - AVAILABLE IN EVERY
GOVERNMENT AGENCY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 3
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract, any amount
held in the fixed account, and any amount held under Guaranteed Term Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) of the Internal
Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple IRA, or Tax Sheltered Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) of the Internal Revenue Code.
SIMPLE IRA- An annuity contract which qualifies for favorable tax treatment
under Section 408(p) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account-9, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
3
<PAGE> 4
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS ................................................. 3
SUMMARY OF STANDARD CONTRACT EXPENSES ..................................... 6
ADDITIONAL CONTRACT OPTIONS ............................................... 7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES .................................... 9
EXAMPLE .................................................................... 11
SYNOPSIS OF THE CONTRACTS................................................... 13
FINANCIAL STATEMENTS........................................................ 14
CONDENSED FINANCIAL INFORMATION............................................. 14
NATIONWIDE LIFE INSURANCE COMPANY........................................... 15
NATIONWIDE ADVISORY SERVICES, INC........................................... 15
INVESTING IN THE CONTRACT................................................... 15
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS............................................. 18
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS ......................... 19
Reduced Purchase Payment Option
CDSC Options and Charges
Death Benefit Options
Guaranteed Minimum Income Benefit Option
CONTRACT OWNERSHIP.......................................................... 21
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT................................................... 23
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE............................................................. 26
SURRENDER (REDEMPTION)...................................................... 26
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional Retirement
Program or a Louisiana Optional Retirement Plan
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE.............................................................. 28
Minimum & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Loan Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT.................................................................. 29
CONTRACT OWNER SERVICES..................................................... 30
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE................................................... 32
ANNUITIZING THE CONTRACT.................................................... 32
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Option ("GMIB")
Annuity Payment Options
DEATH BENEFITS.............................................................. 37
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
4
<PAGE> 5
REQUIRED DISTRIBUTIONS...................................................... 39
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities, SEP IRAs
and Simple IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS................................................... 42
Federal Income Taxes
Individual Retirement Annuities, SEP IRAs, Simple IRAs
and Tax Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS....................................................... 47
YEAR 2000 COMPLIANCE ISSUES.................................................. 48
LEGAL PROCEEDINGS............................................................ 49
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY.............................. 50
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION .................. 54
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS .......................... 55
APPENDIX B: CONDENSED FINANCIAL INFORMATION.................................. 65
5
<PAGE> 6
SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- - the contract owner meets an available exception, or
- - a contract owner has replaced a standard benefit with an available option
for an additional charge.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)....................7%(1)
Range of CDSC over time:
<TABLE>
<CAPTION>
- -------------------------------- ------------------------
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
- -------------------------------- ------------------------
<S> <C> <C>
0 7%
- -------------------------------- ------------------------
1 7%
- -------------------------------- ------------------------
2 6%
- -------------------------------- ------------------------
3 5%
- -------------------------------- ------------------------
4 4%
- -------------------------------- ------------------------
5 3%
- -------------------------------- ------------------------
6 2%
- -------------------------------- ------------------------
7 0%
- -------------------------------- ------------------------
</TABLE>
(1) Each contract year, the contract owner may withdraw without a CDSC the
greater of:
a) 10% of all purchase payments made to the contract; or
b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code
This free withdrawal privilege is non-cumulative. Free amounts not taken
during any given contract year cannot be taken as free amounts in a
subsequent contract year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued to fund a Tax Sheltered
Annuity plan.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of average account value)
Mortality and Expense Risk Charges............0.95%
Total Variable Account Charges...........0.95%3
(2)These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options. They
are charged on a daily basis at the annual rate noted above.
(3)Charges shown include the Five-Year Reset Death Benefit that is standard to
every contract (see "Death Benefit Payment").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states may
not allow Nationwide to assess a loan processing fee (see "Loan Privilege").
6
<PAGE> 7
ADDITIONAL CONTRACT OPTIONS
For an additional charge, the following options are available to contract owners
(upon approval by state insurance authorities). These options must be elected at
the time of application and will replace the corresponding standard contract
benefits.
If the contract owner chooses one or more of the following optional benefits, a
corresponding charge will be deducted. Charges for the optional benefits are IN
ADDITION TO the standard variable account charges. Optional benefit charges will
only apply to allocations made to the variable account and are charged as a
percentage of the average variable account value.
REDUCED PURCHASE PAYMENT OPTION
For an additional 0.25% of the daily net assets of the variable account,
Nationwide will lower an applicant's minimum initial purchase payment to $1,000
and subsequent purchase payments to $25. This option in not available to
contracts issued as Investment-only Contracts.
Reduced Purchase Payment Option...........0.25%
Total Variable Account Charges
(including Reduced Purchase
Payment Option)...................... 1.20%
CDSC OPTION FOR ROTH IRAS
For an additional 0.15% of the daily net assets of the variable account, a Roth
IRA applicant can receive a five year CDSC schedule, instead of the standard
seven year CDSC schedule.
Five Year CDSC Option .......................0.15%
Total Variable Account Charges
(including Five Year CDSC Option)..........1.10%
Range of Five-Year CDSC over time:
<TABLE>
<CAPTION>
- ------------------------------------------------------
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
- ------------------------------------------------------
<S> <C> <C>
0 7%
- ------------------------------------------------------
1 7%
- ------------------------------------------------------
2 6%
- ------------------------------------------------------
3 4%
- ------------------------------------------------------
4 2%
- ------------------------------------------------------
5 0%
- -------------------------------- ---------------------
</TABLE>
CDSC WAIVER OPTIONS
ADDITIONAL WITHDRAWAL WITHOUT CHARGE AND DISABILITY WAIVER
For an additional 0.10% of the daily net assets of the variable account, an
applicant can receive an additional 5% CDSC-free withdrawal privilege, which
also includes a disability waiver. This 5% is in addition to the standard 10%
CDSC-free withdrawal privilege that applies to every contract (see "CDSC
Options and Charges").
Additional Withdrawal Without
Charge and Disability Waiver ..............0.10%
Total Variable Account Charges
(including Additional Withdrawal
Without Charge and
Disability Waiver) ....................1.05%
ADDITIONAL CDSC WAIVER OPTIONS FOR TAX SHELTERED ANNUITIES
Applicants of a Tax Sheltered Annuity may also elect two additional CDSC
waiver options (see "CDSC Options and Charges").
10 Year and Disability Waiver..............0.05%
Total Variable Account Charges
(including 10 Year and Disability
Waiver) .................................1.00%
Hardship Waiver............................0.15%
Total Variable Account Charges
(including Hardship Waiver)............. 1.10%
DEATH BENEFIT OPTIONS
An applicant may choose one of two optional death benefits instead of the
Five-Year Reset Death Benefit that is standard to every contract. The optional
death benefits are:
Optional One-Year Step Up
Death Benefit................................0.05%
Total Variable Account Charges
(including One Year Step Up
Death Benefit).............................1.00%
Optional 5% Enhanced Death
Benefit......................................0.10%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit)...................................1.05%
7
<PAGE> 8
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional 0.45% of the daily net assets of the variable account, an
applicant may elect the Guaranteed Minimum Income Benefit option (see
"Guaranteed Minimum Income Benefit Option").
Guaranteed Minimum Income Benefit
Option......................................0.45%
Total Variable Account Charges
(including a Guaranteed Minimum
Income Benefit option).....................1.40%
8
<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER
EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 1.47% 0.00% 0.00% 1.47%
Century VP International
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 0.00% 1.00%
Century VP Value
-------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.05% 0.00% 0.80%
-------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
-------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond 0.23% 0.47% 0.00% 0.70%
Fund II
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class, 0.49% 0.08% 0.10% 0.67%
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.14% 0.10% 0.82%
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.13% 0.10% 0.97%
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
-------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.10% 0.10% 0.79%
Service Class
-------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - 0.27% 1.25% 0.00% 1.52%
Emerging Markets Debt Portfolio
-------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.07% 0.00% 0.67%
-------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.07% 0.00% 0.57%
-------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.40% 0.06% 0.00% 0.46%
-------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.59% 0.06% 0.00% 0.65%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 0.15% 0.00% 0.90%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.15% 0.00% 0.95%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 1.00% 0.20% 0.00% 1.20%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.15% 0.00% 1.20%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Small Cap Growth Fund 1.10% 0.20% 0.00% 1.30%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 1.00% 0.07% 0.00% 1.07%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.10% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 0.78% 0.06% 0.00% 0.84%
-------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.69% 0.02% 0.00% 0.71%
Aggressive Growth Fund/VA
-------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.72% 0.03% 0.00% 0.75%
Capital Appreciation Fund/VA
-------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main 0.74% 0.05% 0.00% 0.79%
Street Growth & Income Fund/VA
-------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.50% 0.00% 1.50%
Emerging Markets Fund
-------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.16% 0.00% 1.16%
Assets Fund
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley 1.20% 0.00% 0.00% 1.20%
Real Estate Securities Portfolio
-------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 0.51% 0.49% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.33% 0.00% 1.33%
-------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 1.08% 0.32% 0.00% 1.40%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio: Service 0.49% 0.09% 0.10% 0.68%
Class
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.11% 0.10% 0.80%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.17% 0.10% 1.01%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Fidelity VIP II Contrafund Portfolio: Service 0.59% 0.11% 0.10% 0.80%
Class
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.11% 0.10% 0.80%
Service Class
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Morgan Stanley Dean Witter Universal Funds, Inc. 0.80% 1.25% 0.00% 2.05%
- - Emerging Markets Debt Portfolio
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Balanced Fund 0.75% 0.21% 0.00% 0.96%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Equity Income Fund 0.80% 0.35% 0.00% 1.15%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Global Equity Fund 1.00% 0.46% 0.00% 1.46%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.32% 0.00% 1.12%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.21% 0.00% 0.96%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.49% 0.00% 1.54%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Select Advisers Small Cap Growth 1.10% 0.58% 0.00% 1.68%
Fund
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.43% 0.00% 1.33%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.65% 0.00% 1.55%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.33% 0.00% 1.23%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.61% 0.00% 1.61%
Emerging Markets Fund
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.20% 0.00% 1.20%
Hard Assets Fund
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
</TABLE>
10
<PAGE> 11
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The chart reflects expenses of both the variable account and the underlying
mutual funds. The chart reflects variable account charges of 2.05%, which is the
maximum variable account charges that could be assessed to a contract.
For those contracts that do not elect the maximum number of rider options, the
expenses would be reduced. Deductions for premium taxes are not reflected but
may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<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>
American Century Variable 92 142 187 318 29 88 151 318 * 88 151 318
Portfolios, Inc. - American
Century VP Income & Growth
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 100 166 226 392 37 112 190 392 * 112 190 392
Portfolios, Inc. - American
Century VP International
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 95 152 202 347 32 98 166 347 * 98 166 347
Portfolios, Inc. - American
Century VP Value
- --------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 93 146 192 328 30 92 156 328 * 92 156 328
Responsible Growth Fund, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, 87 129 164 273 24 75 128 273 * 75 128 273
Inc.
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 93 146 192 328 30 92 156 328 * 92 156 328
Fund - Capital Appreciation
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - 92 142 187 318 29 88 151 318 * 88 151 318
Federated Quality Bond Fund
II
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 92 142 185 315 29 88 149 315 * 88 149 315
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 92 144 189 323 29 90 153 323 * 90 153 323
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 93 146 193 330 30 92 157 330 * 92 157 330
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 95 151 200 345 32 97 164 345 * 97 164 345
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 92 144 189 323 29 90 153 323 * 90 153 323
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 93 145 191 327 30 91 155 327 * 91 155 327
Opportunities Portfolio:
Service Class
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period. time period.
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter 100 168 228 397 37 114 192 397 * 114 192 397
Universal Funds, Inc. -
Emerging Markets Debt
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation 92 142 185 315 29 88 149 315 * 88 149 315
Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 91 138 180 305 28 84 144 305 * 84 144 305
- --------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 89 135 174 293 26 81 138 293 * 81 138 293
- --------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 91 141 184 313 28 87 148 313 * 87 148 313
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 94 149 197 338 31 95 161 338 * 95 161 338
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity 95 150 199 343 32 96 163 343 * 96 163 343
Income Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 97 158 212 367 34 104 176 367 * 104 176 367
Equity Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income 95 150 199 343 32 96 163 343 * 96 163 343
Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector 94 149 197 338 31 95 161 338 * 95 161 338
Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select 97 158 212 367 34 104 176 367 * 104 176 367
Advisers Mid Cap Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select 98 161 217 376 35 107 181 376 * 107 181 376
Advisers Small Cap Growth
Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap 96 153 205 352 33 99 169 352 * 99 169 352
Value Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small 96 154 206 354 33 100 170 354 * 100 170 354
Company Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 95 152 202 347 32 98 166 347 * 98 166 347
Growth Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 95 152 202 347 32 98 166 347 * 98 166 347
Value Fund
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 95 152 202 347 32 98 166 347 * 98 166 347
Guardian Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 95 152 202 347 32 98 166 347 * 98 166 347
Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 93 147 194 332 30 93 158 332 * 93 158 332
Partners Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 92 143 187 319 29 89 151 319 * 89 151 319
Funds - Oppenheimer
Aggressive Growth Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 92 144 189 323 29 90 153 323 * 90 153 323
Funds - Oppenheimer Capital
Appreciation Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 93 145 191 327 30 91 155 327 * 91 155 327
Funds - Oppenheimer Main
Street Growth & Income
Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period. time period.
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 100 167 227 395 37 113 191 395 * 113 191 395
Trust - Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 97 157 210 363 34 103 174 363 * 103 174 363
Trust - Worldwide Hard
Assets Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment 97 158 212 367 34 104 176 367 * 104 176 367
Trust - Morgan Stanley Real
Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 95 152 202 347 32 98 166 347 * 98 166 347
Growth & Income Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 98 162 219 379 35 108 183 379 * 108 183 379
International Equity
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 99 164 222 386 36 110 186 386 * 110 186 386
Post-Venture Capital
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)."
The contracts can be categorized as:
- - Investment-Only Contracts;
- - Non-Qualified;
- - Individual Retirement Annuities with contributions rolled over or
transferred from certain tax-qualified plans*;
- - Roth IRAs;
- - Tax Sheltered Annuities with contributions rolled over or transferred from
other Tax Sheltered Annuity plans*;
- - Charitable Remainder Trusts;
- - SEP IRAs;
- - Simple IRAs.
*Contributions are not required to be rolled over or transferred if the contract
owner elects the Reduced Purchase Payment Option.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- ------------------- ----------------- -----------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- ------------------- ----------------- -----------------
<S> <C> <C>
Investment-only $100,000 $15,000
Contracts
- ------------------- ----------------- -----------------
Non-Qualified $15,000 $1,000
- ------------------- ----------------- -----------------
IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Roth IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Tax Sheltered $15,000 $1,000
Annuity
- ------------------- ----------------- -----------------
Charitable $15,000 $1,000
Remainder Trust
- ------------------- ----------------- -----------------
SEP IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Simple IRA $15,000 $1,000
- ------------------- ----------------- -----------------
</TABLE>
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 0.95% of
13
<PAGE> 14
the daily net assets of the variable account. Nationwide assesses this charge in
return for bearing certain mortality and expense risks, and for administrative
expenses.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
There are several CDSC options that are available to contract owners, each with
different characteristics and costs. The charge associated with each option is
charged as a percentage of the daily net assets of the variable account. They
are as follows:
<TABLE>
<CAPTION>
- ---------------------------- ------------- ------------
OPTION CONTRACT CHARGE
TYPE
- ---------------------------- ------------- ------------
<S> <C> <C>
Five Year CDSC Option Roth IRAs 0.15%
- ---------------------------- ------------- ------------
Additional Withdrawal all 0.10%
Without Charge and
Disability Waiver
- ---------------------------- ------------- ------------
10 Year and Disability Tax 0.05%
Waiver Sheltered
Annuities
- ---------------------------- ------------- ------------
Hardship Waiver Tax 0.15%
Sheltered
Annuities
- ---------------------------- ------------- ------------
</TABLE>
If the contract owner elects the Reduced Purchase Payment Option, Nationwide
will reduce the minimum initial purchase payment to $1,000 and subsequent
purchase payments to $25. In return for the reduction, Nationwide will deduct an
additional charge of 0.25% of the daily net assets of the variable account. This
option is not available for contracts issued as Investment-only Contracts.
Two optional death benefits are available under the contract. If the contract
owner elects one of these options, Nationwide will deduct either 0.05% for the
One-Year Step Up Death Benefit, or 0.10% for the 5% Enhanced Death Benefit.
A Guaranteed Minimum Income Benefit option is available under the contract. If
the contract owner elects the Guaranteed Minimum Income Benefit option,
Nationwide will deduct an additional charge of 0.45% of the daily net assets of
the variable account (see "Guaranteed Minimum Income Benefit").
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained, without charge, by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of a variable
account charge which may vary from contract to contract (for more information on
the calculation of accumulation unit values, see "Determining Variable Account
Value - Valuing an Accumulation Unit"). Please refer to Appendix B for
information regarding each class of accumulation units.
14
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-9 is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account on May 22, 1997, pursuant to Ohio law. Although the separate
account is registered with the SEC as a unit investment trust pursuant to the
Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the
management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Investment-only Contracts, Individual Retirement Annuities, Simple
IRAs, SEP IRAs, Roth IRAs, and Tax Sheltered Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon
15
<PAGE> 16
as possible before the shareholder meeting. Notification will contain proxy
materials and a form with which to give Nationwide voting instructions.
Nationwide will vote shares for which no instructions are received in the same
proportion as those that are received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus must be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the Guaranteed Term Options are not subject to variable account
charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are
16
<PAGE> 17
not available for use with asset rebalancing, Dollar Cost Averaging, or
systematic withdrawals.
Guaranteed Term Options may not be available in every state.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to accuracy
and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- - New Money Rate - The rate credited on the fixed account allocation when the
contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than the
rate when the contract was issued, since the New Money Rate is subject to
change based on market conditions.
- - Variable Account to Fixed Rate - Allocations transferred from any of the
underlying investment options in the variable account to the fixed account
may receive a different rate. The rate may be lower than the New Money
Rate. There may be limits on the amount and frequency of movements from the
variable account to the fixed account.
- - Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements when
any of the money in the contract owner's fixed account matures. At that
time, the contract owner will have an opportunity to leave the money in the
fixed account and receive the Renewal Rate or the contract owner can move
the money to any of the other underlying mutual fund options.
- - Dollar Cost Averaging Rate - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract when
used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. 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.
Nationwide guarantees that 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 any applicable charges including
CDSC.
17
<PAGE> 18
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 0.95% of the daily net assets of the variable account.
The mortality risk charges compensate Nationwide for guaranteeing the annuity
rate of the contracts. This guarantee ensures that the annuity rates will not
change regardless of the death rates of annuity payees or the general
population.
The expense risk charges compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
<TABLE>
<CAPTION>
The CDSC applies as follows:
- ---------------------------- --------------------------
Number of Years from Date CDSC
of Purchase Payment Percentage
- ---------------------------- --------------------------
<S> <C> <C>
0 7%
- ---------------------------- --------------------------
1 7%
- ---------------------------- --------------------------
2 6%
- ---------------------------- --------------------------
3 5%
- ---------------------------- --------------------------
4 4%
- ---------------------------- --------------------------
5 3%
- ---------------------------- --------------------------
6 2%
- ---------------------------- --------------------------
7 0%
- ---------------------------- --------------------------
</TABLE>
The CDSC is used to cover sales expenses, including commissions (maximum of 6%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general assets, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at least
two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 7 years.
18
<PAGE> 19
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options, the fixed account, or the variable account. Nationwide
may waive the CDSC if a contract described in this prospectus is exchanged for
another Nationwide contract (or a contract of any of its affiliated insurance
companies). A CDSC may apply to the contract received in the exchange.
A contract held by a Charitable Remainder Trust may withdraw CDSC-free the
greater of (a) or (b), where:
(a) is the amount which would otherwise be available for withdrawal without a
CDSC; and
(b) is the difference between the total purchase payments made to the contract
as of the date of the withdrawal (reduced by previous withdrawals) and the
contract value at the close of the day prior to the date of the withdrawal.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes. Premium
taxes may be deducted from death benefit proceeds.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
REDUCED PURCHASE PAYMENT OPTION
If the contract owner chooses the Reduced Purchase Payment Option, Nationwide
will deduct a charge equal to an annual rate of 0.25% of the daily net assets of
the variable account. In return, the minimum initial purchase payment for that
contract will be $1,000 and minimum subsequent purchase payment will be $25.
This option is not available for Investment-only Contracts.
The contract owner may elect to terminate this rider if, throughout a period of
at least two years and continuing until such election:
(1) the total of all purchase payments, less surrenders and withdrawals, is
maintained at $25,000 or more; and
(2) during such period and continuance, all subsequent purchase payments were
at least $1,000.
This election must be submitted in writing on a form provided by Nationwide.
Termination of the rider will occur as of the date on the election form, and the
charge for this rider will no longer be assessed. Subsequent purchase payments,
if any, will be subject to the terms of the contract and must be at least
$1,000.
CDSC OPTIONS AND CHARGES
Five Year CDSC Option for Roth IRAs
For an additional charge of 0.15% of the daily net assets of the variable
account, the contract owner of a Roth IRA may choose the Five-Year CDSC Option.
Under this option, CDSC will not exceed 7% of purchase payments surrendered.
19
<PAGE> 20
The Five Year CDSC Option for Roth IRAs applies as follows:
<TABLE>
<CAPTION>
--------------------------------------------------
Number of Years from Date of CDSC
Purchase Payment Percentage
--------------------------------------------------
<S> <C> <C>
0 7%
--------------------------------------------------
1 7%
--------------------------------------------------
2 6%
--------------------------------------------------
3 4%
--------------------------------------------------
4 2%
--------------------------------------------------
5 0%
--------------------------------------------------
</TABLE>
Additional Withdrawal without Charge and Disability Waiver
Each contract has a standard 10% CDSC-free withdrawal privilege each year. For
an additional charge of 0.10% of the daily net assets of the variable account,
the contract owner can withdraw an additional 5% of total purchase payments each
year without incurring a CDSC. This would allow the contract owner to withdraw a
total of 15% of the total of all purchase payments each year free of CDSC. Like
the standard 10% CDSC-free privilege, this additional withdrawal benefit is
non-cumulative.
This option also contains a disability waiver. Nationwide will waive CDSC if a
contract owner (or annuitant if the contract is owned by a non-natural owner) is
disabled after the contract is issued but before reaching age 65. If this waiver
becomes effective due to disability, no additional purchase payments may be made
to the contract.
Additional CDSC Waiver Options for Tax Sheltered Annuities
10 Year and Disability Waiver
For an additional charge of 0.05% of the daily net assets of the variable
account, the contract owner of a Tax Sheltered Annuity can purchase the 10
Year and Disability Waiver. Under this option, Nationwide will waive CDSC
if two conditions are met:
1) the contract owner has been the owner of the contract for 10 years;
and
2) the contract owner has made regular payroll deferrals during the
entire contract year for at least 5 of those 10 years.
This option also contains a disability waiver. Nationwide will waive CDSC
if the contract owner is disabled after the contract is issued but before
reaching age 65. If this waiver becomes effective due to disability, no
additional purchase payments may be made to the contract.
Hardship Waiver
For an additional charge of 0.15% of the daily net assets of the variable
account, the contract owner of a Tax Sheltered Annuity can purchase the
Hardship Waiver. Under this option, Nationwide will waive CDSC if the
contract owner experiences a hardship (as defined for purposes of Internal
Revenue Code Section (401(k)). The contract owner may be required to
provide proof of hardship.
If this waiver becomes effective, no additional purchase payments may be
made to the contract.
DEATH BENEFIT OPTIONS
If the contract owner chooses an optional death benefit, Nationwide will deduct
a charge equal to an annual rate of either 0.05% (for the One-Year Step Up Death
Benefit) or 0.10% (for the 5% Enhanced Death Benefit) of the daily net assets of
the variable account, depending upon which option was chosen. Nationwide may
lower either of these charges at any time without notifying contract owners.
Further information about these benefits can be found in the "Death Benefit
Payment" provision.
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th
20
<PAGE> 21
birthday, less an adjustment for amounts subsequently surrendered,
plus purchase payments received after that contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase
payment or surrender to the most recent contract anniversary prior to
the annuitant's 86th birthday, less an adjustment for amounts
subsequently surrendered, plus purchase payments received since that
contract anniversary.
Long Term Care Facility Provisions
If the contract owner chooses an optional death benefit, no CDSC will be charged
if:
- The third contract anniversary has passed; and
- The contract owner has been confined to a long-term care facility or
hospital for a continuous 90-day period that began after the contract
issue date.
Additionally, if the contract owner chooses an optional death benefit, no CDSC
will be charged if:
- The contract owner has been diagnosed by a physician to have a
terminal illness; and
- Nationwide receives and records a letter from that physician
indicating such diagnosis.
Written notice and proof of terminal illness or confinement for 90 days in a
hospital or long term care facility must be received in a form satisfactory to
Nationwide and recorded at Nationwide's home offer prior to waiver of the CDSC.
For those contracts that have a non-natural person as contract owner as an agent
for a natural person, the annuitant may exercise the rights of the contract
owner for the purposes described in this provision. If the non-natural contract
owner does NOT own the contract as an agent for a natural person (e.g., the
contract owner is a corporation or a trust for the benefit of an entity), the
annuitant may NOT exercise the rights described in this provision.
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge of 0.45% of the daily net assets of the variable
account, the contract owner can purchase a Guaranteed Minimum Income Benefit
option at the time of application. The Guaranteed Minimum Income Benefit option
provides for a minimum guaranteed value that may replace the contract value as
the amount to be annuitized under certain circumstances. A Guaranteed Minimum
Income Benefit may afford protection against unfavorable investment performance.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract. Purchasers who name
someone other than themselves as the contract owner will have no rights under
the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
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The contract owner may also request a change in the annuitant, contingent
annuitant, contingent owner, beneficiary, or contingent beneficiary before the
annuitization date. These changes must be:
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is a Charitable Remainder Trust.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- Joint owners can only be named for Non-Qualified Contracts.
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners.
- The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners.
- An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner.
- Nationwide will not be liable for any loss, liability, cost, or
expense for acting in accordance with the instructions of either joint
owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract if a
contract owner who is NOT the annuitant dies before the annuitization date, and
there is no surviving joint owner.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance (age 83
or younger if electing a Guaranteed Minimum Income Benefit option), unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be changed before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person(s) who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
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OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- ------------------- ----------------- -----------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- ------------------- ----------------- -----------------
<S> <C> <C>
Investment-only $100,000 $15,000
Contracts
- ------------------- ----------------- -----------------
Non-Qualified $15,000 $1,000
- ------------------- ----------------- -----------------
IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Roth IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Tax Sheltered $15,000 $1,000
Annuity
- ------------------- ----------------- -----------------
Charitable $15,000 $1,000
Remainder Trust
- ------------------- ----------------- -----------------
SEP IRA $15,000 $1,000
- ------------------- ----------------- -----------------
Simple IRA $15,000 $1,000
- ------------------- ----------------- -----------------
</TABLE>
Subsequent purchase payments are not permitted for contracts issued in the State
of Oregon and may not be permitted in other states under certain circumstances.
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, contract value may be affected since the contract owner would
not have access to their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account,
and/or Guaranteed Term Options as instructed by the contract owner. Shares of
the underlying mutual funds allocated to the sub-accounts are purchased at net
asset value, then converted into accumulation units. Contract owners can change
allocations or make exchanges among the sub-accounts, fixed account or
Guaranteed Term Options. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account.
Certain transactions may be
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subject to conditions imposed by the underlying mutual funds, as well as those
set forth in the contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
1) the value of amounts allocated to the sub-accounts of the variable
account; and
2) amounts allocated to the fixed account; and
3) amounts allocated to a Guaranteed Term Option.
If part or all of the contract value is surrendered, or charges are assessed
against the whole contract value, Nationwide will deduct a proportionate amount
from each sub-account, the fixed account and any Guaranteed Term Option based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(1) the net asset value of the underlying mutual fund as of the end of the
current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the ex-dividend date occurs during the
current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of the
end of the preceding valuation period.
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate ranging from 0.95% to 2.05% of the daily
net assets of the variable account, depending on which contract features
the contract owner chooses.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
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Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment); and
2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option; and
3) subtracting charges deducted in accordance with the contract..
TRANSFERS
Transfers from the Fixed Account to the Variable Account or a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account to a
Guaranteed Term Option only upon reaching the end of an interest rate guarantee
period. Normally, Nationwide will permit 100% of such fixed account allocations
to be transferred to the variable account or a Guaranteed Term Option; however
Nationwide may, under certain economic conditions and at its discretion, limit
the maximum transferable amount. Under no circumstances will the maximum
transferable amount be less than 10% of the fixed account allocation reaching
the end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term Options) under the
terms of that program (see "Dollar Cost Averaging").
Transfers to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account. Except as noted below, under no
circumstances will the transfer limit be less than 10% of the current value of
the variable account, less any transfers made in the 12 months preceding the
date the transfer is requested, but not including transfers made prior to the
imposition of the transfer limit. However, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account (whether from the variable account or a Guaranteed Term Option)
when the fixed account value is greater than or equal to 30% of the contract
value at the time the purchase payment is made or the transfer is requested.
Transfers from a Guaranteed Term Option
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine and will not be liable for
following telephone instructions that it reasonably determined to be genuine.
Nationwide may withdraw the telephone exchange privilege upon 30 days written
notice to contract owners.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account or to the Guaranteed Term Options. Nationwide will
determine the amount that may be transferred and will declare this
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<PAGE> 26
amount at the end of the guarantee period. This amount will not be less than 10%
of the amount in the fixed account that is maturing.
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or a Guaranteed Term Option, this period
begins on the date of deposit or transfer and ends on the one year anniversary
of the deposit or transfer. The guaranteed interest rate period may last for up
to 3 months beyond the 1 year anniversary because guaranteed terms end on the
last day of a calendar quarter.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market-timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using
market-timing firms. To avoid this, Nationwide may modify transfer and exchange
rights of contract owners who use market timing firms (or other third parties)
to transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
- submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one contract
owner at the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. The refunded contract value will reflect the deduction of any contract
charges, unless otherwise required by law. All Individual Retirement Annuity,
SEP IRA, Simple IRA and Roth IRA refunds will be a return of purchase payments.
State and/or federal law may provide additional free look privileges.
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 Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
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Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. The amount withdrawn from
each investment option will be in proportion to the value in each option at the
time of the surrender request.
A CDSC may apply. The contract owner may take the CDSC from either:
a) the amount requested; or
b) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds. A CDSC may apply.
SURRENDERS UNDER A TEXAS OPTIONAL RETIREMENT PROGRAM OR A LOUISIANA OPTIONAL
RETIREMENT PLAN
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
- the participant dies;
- the participant retires;
- the participant terminates employment due to total disability; or
- the participant that works in a Texas public institution of higher
education terminates employment.
A participant under a contract issued under the Louisiana Optional Retirement
Plan may only take distributions from the contract upon retirement or
termination of employment. All retirement benefits under this type of plan must
be paid as lifetime income; lump sum cash payments are not permitted, except for
death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless one of
the applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide 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. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
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1. when the contract owner reaches age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may NOT
include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A 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 a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions stated above.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Tax Sheltered Annuities. These
contract owners can take loans from the contract value beginning 30 days after
the contract is issued up to the annuitization date. Loans are subject to the
terms of the contract, the plan, and the Internal Revenue Code.
Nationwide may modify the terms of a loan to comply with changes in applicable
law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
- --------------- ------------ --------------------------
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
- --------------- ------------ --------------------------
<S> <C> <C>
NON-ERISA up to up to 80% of contract
PLANS $20,000 value (not more than
$10,000)
- --------------- ------------ --------------------------
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
- --------------- ------------ --------------------------
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
- --------------- ------------ --------------------------
</TABLE>
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a loan processing fee at the time each new loan is
processed. If assessed, this fee compensates Nationwide for expenses related to
administering and processing loans.
The fee is taken from the sub-accounts, fixed account, and Guaranteed Term
Options in proportion to the contract value at the time the loan is processed.
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HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. Any
remaining required collateral will be transferred from the Guaranteed Term
Options. Transfers from the Guaranteed Term Options may be subject to a market
value adjustment. No CDSC will be deducted on transfers related to loan
processing.
LOAN INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the NSAT Money Market
Fund unless the contract owner directs otherwise.
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to
annuitization; or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD & LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed distribution may also be subject to an early withdrawal
tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An
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assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Investment-only Contracts, Individual Retirement Annuities, Roth IRAs, SEP IRAs,
Simple IRAs, and Tax Sheltered Annuities may not be assigned, pledged or
otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
Requests for asset rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York Stock Exchange is
closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Tax Sheltered Annuity plan. Contract owners should consult
a financial adviser to discuss the use of asset rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. Contract owners may participate in this program if their contract
value is $15,000 or more. Nationwide does not guarantee that this program will
result in profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the following underlying mutual funds: Federated
Insurance Series - Federated Quality Bond Fund II, Fidelity VIP High Income
Portfolio, NSAT Government Bond Fund, NSAT Nationwide High Income Bond Fund, and
NSAT Money Market Fund to any other underlying mutual fund. Dollar Cost
Averaging transfers may not be directed to Guaranteed Term Options. The minimum
monthly transfer is $100.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
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Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal or less than to 1/30th of the
fixed account value at the time the program is requested. A Dollar Cost
Averaging program which transfers amounts from the fixed account to the variable
account is not the same as an Enhanced Rate Dollar Cost Averaging program.
Contract owners that wish to utilize Dollar Cost Averaging from the fixed
account should first inquire whether any Enhanced Rate Dollar Cost Averaging
programs are available.
Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs. Dollar Cost Averaging transfers for this program may only be made from
the fixed account. Such Enhanced Rate Dollar Cost Averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date;
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
<TABLE>
<CAPTION>
--------------------------- -----------------------
PERCENTAGE OF
CONTRACT OWNER'S CONTRACT VALUE
AGE
--------------------------- -----------------------
<S> <C>
Under age 59 1/2 5%
--------------------------- -----------------------
Age 59 1/2 through age 61 7%
--------------------------- -----------------------
Age 62 through age 64 8%
--------------------------- -----------------------
Age 65 through age 74 10%
--------------------------- -----------------------
Age 75 and over 13%
--------------------------- -----------------------
</TABLE>
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of
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<PAGE> 32
CDSC for that contract year will be determined in accordance with that
provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a Tax
Sheltered Annuity plan, annuitization may occur during the first 2 years subject
to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
- -------------------------------------------------------
A VARIABLE PAYMENT ANNUITY MAY NOT BE ELECTED WHEN
EXERCISING THE GUARANTEED MINIMUM INCOME BENEFIT
OPTION.
- -------------------------------------------------------
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that
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<PAGE> 33
will represent each monthly payment. This is done by dividing the dollar amount
of the first payment by the value of an annuity unit as of the annuitization
date. This number of annuity units remains fixed during annuitization.
The second and subsequent payments are 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 amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate is the percentage rate of return required to maintain
level variable annuity payments. Subsequent variable annuity payments may be
more or less than the first payment based on whether actual investment
performance of the underlying mutual funds is higher or lower than the assumed
investment rate of 3.5%.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
Exchanges among Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- the amount to be distributed is less than $5,000, in which case
Nationwide may make one lump sum payment of the contract value; or
- an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
GUARANTEED MINIMUM INCOME BENEFIT OPTION ("GMIB")
What is a GMIB?
A GMIB is a benefit which ensures the availability of a minimum amount when the
contract owner wishes to annuitize the contract. This minimum amount, referred
to as the Guaranteed Annuitization Value, may be used at specified times to
provide a guaranteed level of determinable lifetime annuity payments. The GMIB
may provide protection in the event of lower contract values that may result
from the investment performance of the contract.
How is the Guaranteed Annuitization Value Determined?
The Guaranteed Annuitization Value is equal to (a) - (b), but will never be
greater than 200% of all purchase payments, where:
(a) is the sum of all purchase payments, plus interest accumulated at a
compounded annual rate of 5% starting at the date of issue and ending on
the contract anniversary occurring immediately prior to the annuitant's
86th birthday;
(b) is the reductions to (a) due to surrenders made from the contract. All such
reductions
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<PAGE> 34
will be proportionately the same as reductions to the contract value caused
by surrenders. For example, a surrender which reduces the contract value by
25% will also reduce the Guaranteed Annuitization Value by 25%.
Special Restrictions for a GMIB
After the first contract year, if the value of the contract owner's fixed
account allocation becomes greater than 30% of the contract value in any
contract year due to:
(1) the application of additional purchase payments;
(2) surrenders; or
(3) transfers from the variable account,
then 0% interest will accrue in that contract year for purposes of calculating
the Guaranteed Annuitization Value.
If the contract owner's fixed account allocation becomes greater than 30% of the
contract value solely as a result of fluctuations in the value of the variable
account, then interest will continue to accrue for the purposes of the
Guaranteed Annuitization Value at 5% annually, subject to the other terms and
conditions outlined herein.
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<PAGE> 35
GMIB Illustrations
The following charts illustrate the amount of income that will be provided to an
annuitant if the contract owner annuitizes the contract at the 7th, 10th or 15th
contract anniversary date, using the GMIB.
The illustrations assume the following:
- An initial purchase payment of $100,000.00 is made to the contract and
allocated to the variable account;
- There are no surrenders from the contract or transfers to the fixed
account (raising the fixed account value to greater than 30% of the
contract value);
- The contract is issued to a MALE at age 55, 65 or 70;
- A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option
is elected.
<TABLE>
<CAPTION>
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
55 62 $4.72 $664.15
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
65 72 $5.96 $838.63
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
70 77 $6.79 $955.42
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
55 65 $5.03 $819.33
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
65 75 $6.44 $1,049.01
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
70 80 $7.32 $1,192.35
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
55 70 $5.66 $1,132.00
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
65 80 $7.32 $1,464.00
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
70 85 $8.18 $1,636.00
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
*Guaranteed Monthly Benefit per $1,000 applied
The illustrations should be used as a tool to assist an investor in determining
whether purchasing and exercising a GMIB option is right for them. The
guaranteed purchase rates assumed in the illustrations may not apply in some
states, or for contracts issued under an employer sponsored plan. Different
guaranteed purchase rates will apply for females, for males who annuitize at
ages other than the ages shown above, or for annuitizations under other annuity
payment options. Where different guaranteed purchase rates apply, GMIB amounts
shown above will be different. In all cases, the guaranteed purchase rates used
to calculate the GMIB will be the same as the purchase rates guaranteed in the
contract for fixed annuitizations without the GMIB.
The purchase rates available in connection with annuitization options under a
GMIB are minimum guaranteed purchase rates. Alternative purchase rates, which
may be more favorable, may apply to annuitizations which occur without a GMIB
option.
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<PAGE> 36
When May the Guaranteed Annuitization Value be Used?
The contract owner may use the Guaranteed Annuitization Value by annuitizing the
contract during the thirty day period following any contract anniversary:
(1) after the contract has been in effect for seven years; AND
(2) the annuitant has attained age 60.
What Annuity Payment Options May Be Used With the Guaranteed Annuitization
Value?
The contract owner may elect any life contingent FIXED ANNUITY PAYMENT OPTION
calculated using the guaranteed annuity purchase rates set forth in the
contract. Such Fixed Annuity Payment Options include:
- Life Annuity;
- Joint and Last Survivor Annuity;
- Life Annuity with 120 or 240 Monthly Payments Guaranteed.
Other GMIB Terms and Conditions
**PLEASE READ CAREFULLY**
- The GMIB must be elected at the time of application.
- The annuitant must be age 83 or younger at the time the contract is
issued.
- The GMIB is irrevocable and will remain for as long as the contract
remains in force.
- -------------------------------------------------------------------------------
IMPORTANT CONSIDERATIONS TO KEEP IN MIND REGARDING
THE GMIB OPTION
While a GMIB does provide a Guaranteed Annuitization Value, A GMIB MAY NOT BE
APPROPRIATE FOR ALL INVESTORS and should be understood completely and analyzed
thoroughly before being elected.
- A GMIB DOES NOT in any way guarantee the performance of any underlying
mutual fund, or any other investment option available under the
contract.
- Once elected, the GMIB is irrevocable, meaning that even if the
investment performance of underlying mutual funds or other available
investment options surpasses the minimum guarantees associated with
the GMIB, the GMIB charges will still be assessed.
- The GMIB in no way restricts or limits the rights of contract owners
to annuitize the contract at other times permitted under the contract,
nor will it in any way restrict the right to annuitize the contract
using contract values that may be higher than the Guaranteed
Annuitization Value.
- Please take advantage of the guidance of a qualified financial adviser
in evaluating the GMIB options, and all other aspects of the contract.
- GMIB may not be approved in all state jurisdictions.
- -------------------------------------------------------------------------------
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<PAGE> 37
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. Individual Retirement Annuities and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, contract, and the Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED
CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the contingent owner becomes the contract owner. If no contingent owner is
named, the last surviving contract owner's estate becomes the contract owner.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death
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<PAGE> 38
benefit. Contingent beneficiaries will share the death benefit equally, unless
otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
DEATH BENEFIT PAYMENT
Contract owners may select one of three death benefits available under the
contract at the time of application (not all death benefit options may be
available in all states). If no selection is made at the time of application,
the death benefit will be the Five-Year Reset Death Benefit.
The death benefit value is determined as of the date Nationwide receives:
1) proper proof of the annuitant's death;
2) an election specifying the distribution method; and
3) any state required form(s).
Five-Year Reset Death Benefit (Standard Contractual Death Benefit)
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the contract value as of the most recent five year contract
anniversary before the annuitant's 86th birthday, less an adjustment
for amounts surrendered, plus purchase payments received after that
five year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
1) the contract value; or
2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase payment
or surrender to the most recent contract anniversary prior to the
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<PAGE> 39
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received since that contract
anniversary.
The total accumulated amount will not exceed 200% of the net of purchase
payments and amounts surrendered. The adjustment for amounts subsequently
surrendered after the most recent contract anniversary will reduce the 5%
interest anniversary value in the same proportion that the contract value was
reduced on the date(s) of the partial surrender(s).
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and before
the entire interest in the contract has been distributed, then the
remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the entire
interest in the contract (consisting of either the death benefit or the
contract value reduced by charges set forth elsewhere in the contract)
will be distributed within 5 years of the contract owner's death,
provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary. Payments must begin within one year of the contract
owner's death unless otherwise permitted by federal income tax
regulations;
b) if the designated beneficiary is the surviving spouse of the deceased
contract owner, the spouse can choose to become the contract owner
instead of receiving a death benefit. Any distributions required
under these distribution rules will be made upon that spouse's death.
In the event that the contract owner is NOT a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
b) any change of annuitant will be treated as the death of a contract
owner; and
c) in either case, the appropriate distribution will be made upon the death
or change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option over a period not longer than
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint
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<PAGE> 40
life expectancies of the annuitant and the annuitant's designated
beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
a) or b), the payments will begin on the required beginning date. The required
beginning date is the later of:
a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70 1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Distribution commencing on the required distribution date must satisfy minimum
distribution and incidental benefit provisions set forth in the Internal Revenue
Code. Those provisions require that distributions cannot be less than the amount
determined by dividing the annuitant's interest in the Tax Sheltered Annuity
determined by the end of the previous calendar year by (a) the annuitant's life
expectancy; or if applicable, (b) the joint and survivor life expectancy of the
annuitant and the annuitant's beneficiary. The life expectancies and joint life
expectancies are determined by reference to Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Tax
Sheltered Annuity must be distributed by December 31 of the calendar year in
which the fifth anniversary of the annuitant's death occurs unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not longer
than his or her life expectancy) and beginning no later than December 31
of the year in which the annuitant would have attained age 70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving spouse
and the beneficiary elects to receive distribution of the contract in
substantially equal payments over his or her life (or a period not longer
than his or her life expectancy) beginning no later than December 31 of
the year following the year in which the annuitant dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES, SEP IRAS AND SIMPLE
IRAS
Distributions from an Individual Retirement Annuity, SEP IRA or Simple IRA must
begin no later than April 1 of the calendar year following the calendar year in
which the contract owner reaches age 70 1/2. Distribution may be paid in a lump
sum or in substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity, SEP IRA or Simple IRA must be distributed by
December 31 of the calendar year
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in which the fifth anniversary of the contract owner's death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary and
such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity, SEP IRA or
Simple IRA established for his or her benefit; or
2) receive distribution of the contract in substantially equal payments
over his or her life (or a period not longer than his or her life
expectancy) and beginning no later than December 31 of the year in
which the contract owner would have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a period
not longer than his or her life expectancy) beginning no later than
December 31 of the year following the year of the contract owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA or
Simple IRA of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity, SEP IRA or Simple IRA must annually report the amount of non-deductible
purchase payments, the amount of any distribution, the amount by which
non-deductible purchase payments for all years exceed non-taxable distributions
for all years, and the total balance of all Individual Retirement Annuities, SEP
IRA or Simple IRA.
If the contract owner dies before the entire interest in the contract has been
distributed, the balance will also be included in his or her gross estate.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary and
the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her benefit;
or
2) receive distribution of the contract in substantially equal payments
over his or her life (or a period not longer than his or her life
expectancy) and beginning no later than December 31 of the year
following the year in which the contract owner would have reached age
70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the contract
in
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substantially equal payments over his or her life (or a period not longer
than his or her life expectancy) beginning no later than December 31 of the
year following the year in which the contract owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
advisor to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities, including SEP IRAs and Simple IRAs; (2) Roth
IRAs; (3) Tax Sheltered Annuities; and (4) Non-Qualified Contracts. Each type of
annuity is discussed below.
Individual Retirement Annuities, SEP IRAs and Simple IRAs
Distributions from Individual Retirement Annuities, SEP IRAs, Simple IRAs and
contracts owned by Individual Retirement Accounts are generally taxed when
received. The excludable portion of each payment is based on the ratio between
the amount by which non-deductible purchase payments to all the contracts
exceeds prior non-taxable distributions from the contracts, and the total
account balances in the contracts at the time of the distribution. The owner of
the Individual Retirement Annuity, SEP IRA, Simple IRA 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 distributions;
- - 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, SEP IRAs, Simple
IRAs and Individual Retirement Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five-year rule and meets
one of the following requirements:
(i) it is made on or after the date on which the contract owner attains
age 59 1/2;
(ii) it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
(iii) it is attributable to the contract owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in
Section 72(t)(2)(F) of the Internal Revenue Code).
If the Roth IRA does not have any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the distribution is not made within the five year
period beginning with the first contribution to the Roth IRA. If the Roth IRA
contains qualified rollover contributions from a retirement plan other than a
Roth IRA (or income allocable thereto), the five year rule is satisfied if the
distribution is not made within the five taxable year period commencing with the
taxable year in which the qualified rollover contribution was made.
A nonqualified distribution is any distribution that is not a qualified
distribution.
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A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that the distribution, when added to all previous distributions, does not
exceed that total amount of contributions made to the Roth IRA. Any nonqualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
If the contract owner dies before the contract is completely distributed, the
balance will also be included in the contract owner's gross estate for tax
purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
required by the Internal Revenue Code. The formula excludes from income the
amount invested in the contract divided by the number of anticipated payments
(as determined pursuant to Section 72(d) of the Internal Revenue Code) until the
full investment in the contract is recovered. Thereafter all distributions are
fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment 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 until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income and no additional payments are due
after his or her death, then he or she may be entitled to a deduction for the
balance of the unrecovered investment in the contract on his or her final income
tax return.
Distributions before 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
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during any 12-month period will be treated as one annuity contract. Additional
limitations on the use of multiple contracts may be imposed by Treasury
Regulations.
Distributions before the annuitization date allocable to a 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 earnings from contributions made to the contract after
February 28, 1986. There are exceptions for immediate annuities and certain
contracts owned for the benefit of an individual. An immediate annuity, for
purposes of this discussion, is a single premium contract on which payments
begin within one year of purchase. If this contract is issued as the result of
an exchange described in Section 1035 of the Internal Revenue Code, for purposes
of determining whether the contract is an immediate annuity, it will generally
be considered to have been purchased on the
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purchase date of the contract given up in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59 1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner),
4) is for the purchase of an immediate annuity;
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
Distributions for Non-Qualified Contracts."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent for an individual is
treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
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b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES, SEP IRAS, SIMPLE IRAS AND TAX SHELTERED
ANNUITIES
Contract owners looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Individual Retirement Annuities, SEP IRAs, Simple IRAs, and
Tax Sheltered Annuities should contact a qualified adviser. The terms of each
plan may limit the rights available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into Individual Retirement Annuities, SEP IRAs or Simple IRAs. Most
distributions from Tax Sheltered Annuities may be rolled into another Tax
Sheltered Annuity, Individual Retirement Annuity, SEP IRA or Simple IRA.
Distributions that may NOT be rolled over are those that are:
a) one of a series of substantially equal annual (or more frequent) payments
made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the contract
owner and the contract owner's designated beneficiary;
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
Individual Retirement Annuities, SEP IRAs and Simple IRAs may not provide life
insurance benefits. If the death benefit exceeds the greater of the contract's
cash value or the sum of all purchase payments (less any surrenders), the
contract could be considered life insurance. Consequently, the Internal Revenue
Service could determine that the Individual Retirement Annuity, SEP IRA or
Simple IRA does not qualify for the desired tax treatment.
ROTH IRAS
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
For rollovers from Individual Retirement Accounts and Individual Retirement
Annuities, all of the income from the rollover will be required to be included
in income in the year of the rollover distribution from the Individual
Retirement Account or Individual Retirement Annuity.
A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual
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Retirement Account or Individual Retirement Annuity within the preceding five
years could be subject to a 10% penalty, even if the distribution is not
taxable. In addition, if the rollover from the Individual Retirement Account or
Individual Retirement Annuity was made in 1998, and the income from that
rollover was included in income ratably over a four year period, a distribution
from the Roth IRA within four years of the rollover may result in the loss of
the four year spread, subject to the amount deferred under the four year
election to be taxed immediately.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required), or if it is
an eligible rollover distribution. Mandatory back-up withholding rates are 31%
of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
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If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., Dollar Cost Averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
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- annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must be sent to
the underlying mutual fund beneficial shareholders as required by the
rules under the Investment Company Act of 1940 for the variable
account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace computer systems so
that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that supports our mutual fund products
will be fully deployed in the first quarter of 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners including electronic interfaces. Processes
have been put into place and programs initiated to process data irrespective of
the format by converting non-compliant data into a Year 2000 compliant format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems with embedded
computer chips. Nationwide's building systems such as fire, security, and
elevators and escalators supporting facilities in Columbus, Ohio have been
tested and are Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses in 1998 and 1997 included approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending approximately $5 million
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on Year 2000 activities in 1999. These expenses do not have an effect on the
assets of the variable account and are not charged through to the contract
owner.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In February 1997, Nationwide was named as a defendant in a lawsuit filed in New
York state court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Co.). In April 1998,
Nationwide was named as a defendant in a lawsuit filed in Ohio state court
similar to the Snyder case (David and Joan Mishler v. Nationwide Life Insurance
Co.). In August 1998, Nationwide Mutual Insurance Company and Nationwide and the
plaintiffs executed a stipulation of settlement and submitted it to the New York
state court for approval. On August 20, 1998, the court in the Snyder case
signed an order preliminarily approving a class for settlement purposes (which
would include the Mishler case) and scheduled a fairness hearing for December
17, 1998. At that hearing, the court reviewed the fairness and reasonableness of
the proposed settlement and issued a final order and judgment. The approved
settlement provides for dismissal of both the Snyder and Mishler cases, bars
class members from pursuing litigation against Nationwide Mutual Insurance
Company and its affiliates, including Nationwide and its subsidiaries, relating
to the allegations in the Snyder case, and provides class members with a
potential value of approximately $100 million in policy adjustments, discounted
premiums and discounted products.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance policy and the other who was the owner of a variable annuity contract,
commenced a lawsuit in a federal court in Texas against Nationwide and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs seek to
represent a class of variable life insurance policy owners and variable annuity
contract owners whom they claim were allegedly misled when purchasing these
variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the district court denied, in part, and granted, in part, Nationwide and
American Century's motions to dismiss the complaint. The remaining claims
against Nationwide allege securities fraud, common law fraud, civil conspiracy
and breach of contract. On December 2, 1998, the district court issued an order
denying plaintiffs' motion for class certification. On December 10, 1998, the
district court stayed the lawsuit pending plaintiffs' petition to the federal
appeals court for interlocutory review of the order denying class certification.
On December 14, 1998, plaintiffs filed their petition for interlocutory review,
on which the federal appeals court has not yet ruled. Nationwide intends to
defend the case vigorously.
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On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, Nationwide Advisory Services, Inc., is not engaged in
any litigation of any material nature.
ADVERTISING AND SUB-ACCOUNT
PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "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 NSAT Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT Money Market Fund 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 SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, 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;
- - bank money market deposit accounts and passbook savings;
- - CDs; and
- - the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- - 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.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- - 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;
News and World Report;
- - LIMRA;
- - Value;
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- - Best's Agent Guide;
- - Western Annuity Guide;
- - Comparative Annuity Reports;
- - Wall Street Journal;
- - Barron's;
- - Investor's Daily;
- - Standard & Poor's Outlook; and
- - Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized average annual total return
("standardized return") calculated in a manner prescribed by the SEC, and
non-standardized total return ("non-standardized return").
Standardized return shows the percentage rate of return of a hypothetical
initial investment of $1,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been available
in the variable account if it has not been available for one of the prescribed
periods). This calculation reflects the standard 7 year CDSC schedule and the
maximum charges that could be assessed to a contract if all rider options for a
contract issued as a Tax Sheltered Annuity are chosen (2.05%). Standardized
return does not reflect the deduction of state premium taxes, which may be
imposed by certain states.
Non-standardized return is calculated similarly to standardized return except
non-standardized return assumes an initial investment of $25,000, with base
contract variable account charges of 0.95% and does NOT reflect CDSC. An assumed
initial investment of $25,000 is used because that amount more accurately
reflects the average contract size.
Both methods of calculation reflect total return for the most recent one, five
and ten year periods (or for a period covering the time the underlying mutual
fund has been in existence). For those underlying mutual funds which have not
been available for one of the prescribed periods, the nonstandardized total
return illustrations will show the investment performance the underlying mutual
funds would have achieved had they been available in the variable account for
one of the periods.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
51
<PAGE> 52
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/98 to 12/31/98 to 12/31/98 Account
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 19.23% N/A 20.71% 11/03/97
American Century VP Income & Growth
- ------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 11.21% N/A 10.48% 11/03/97
American Century VP International
- ------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - -2.59% N/A 0.41% 11/03/97
American Century VP Value
- ------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 21.72% N/A 20.32% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 20.57% N/A 21.17% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 22.55% N/A 21.88% 11/03/97
Appreciation Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 4.07% N/A 6.69% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 31.62% N/A 27.11% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class -11.35% N/A -8.91% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 5.16% N/A 3.49% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 22.27% N/A 18.46% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 16.90% N/A 18.57% 11/03/97
Service Class
- ------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - -33.39% N/A -27.05% 11/03/97
Emerging Markets Debt Portfolio
- ------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 22.30% N/A 23.12% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 1.47% N/A 2.58% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund -2.13% N/A -1.18% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 10.54% N/A 11.43% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.63% N/A 1.74% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 7.63% N/A 8.11% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 11.59% N/A 10.94% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund -1.61% N/A 0.51% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund -4.78% N/A -3.37% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 3.34% N/A 2.39% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund -10.10% N/A -10.17% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund -6.35% N/A -8.66% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 7.09% N/A 8.06% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund -6.92% N/A -4.78% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 23.99% N/A 25.87% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 31.52% N/A 45.97% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio -3.19% N/A -1.59% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 4.88% N/A -0.28% 11/03/97
Aggressive Growth Fund/VA
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 16.40% N/A 12.20% 11/03/97
Capital Appreciation Fund/VA
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/98 to 12/31/98 to 12/31/98 Account
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds - Oppenheimer -2.70% N/A -0.02% 11/03/97
Main Street Growth & Income Fund/VA
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide -38.69% N/A -41.15% 11/03/97
Emerging Markets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard -35.78% N/A -37.77% 11/03/97
Assets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley -17.97% N/A -13.30% 11/03/97
Real Estate Securities Portfolio
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 4.65% N/A 7.54% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio -2.06% N/A -6.65% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio -0.91% N/A -2.14% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
$25,000 INITIAL INVESTMENT, VARIABLE ACCOUNT CHARGES OF 0.95%, NO CDSC
PLEASE NOTE: THE PERFORMANCE NUMBERS BELOW REFLECT THE DEDUCTION OF THE AMOUNT
ASSESSED FOR THE BASE CONTRACT OF 0.95% (A CONTRACT WITH NO RIDER OPTIONS). FOR
CONTRACT OWNERS WHICH HAVE CHOSEN ONE OR MORE RIDER OPTIONS, THE FUND
PERFORMANCE AS SHOWN BELOW WOULD BE REDUCED IN ACCORDANCE TO THE COSTS OF THE
RIDER OPTIONS SELECTED.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 25.53% N/A 29.34% 10/30/97
American Century VP Income & Growth
- ------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 17.51% N/A 11.12% 05/02/94
American Century VP International
- ------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 3.71% N/A 14.74% 05/01/96
American Century VP Value
- ------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 28.02% 21.15% 21.69% 10/06/93
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 26.87% 22.28% 15.91% 09/29/89
- ------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 28.85% 22.28% 20.36% 04/05/93
Appreciation Portfolio
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class, 10.37% 17.50% 14.40% 10/09/86
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 37.92% 20.44% 18.13% 10/09/86
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class -5.43% 7.62% 9.96% 09/19/85
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 11.46% 8.53% 8.91% 01/28/87
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 28.57% N/A 27.27% 01/03/95
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 23.20% N/A 24.93% 01/03/95
Service Class
- ------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - -29.13% N/A -19.92% 06/19/97
Emerging Markets Debt Portfolio
- ------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 28.60% 21.81% 18.10% 04/15/92
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT Government Bond Fund 7.77% 6.14% 8.20% 11/08/82
- ------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 4.17% 3.94% 4.33% 11/10/81
- ------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 16.84% 18.17% 14.23% 11/08/82
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 6.93% N/A 7.08% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 13.93% N/A 13.35% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 17.89% N/A 16.14% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 4.69% N/A 5.87% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 1.52% N/A 2.05% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 9.64% N/A 7.72% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund -4.08% N/A 4.99% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund -0.05% N/A 16.11% 10/23/95
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 13.39% N/A 13.30% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund -0.66% N/A 0.66% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 30.29% N/A 31.10% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 37.82% N/A 51.08% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 3.11% N/A 18.46% 03/22/94
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 11.18% 11.88% 14.91% 08/15/86
Aggressive Growth Fund/VA
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 22.70% 20.83% 15.64% 04/03/85
Capital Appreciation Fund/VA
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 3.60% N/A 25.67% 07/05/95
Main Street Growth & Income Fund/VA
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide -34.82% N/A -10.77% 12/21/95
Emerging Markets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard -31.69% -4.29% 1.03% 09/01/89
Assets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley -12.55% N/A 13.88% 07/03/95
Real Estate Securities Portfolio
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 10.95% N/A 12.79% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio 4.24% N/A 4.61% 06/30/95
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 5.39% N/A 6.51% 09/30/96
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no sub-account performance is available.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................2
Underwriters..................................................................2
Calculations of Performance...................................................2
Annuity Payments..............................................................3
Financial Statements..........................................................4
54
<PAGE> 55
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURYSM
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management
company that offers its shares only as investment vehicles for variable annuity
and variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth 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.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company incorporated under Maryland law on January 24, 1989 and
commenced operations on September 29, 1989. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation
55
<PAGE> 56
("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index manager. Dreyfus is a wholly
owned subsidiary of Mellon Bank, N.A., which is a wholly owned subsidiary of
Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment company.
It was organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts on October 29, 1986 and commenced operations on
August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This Portfolio
invests primarily in the common stocks of domestic and foreign issuers.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Dreyfus serves as the Fund's investment adviser. NCM
Capital Management Group, Inc. serves as the Fund's sub-investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an Open-End Management Investment
Company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Federated Advisers serves as the investment adviser.
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade
fixed income securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: 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
56
<PAGE> 57
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also 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.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred stocks,
including convertible securities
- up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Service, Inc. ("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.
VIP OVERSEAS PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
VIP II CONTRAFUND PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that FMR 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 Portfolio primarily invests in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type
57
<PAGE> 58
of security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and it's portfolios.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio, under
normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds, that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Morgan Stanley Dean Witter Universal Funds, Inc. is a mutual fund designed to
provide investment vehicles for variable annuity contracts and variable life
insurance policies and for certain tax-qualified investors. Its Emerging Markets
Debt Portfolio is managed by Morgan Stanley Dean Witter Investment Management,
Inc.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Nationwide Advisory
Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life Insurance
Company.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term capital appreciation.
GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital 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: As high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
SUBADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
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<PAGE> 59
portfolio entirely invested in equity securities. The Fund's secondary
objective is to take advantage of opportunities for growth of capital and
income. The Fund seeks its objective primarily through investments in a
broad variety of securities, including equity securities, fixed-income
securities and short-term obligations. Under normal market conditions, it
is anticipated that the Fund will invest at least 40% of the Fund's total
assets in equity securities and at least 25% in fixed-income senior
securities. The Fund's subadviser, Salomon Brothers Asset Management,
Inc., will have discretion to invest in the full range of maturities of
fixed-income securities. Generally, most of the Fund's long-term debt
investments will consist of "investment grade" securities, but the Fund
may invest up to 20% of its net assets in non-convertible fixed-income
securities rated below investment grade or determined by the subadviser
to be of comparable quality. These securities are commonly known as junk
bonds. In addition, the Fund may invest an unlimited amount in
convertible securities rated below investment grade.
NATIONWIDE EQUITY INCOME FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks above average income and capital appreciation
by investing at least 65% of its assets in income-producing equity
securities. Such equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible
into common stocks. The portion of the Fund's total assets invested in
each type of equity security will vary according to the Fund's
subadviser's assessment of market, economic conditions and outlook.
NATIONWIDE GLOBAL EQUITY FUND
Subadviser: J. P. Morgan Investment Management Inc.
Investment Objective: To provide high total return from a globally
diversified portfolio of equity securities. Total return will consist of
income plus realized and unrealized capital gains and losses. The Fund
seeks its investment objective through country allocation, stock
selection and management of currency exposure. Under normal market
conditions, J.P. Morgan Investment Management Inc. intends to keep the
Fund essentially fully invested with at least 65% of the value of its
total assets in equity securities consisting of common stocks and other
securities with equity characteristics such as preferred stocks,
warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Fund's primary
equity instruments are the common stock of companies based in the
developed countries around the world. The assets of the Fund will
ordinarily be invested in the securities of at least five different
countries.
NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed
income securities. To meet its objective, the Fund intends to invest at
least 65% of its assets in lower-rated fixed income securities such as
preferred stocks, bonds, debentures, notes, equipment lease certificates
and equipment trust certificates which are rated BBB or lower by Standard
& Poor's or Fitch Investors Service or Baa or lower by Moody's (or if not
rated, are determined by the Fund's subadviser to be of a comparable
quality). Such investments are commonly referred to as "junk bonds." For
a further
59
<PAGE> 60
discussion of lower-rated securities, please see the "High Yield
Securities" section of the Fund's prospectus.
NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Salomon Brothers Asset Management, Inc. with Salomon
Brothers Asset Management Limited
Investment Objective: Primarily seeks a high level of current income.
Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in a globally diverse portfolio of
fixed-income investments and by giving the subadviser, Salomon Brothers
Asset Management, Inc. broad discretion to deploy the Fund's assets among
certain segments of the fixed-income market that the subadviser believes
will best contribute to achievement of the Fund's investment objectives.
The Fund reserves the right to invest predominantly in securities rated
in medium or lower categories, or as determined by the subadviser to be
of comparable quality, commonly referred to as "junk bonds." Although the
subadviser has the ability to invest up to 100% of the Fund's assets in
lower-rated securities, the subadviser does not anticipate investing in
excess of 75% of the Fund's assets in such securities. The Subadviser has
entered into a subadvisory agreement with its London based affiliate,
Salomon Brothers Asset Management Limited, pursuant to which the
subadviser has delegated to Salomon Brothers Asset Management Limited
responsibility for management of the Fund's investments in non-dollar
denominated debt securities and currency transactions.
NATIONWIDE SELECT ADVISERS MID CAP FUND
Subadvisers: First Pacific Advisors, Inc., Pilgrim Baxter & Associates,
Ltd., and Rice, Hall, James & Associates
Investment Objective: Capital appreciation by investing primarily in
equity securities of medium-sized companies (market capitalization
between $500 million and $7 billion). Under normal market conditions, the
Fund will invest in equity securities consisting of common stock,
preferred stock and securities convertible into common stocks, including
convertible preferred stock and convertible bonds. NAS has chosen the
Fund's subadvisers because they utilize a number of different investment
styles. In utilizing these different styles, NAS hopes to increase
prospects for investment return and to reduce market risk and volatility.
NATIONWIDE SELECT ADVISERS SMALL CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies
represented by the Russell 2000, known has small cap companies. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of small cap companies. The balance of
the Fund's assets may be invested in equity securities of larger cap
companies.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: The Fund intends to pursue its investment objective
by investing, under normal market conditions, at least 75% of the Fund's
total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
60
<PAGE> 61
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC.,
Lazard Asset Management, Strong Capital Management, Inc. and
Warburg Pincus Asset Management, Inc.
Investment Objective: Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities of companies
whose equity market capitalizations at the time of investment are similar
to the market capitalizations of companies in the Russell 2000 Small
Stock Index.
NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser
extent, in companies in which significant further growth is not
anticipated but whose market value is thought to be undervalued. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities, including common stocks, preferred stocks,
and securities convertible into common or preferred stocks, such as
warrants and convertible bonds. The Fund may invest up to 35% of its
total assets in debt obligations, including intermediate- to long-term
corporate or U.S. Government debt securities.
NATIONWIDE STRATEGIC VALUE FUND
Subadviser: Strong Capital Management Inc./Schafer Capital Management
Inc.
Investment Objective: Primarily long-term capital appreciation; current
income is a secondary objective. The Fund seeks to meet its objectives by
investing in securities which are believed to offer the possibility of
increase in value, primarily common stocks of established companies
having a strong financial position and a low stock market valuation at
the time of purchase in relation to investment value. Other than
considered appropriate for cash reserves, the Fund will generally
maintain a fully invested position in common stocks of publicly held
companies, primarily in stocks of companies listed on a national
securities exchange or other equity securities (common stock or
securities convertible into common stock). Investments may also be made
in debt securities which are convertible into common stocks and in
warrants or other rights to purchase common stock, which in such case are
considered equity securities by the Fund. Strong Capital Management, Inc.
has subcontracted with Schafer Capital Management, Inc. to subadvise the
Fund.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust ("NB AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of NB AMT 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 Guardian, Partners and Mid-Cap Growth Portfolios of NB AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger & Berman Management Incorporated ("NB Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own
61
<PAGE> 62
portfolios of securities. (For more information regarding "master/feeder fund"
structure, see "Special Information Regarding Organization, Capitalization, and
Other Matters" in the underlying mutual fund prospectus.) The investment advisor
is NB Management.
AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
NB Management uses a value-oriented investment approach in selecting
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that NB Management believes have the
potential for long-term, above-average capital appreciation. Medium-sized
companies have market capitalizations form $300 million to $10 billion at
the time of investment. The Portfolio and its corresponding series may
invest up to 10% of its net assets, measured at the time of investment, in
corporate debt securities that are below investment grade or, if unrated,
deemed by NB Management to be of comparable quality. Securities that are
below investment grade, as well as unrated securities, are often considered
to be speculative and usually entail greater risk. As a part of the
Portfolio's investment strategy, the Portfolio may invest up to 20% of its
net assets in securities of issuers organized and doing business
principally outside the United States. This limitation does not apply with
respect to foreign securities that are denominated in U.S. dollars.
AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth 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 the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer variable account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA (FORMERLY "OPPENHEIMER CAPITAL
APPRECIATION FUND")
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY "OPPENHEIMER GROWTH
FUND)
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a
history of earnings and dividends and are issued by seasoned companies
(companies which have an operating history of at least five years
including predecessors). Current income is a secondary consideration in
the selection of the Fund's portfolio securities.
62
<PAGE> 63
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA (FORMERLY "OPPENHEIMER
GROWTH & INCOME FUND")
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of Van Eck Trust are offered only to
separate accounts of insurance companies to fund the benefits of variable life
insurance policies and variable annuity contracts. The investment advisor and
manager is Van Eck Associates Corporation.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund emphasizes investment in countries that, compared to the world's major
economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in "Hard Asset Securities." For the Fund's purpose, "Hard Assets" are real
estate, energy, timber, and industrial and precious metals. Income is a
secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen Asset Management Inc. serves as the Fund's investment adviser.
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified 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 Portfolio 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.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the
63
<PAGE> 64
purpose of funding variable annuity and variable life contracts. Portfolios are
managed by Warburg Pincus Asset Management, Inc. ("Warburg").
GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Warburg considers to be relatively undervalued based
upon research and analysis, taking into account factors such as price/book
ratio, price/cash flow ratio, earnings growth, debt/capital ratio and
multiples of earnings of comparable securities. Although the Portfolio may
hold securities of any size, it currently expects to focus on companies
with market capitalizations of $1 billion or greater at the time of initial
purchase.
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgment of Warburg 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.
POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence or
the early stages of the development of a new product or service; or (b) as
part of a restructuring or recapitalization of the company. The Portfolio
may invest up to 10% of its assets in venture capital and other investment
funds.
64
<PAGE> 65
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
NO OPTIONAL DEATH BENEFITS
(VARIABLE ACCOUNT CHARGES OF 0.95% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT)
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
American Century 10.409767 13.081019 25.66% 954,865 1998
Variable Portfolios, 10.000000 10.409767 4.10% 5,919 1997
Inc. - American
Century VP Income &
Growth - Q
American Century 10.409767 13.081019 25.66% 1,156,159 1998
Variable Portfolios, 10.000000 10.409767 4.10% 14,727 1997
Inc. - American
Century VP Income &
Growth - NQ
American Century 10.088106 11.866841 17.63% 1,231,761 1998
Variable Portfolios, 10.000000 10.088106 0.88% 11,451 1997
Inc. - American
Century VP
International - Q
American Century 10.088106 11.866841 17.63% 1,439,143 1998
Variable Portfolios, 10.000000 10.088106 0.88% 27,628 1997
Inc. - American
Century VP
International - NQ
American Century 10.296896 10.689857 3.82% 628,798 1998
Variable Portfolios, 10.000000 10.296896 2.97% 32,890 1997
Inc. - American
Century VP Value - Q
American Century 10.296896 10.689857 3.82% 591,188 1998
Variable Portfolios, 10.000000 10.296896 2.97% 24,450 1997
Inc. - American
Century VP Value - NQ
The Dreyfus Socially 10.171132 13.034607 28.15% 897,734 1998
Responsible Growth 10.000000 10.171132 1.71% 13,265 1997
Fund, Inc. - Q
The Dreyfus Socially 10.171132 13.034607 28.15% 729,174 1998
Responsible Growth 10.000000 10.171132 1.71% 28,338 1997
Fund, Inc. - NQ
</TABLE>
65
<PAGE> 66
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.343734 13.135997 26.99% 6,530,360 1998
Fund, Inc. - Q 10.000000 10.343734 3.44% 167,229 1997
Dreyfus Stock Index 10.343734 13.135997 26.99% 6,930,101 1998
Fund, Inc. - NQ 10.000000 10.343734 3.44% 220,208 1997
Dreyfus Variable 10.249990 13.220513 28.98% 994,159 1998
Investment Fund - 10.000000 10.249990 2.50% 23,139 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.249990 13.220513 28.98% 1,635,130 1998
Investment Fund - 10.000000 10.249990 2.50% 36,467 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.338433 11.422130 10.48% 4,652,014 1998
Equity-Income 10.000000 10.338433 3.88% 124,825 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.338433 11.422130 10.48% 4,431,491 1998
Equity-Income 10.000000 10.338433 3.88% 152,449 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.030842 13.848033 38.05% 2,225,770 1998
Portfolio: Service 10.000000 10.030842 0.31% 51,944 1997
Class - Q
Fidelity VIP Growth 10.030842 13.848033 38.05% 1,962,518 1998
Portfolio: Service 10.000000 10.030842 0.31% 64,880 1997
Class - NQ
Fidelity VIP High 10.126638 9.586675 -5.33% 3,021,525 1998
Income Portfolio: 10.000000 10.126638 1.27% 90,815 1997
Service Class - Q
Fidelity VIP High 10.126638 9.586675 -5.33% 3,109,107 1998
Income Portfolio: 10.000000 10.126638 1.27% 114,247 1997
Service Class - NQ
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.902344 11.047878 11.57% 630,058 1998
Portfolio: Service 10.000000 9.902344 -0.98% 29,834 1997
Class - Q
Fidelity VIP Overseas 9.902344 11.047878 11.57% 759,889 1998
Portfolio: Service 10.000000 9.902344 -0.98% 32,688 1997
Class - NQ
Fidelity VIP II 9.954885 12.812355 28.74% 2,868,661 1998
Contrafund Portfolio: 10.000000 9.954885 -0.45% 94,143 1997
Service Class - Q
Fidelity VIP II 9.954885 12.812355 28.74% 2,993,987 1998
Contrafund Portfolio: 10.000000 9.954885 -0.45% 137,715 1997
Service Class - NQ
Fidelity VIP III 10.400464 12.826216 23.32% 2,015,088 1998
Growth Opportunities 10.000000 10.400464 4.00% 65,917 1997
Portfolio: Service
Class - Q
Fidelity VIP III 10.400464 12.826216 23.32% 2,029,092 1998
Growth Opportunities 10.000000 10.400464 4.00% 74,836 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.425451 7.395794 -29.06% 148,936 1998
Witter Universal 10.000000 10.425451 4.25% 3,325 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - Q
Morgan Stanley Dean 10.425451 7.395794 -29.06% 152,995 1998
Witter Universal 10.000000 10.425451 4.25% 5,093 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - NQ
NSAT Capital 10.385596 13.369463 28.73% 4,235,753 1998
Appreciation Fund - Q 10.000000 10.385596 3.86% 76,048 1997
</TABLE>
67
<PAGE> 68
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.385596 13.369463 28.73% 4,697,136 1998
Appreciation Fund - NQ 10.000000 10.385596 3.86% 74,609 1997
NSAT Government Bond 10.143182 10.941842 7.87% 3,607,650 1998
Fund - Q 10.000000 10.143182 1.43% 67,127 1997
NSAT Government Bond 10.143182 10.941842 7.87% 3,232,045 1998
Fund - NQ 10.000000 10.143182 1.43% 138,589 1997
NSAT Money Market Fund 10.074129 10.504509 4.27% 4,931,150 1998
- - Q* 10.000000 10.074129 0.74% 155,902 1997
NSAT Money Market Fund 10.074129 10.504509 4.27% 5,513,782 1998
- - NQ* 10.000000 10.074129 0.74% 581,682 1997
NSAT Total Return Fund 10.242940 11.979444 16.95% 8,225,066 1998
- - Q 10.000000 10.242940 2.43% 182,146 1997
NSAT Total Return Fund 10.242940 11.979444 16.95% 5,639,031 1998
- - NQ 10.000000 10.242940 2.43% 197,787 1997
NSAT Nationwide 10.130674 10.844036 7.04% 1,042,085 1998
Balanced Fund - Q 10.000000 10.130674 1.31% 20,941 1997
NSAT Nationwide 10.130674 10.844036 7.04% 927,751 1998
Balanced Fund - NQ 10.000000 10.130674 1.31% 23,584 1997
NSAT Nationwide Equity 10.161693 11.588459 14.04% 237,366 1998
Income Fund - Q 10.000000 10.161693 1.62% 10,838 1997
NSAT Nationwide Equity 10.161693 11.588459 14.04% 340,149 1998
Income Fund - NQ 10.000000 10.161693 1.62% 27,331 1997
NSAT Nationwide Global 10.102208 11.921445 18.01% 296,907 1998
Equity Fund - Q 10.000000 10.102208 1.02% 15,788 1997
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.102208 11.921445 18.01% 382,578 1998
Equity Fund - NQ 10.000000 10.102208 1.02% 12,998 1997
NSAT Nationwide High 10.212505 10.701912 4.79% 656,370 1998
Income Bond Fund - Q 10.000000 10.212505 2.13% 15,004 1997
NSAT Nationwide High 10.212505 10.701912 4.79% 709,535 1998
Income Bond Fund - NQ 10.000000 10.212505 2.13% 33,703 1997
NSAT Nationwide 10.088793 10.252876 1.63% 915,760 1998
Multi-Sector Bond Fund 10.000000 10.088793 0.89% 13,658 1997
- - Q
NSAT Nationwide 10.088793 10.252876 1.63% 934,096 1998
Multi-Sector Bond Fund 10.000000 10.088793 0.89% 41,385 1997
- - NQ
NSAT Nationwide Select 9.949100 10.919701 9.76% 171,632 1998
Advisers Mid Cap Fund- 10.000000 9.949100 -0.51% 3,322 1997
Q
NSAT Nationwide Select 9.949100 10.919701 9.76% 185,246 1998
Advisers Mid Cap Fund- 10.000000 9.949100 -0.51% 5,540 1997
NQ
NSAT Nationwide Small 9.823904 9.432351 -3.99% 930,565 1998
Cap Value Fund - Q 10.000000 9.823904 -1.76% 29,661 1997
NSAT Nationwide Small 9.823904 9.432351 -3.99% 1,021,664 1998
Cap Value Fund - NQ 10.000000 9.823904 -1.76% 42,125 1997
NSAT Nationwide Small 9.613184 9.617964 0.05% 1,269,546 1998
Company Fund - Q 10.000000 9.613184 -3.87% 26,226 1997
</TABLE>
69
<PAGE> 70
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.613184 9.617964 0.05% 1,253,383 1998
Company Fund - NQ 10.000000 9.613184 -3.87% 60,510 1997
NSAT Nationwide 10.204129 11.582258 13.51% 265,377 1998
Strategic Growth Fund 10.000000 10.204129 2.04% 7,333 1997
- - Q
NSAT Nationwide 10.204129 11.582258 13.51% 223,704 1998
Strategic Growth Fund 10.000000 10.204129 2.04% 14,559 1997
- - NQ
NSAT Nationwide 10.147459 10.090240 -0.56% 345,847 1998
Strategic Value Fund - 10.000000 10.147459 1.47% 12,123 1997
Q
NSAT Nationwide 10.147459 10.090240 -0.56% 505,486 1998
Strategic Value Fund - 10.000000 10.147459 1.47% 13,612 1997
NQ
Neuberger Berman AMT 10.504106 13.699229 30.42% 578,032 1998
Guardian Portfolio - Q 10.000000 10.504106 5.04% 5,387 1997
Neuberger Berman AMT 10.504106 13.699229 30.42% 609,746 1998
Guardian Portfolio - NQ 10.000000 10.504106 5.04% 9,331 1997
Neuberger Berman AMT 11.702355 16.144809 37.96% 436,579 1998
Mid-Cap Growth 10.000000 11.702355 17.02% 24,058 1997
Portfolio - Q
Neuberger Berman AMT 11.702355 16.144809 37.96% 449,661 1998
Mid-Cap Growth 10.000000 11.702355 17.02% 27,997 1997
Portfolio - NQ
Neuberger Berman AMT 10.132434 10.458607 3.22% 3,020,772 1998
Partners Portfolio - Q 10.000000 10.132434 1.32% 123,308 1997
</TABLE>
70
<PAGE> 71
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.132434 10.458607 3.22% 2,842,880 1998
Partners Portfolio - NQ 10.000000 10.132434 1.32% 816,409 1997
Oppenheimer Variable 9.533314 10.609896 11.29% 787,398 1998
Account Funds - 10.000000 9.533314 -4.67% 17,204 1997
Oppenheimer Aggressive
Growth Fund/VA - Q
Oppenheimer Variable 9.533314 10.609896 11.29% 753,325 1998
Account Funds - 10.000000 9.533314 -4.67% 22,088 1997
Oppenheimer Aggressive
Growth Fund/VA - NQ
Oppenheimer Variable 9.827325 12.070167 22.82% 916,203 1998
Account Funds - 10.000000 9.827325 -1.73% 32,359 1997
Oppenheimer Capital
Appreciation Fund/VA -
Q
Oppenheimer Variable 9.827325 12.070167 22.82% 1,094,091 1998
Account Funds - 10.000000 9.827325 -1.73% 11,808 1997
Oppenheimer Capital
Appreciation Fund/VA -
NQ
Oppenheimer Variable 10.259486 10.639805 3.71% 1,242,544 1998
Account Funds - 10.000000 10.259486 2.59% 18,417 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - Q
Oppenheimer Variable 10.259486 10.639805 3.71% 1,352,028 1998
Account Funds - 10.000000 10.259486 2.59% 39,986 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - NQ
</TABLE>
71
<PAGE> 72
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.814851 5.751082 -34.76% 217,873 1998
Insurance Trust - 10.000000 8.814851 -11.85% 9,145 1997
Worldwide Emerging
Markets Fund - Q
Van Eck Worldwide 8.814851 5.751082 -34.76% 279,325 1998
Insurance Trust - 10.000000 8.814851 -11.85% 18,343 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.979477 6.139717 -31.63% 82,690 1998
Insurance Trust - 10.000000 8.979477 -10.21% 10,008 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.979477 6.139717 -31.63% 115,681 1998
Insurance Trust - 10.000000 8.979477 -10.21% 7,257 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.338661 9.050353 -12.46% 646,017 1998
Investment Trust - 10.000000 10.338661 3.39% 32,778 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.338661 9.050353 -12.46% 606,338 1998
Investment Trust - 10.000000 10.338661 3.39% 27,341 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.373620 11.521372 11.06% 373,962 1998
Growth & Income 10.000000 10.373620 3.74% 11,884 1997
Portfolio - Q
Warburg Pincus Trust - 10.373620 11.521372 11.06% 328,455 1998
Growth & Income 10.000000 10.373620 3.74% 1,514 1997
Portfolio - NQ
</TABLE>
72
<PAGE> 73
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.454794 9.865775 4.35% 479,917 1998
International Equity 10.000000 9.454794 -5.45% 23,146 1997
Portfolio - Q
Warburg Pincus Trust - 9.454794 9.865775 4.35% 496,472 1998
International Equity 10.000000 9.454794 -5.45% 35,372 1997
Portfolio - NQ
Warburg Pincus Trust - 9.852750 10.394476 5.50% 192,595 1998
Post-Venture Capital 10.000000 9.852750 -1.47% 1,213 1997
Portfolio - Q
Warburg Pincus Trust - 9.852750 10.394476 5.50% 209,056 1998
Post-Venture Capital 10.000000 9.852750 -1.47% 7,662 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
73
<PAGE> 74
<TABLE>
<CAPTION>
OPTIONAL ONE-YEAR STEP UP DEATH BENEFIT
(VARIABLE ACCOUNT CHARGES OF 1.00% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT)
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
American Century 10.408936 13.073386 25.60% 583,554 1998
Variable Portfolios, 10.000000 10.408936 4.09% 11,674 1997
Inc. - American
Century VP Income &
Growth - Q
American Century 10.408936 13.073386 25.60% 612,111 1998
Variable Portfolios, 10.000000 10.408936 4.09% 5,571 1997
Inc. - American
Century VP Income &
Growth - NQ
American Century 10.087297 11.859906 17.57% 667,671 1998
Variable Portfolios, 10.000000 10.087297 0.87% 3,170 1997
Inc. - American
Century VP
International - Q
American Century 10.087297 11.859906 17.57% 795,739 1998
Variable Portfolios, 10.000000 10.087297 0.87% 9,299 1997
Inc. - American
Century VP
International - NQ
American Century 10.296077 10.683601 3.76% 355,592 1998
Variable Portfolios, 10.000000 10.296077 2.96% 42,338 1997
Inc. - American
Century VP Value - Q
American Century 10.296077 10.683601 3.76% 298,758 1998
Variable Portfolios, 10.000000 10.296077 2.96% 22,796 1997
Inc. - American
Century VP Value - NQ
The Dreyfus Socially 10.170317 13.026995 28.09% 570,245 1998
Responsible Growth 10.000000 10.170317 1.70% 21,267 1997
Fund, Inc. - Q
The Dreyfus Socially 10.170317 13.026995 28.09% 538,134 1998
Responsible Growth 10.000000 10.170317 1.70% 13,946 1997
Fund, Inc. - NQ
</TABLE>
74
<PAGE> 75
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.342909 13.128325 26.93% 4,403,681 1998
Fund, Inc. - Q 10.000000 10.342909 3.43% 79,005 1997
Dreyfus Stock Index 10.342909 13.128325 26.93% 4,086,832 1998
Fund, Inc. - NQ 10.000000 10.342909 3.43% 103,007 1997
Dreyfus Variable 10.249171 13.212796 28.92% 620,733 1998
Investment Fund - 10.000000 10.249171 2.49% 16,809 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.249171 13.212796 28.92% 689,993 1998
Investment Fund - 10.000000 10.249171 2.49% 10,034 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.337608 11.415454 10.43% 3,163,281 1998
Equity-Income 10.000000 10.337608 3.38% 80,230 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.337608 11.415454 10.43% 3,558,258 1998
Equity-Income 10.000000 10.337608 3.38% 101,670 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.030041 13.839948 37.98% 1,633,140 1998
Portfolio: Service 10.000000 10.030041 0.30% 26,495 1997
Class - Q
Fidelity VIP Growth 10.030041 13.839948 37.98% 1,450,527 1998
Portfolio: Service 10.000000 10.030041 0.30% 42,184 1997
Class - NQ
Fidelity VIP High 10.125825 9.581067 -5.38% 1,716,342 1998
Income Portfolio: 10.000000 10.125825 1.26% 28,809 1997
Service Class - Q
Fidelity VIP High 10.125825 9.581067 -5.38% 1,953,504 1998
Income Portfolio: 10.000000 10.125825 1.26% 38,172 1997
Service Class - NQ
</TABLE>
75
<PAGE> 76
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.901549 11.041416 11.51% 390,759 1998
Portfolio: Service 10.000000 9.901549 -0.98% 6,886 1997
Class - Q
Fidelity VIP Overseas 9.901549 11.041416 11.51% 364,389 1998
Portfolio: Service 10.000000 9.901549 -0.98% 13,646 1997
Class - NQ
Fidelity VIP II 9.954090 12.804877 28.64% 1,744,153 1998
Contrafund Portfolio: 10.000000 9.954090 -0.46% 52,859 1997
Service Class - Q
Fidelity VIP II 9.954090 12.804877 28.64% 1,750,402 1998
Contrafund Portfolio: 10.000000 9.954090 -0.46% 61,145 1997
Service Class - NQ
Fidelity VIP III 10.399630 12.818700 23.26% 1,566,691 1998
Growth Opportunities 10.000000 10.399630 4.00% 50,299 1997
Portfolio: Service
Class - Q
Fidelity VIP III 10.399630 12.818700 23.26% 1,701,741 1998
Growth Opportunities 10.000000 10.399630 4.00% 34,840 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.424614 7.391460 -29.10% 50,958 1998
Witter Universal 10.000000 10.424614 4.25% 4,517 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - Q
Morgan Stanley Dean 10.424614 7.391460 -29.10% 56,822 1998
Witter Universal 10.000000 10.424614 4.25% 4,151 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - NQ
NSAT Capital 10.384765 13.361662 28.67% 2,719,427 1998
Appreciation Fund - Q 10.000000 10.384765 3.85% 42,993 1997
</TABLE>
76
<PAGE> 77
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.384765 13.361662 28.67% 2,067,286 1998
Appreciation Fund - NQ 10.000000 10.384765 3.85% 34,299 1997
NSAT Government Bond 10.142367 10.935440 7.82% 2,389,465 1998
Fund - Q 10.000000 10.142367 1.42% 35,843 1997
NSAT Government Bond 10.142367 10.935440 7.82% 2,162,208 1998
Fund - NQ 10.000000 10.142367 1.42% 31,348 1997
NSAT Money Market Fund 10.073279 10.498325 4.22% 3,146,947 1998
- - Q* 10.000000 10.073279 0.73% 172,291 1997
NSAT Money Market Fund 10.073279 10.498325 4.22% 2,859,923 1998
- - NQ* 10.000000 10.073279 0.73% 228,200 1997
NSAT Total Return Fund 10.242118 11.972436 16.89% 4,784,644 1998
- - Q 10.000000 10.242118 2.42% 84,236 1997
NSAT Total Return Fund 10.242118 11.972436 16.89% 3,784,283 1998
- - NQ 10.000000 10.242118 2.42% 76,652 1997
NSAT Nationwide 10.129864 10.837697 6.99% 724,101 1998
Balanced Fund - Q 10.000000 10.129864 1.30% 18,660 1997
NSAT Nationwide 10.129864 10.837697 6.99% 641,839 1998
Balanced Fund - NQ 10.000000 10.129864 1.30% 7,268 1997
NSAT Nationwide Equity 10.160882 11.581699 13.98% 182,603 1998
Income Fund - Q 10.000000 10.160882 1.61% 10,109 1997
NSAT Nationwide Equity 10.160882 11.581699 13.98% 263,284 1998
Income Fund - NQ 10.000000 10.160882 1.61% 4,986 1997
NSAT Nationwide Global 10.101401 11.914478 17.95% 209,682 1998
Equity Fund - Q 10.000000 10.101401 1.01% 10,785 1997
</TABLE>
77
<PAGE> 78
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.101401 11.914478 17.95% 265,967 1998
Equity Fund - NQ 10.000000 10.101401 1.01% 5,708 1997
NSAT Nationwide High 10.211688 10.695657 4.74% 563,880 1998
Income Bond Fund - Q 10.000000 10.211688 2.12% 15,211 1997
NSAT Nationwide High 10.211688 10.695657 4.74% 507,316 1998
Income Bond Fund - NQ 10.000000 10.211688 2.12% 7,868 1997
NSAT Nationwide 10.087985 10.246882 1.58% 628,805 1998
Multi-Sector Bond Fund 10.000000 10.087985 0.88% 22,440 1997
- - Q
NSAT Nationwide 10.087985 10.246882 1.58% 548,001 1998
Multi-Sector Bond Fund 10.000000 10.087985 0.88% 12,227 1997
- - NQ
NSAT Nationwide Select 9.948304 10.913315 9.70% 124,451 1998
Advisers Mid Cap Fund- 10.000000 9.948304 -0.52% 5,466 1997
Q
NSAT Nationwide Select 9.948304 10.913315 9.70% 125,175 1998
Advisers Mid Cap Fund- 10.000000 9.948304 -0.52% 4,072 1997
NQ
NSAT Nationwide Small 9.823118 9.426837 -4.03% 502,680 1998
Cap Value Fund - Q 10.000000 9.823118 -1.77% 16,510 1997
NSAT Nationwide Small 9.823118 9.426837 -4.03% 467,220 1998
Cap Value Fund - NQ 10.000000 9.823118 -1.77% 20,577 1997
NSAT Nationwide Small 9.612411 9.612340 0.00% 832,015 1998
Company Fund - Q 10.000000 9.612411 -3.88% 30,320 1997
</TABLE>
78
<PAGE> 79
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.612411 9.612340 0.00% 830,194 1998
Company Fund - NQ 10.000000 9.612411 -3.88% 32,541 1997
NSAT Nationwide 10.203313 11.575478 13.45% 105,819 1998
Strategic Growth Fund 10.000000 10.203313 2.03% 3,708 1997
- - Q
NSAT Nationwide 10.203313 11.575478 13.45% 115,940 1998
Strategic Growth Fund 10.000000 10.203313 2.03% 2,921 1997
- - NQ
NSAT Nationwide 10.146650 10.084334 -0.61% 134,335 1998
Strategic Value Fund - 10.000000 10.146650 1.47% 3,022 1997
Q
NSAT Nationwide 10.146650 10.084334 -0.61% 239,315 1998
Strategic Value Fund - 10.000000 10.146650 1.47% 13,153 1997
NQ
Neuberger Berman AMT 10.503269 13.691238 30.35% 519,550 1998
Guardian Portfolio - Q 10.000000 10.503269 5.03% 8,001 1997
Neuberger Berman AMT 10.503269 13.691238 30.35% 425,826 1998
Guardian Portfolio - NQ 10.000000 10.503269 5.03% 14,929 1997
Neuberger Berman AMT 11.701424 16.135377 37.89% 347,143 1998
Mid-Cap Growth 10.000000 11.701424 17.01% 56,145 1997
Portfolio - Q
Neuberger Berman AMT 11.701424 16.135377 37.89% 372,662 1998
Mid-Cap Growth 10.000000 11.701424 17.01% 16,768 1997
Portfolio - NQ
Neuberger Berman AMT 10.131623 10.452498 3.17% 1,949,091 1998
Partners Portfolio - Q 10.000000 10.131623 1.32% 195,515 1997
</TABLE>
79
<PAGE> 80
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.131623 10.452498 3.17% 1,997,553 1998
Partners Portfolio - NQ 10.000000 10.131623 1.32% 133,165 1997
Oppenheimer Variable 9.532548 10.603692 11.24% 395,607 1998
Account Funds - 10.000000 9.532548 -4.67% 11,021 1997
Oppenheimer Aggressive
Growth Fund/VA - Q
Oppenheimer Variable 9.532548 10.603692 11.24% 446,338 1998
Account Funds - 10.000000 9.532548 -4.67% 10,675 1997
Oppenheimer Aggressive
Growth Fund/VA - NQ
Oppenheimer Variable 9.826536 12.063121 22.76% 587,304 1998
Account Funds - 10.000000 9.826536 -1.73% 26,012 1997
Oppenheimer Capital
Appreciation Fund/VA -
Q
Oppenheimer Variable 9.826536 12.063121 22.76% 591,561 1998
Account Funds - 10.000000 9.826536 -1.73% 16,143 1997
Oppenheimer Capital
Appreciation Fund/VA -
NQ
Oppenheimer Variable 10.258664 10.633592 3.65% 825,742 1998
Account Funds - 10.000000 10.258664 2.59% 15,547 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - Q
Oppenheimer Variable 10.258664 10.633592 3.65% 1,013,404 1998
Account Funds - 10.000000 10.258664 2.59% 15,661 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - NQ
Van Eck Worldwide 8.814146 5.747723 -34.79% 141,469 1998
Insurance Trust - 10.000000 8.814146 -11.86% 30,479 1997
Worldwide Emerging
Markets Fund - Q
</TABLE>
80
<PAGE> 81
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.814146 5.747723 -34.79% 104,323 1998
Insurance Trust - 10.000000 8.814146 -11.86% 15,119 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.978753 6.136113 -31.66% 69,784 1998
Insurance Trust - 10.000000 8.978753 -10.21% 765 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.978753 6.136113 -31.66% 36,296 1998
Insurance Trust - 10.000000 8.978753 -10.21% 4,496 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.337835 9.045055 -12.89% 372,172 1998
Investment Trust - 10.000000 10.337835 3.38% 8,443 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.337835 9.045055 -12.89% 250,104 1998
Investment Trust - 10.000000 10.337835 3.38% 23,459 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.372788 11.514627 11.01% 150,366 1998
Growth & Income 10.000000 10.372788 3.73% 10,462 1997
Portfolio - Q
Warburg Pincus Trust - 10.372788 11.514627 11.01% 193,659 1998
Growth & Income 10.000000 10.372788 3.73% 11,043 1997
Portfolio - NQ
Warburg Pincus Trust - 9.454036 9.860001 4.29% 2,136,445 1998
International Equity 10.000000 9.454036 -5.46% 9,501 1997
Portfolio - Q
Warburg Pincus Trust - 9.454036 9.860001 4.29% 2,809,469 1998
International Equity 10.000000 9.454036 -5.46% 11,346 1997
Portfolio - NQ
</TABLE>
81
<PAGE> 82
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.851960 10.388404 5.45% 92,766 1998
Post-Venture Capital 10.000000 9.851960 -1.48% 1,263 1997
Portfolio - Q
Warburg Pincus Trust - 9.851960 10.388404 5.45% 59,430 1998
Post-Venture Capital 10.000000 9.851960 -1.48% 1,127 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
82
<PAGE> 83
<TABLE>
<CAPTION>
OPTIONAL 5% ENHANCED DEATH BENEFIT
(VARIABLE ACCOUNT CHARGES OF 1.05% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT)
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
American Century 10.408098 13.065728 25.53% 81,928 1998
Variable Portfolios, 10.000000 10.408098 4.08% 832 1997
Inc. - American
Century VP Income &
Growth - Q
American Century 10.408098 13.065728 25.53% 128,629 1998
Variable Portfolios, 10.000000 10.408098 4.08% 5,236 1997
Inc. - American
Century VP Income &
Growth - NQ
American Century 10.086493 11.852979 17.51% 99,298 1998
Variable Portfolios, 10.000000 10.086493 0.86% 698 1997
Inc. - American
Century VP
International - Q
American Century 10.086493 11.852979 17.51% 165,809 1998
Variable Portfolios, 10.000000 10.086493 0.86% 2,265 1997
Inc. - American
Century VP
International - NQ
American Century 10.295249 10.677353 3.71% 77,126 1998
Variable Portfolios, 10.000000 10.295249 2.95% 1,336 1997
Inc. - American
Century VP Value - Q
American Century 10.295249 10.677353 3.71% 72,329 1998
Variable Portfolios, 10.000000 10.295249 2.95% 8,217 1997
Inc. - American
Century VP Value - NQ
The Dreyfus Socially 10.169503 13.019372 28.02% 89,640 1998
Responsible Growth 10.000000 10.169503 1.70% 4,821 1997
Fund, Inc. - Q
The Dreyfus Socially 10.169503 13.019372 28.02% 135,100 1998
Responsible Growth 10.000000 10.169503 1.70% 2,598 1997
Fund, Inc. - NQ
</TABLE>
83
<PAGE> 84
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.342079 13.120640 26.87% 783,466 1998
Fund, Inc. - Q 10.000000 10.342079 3.42% 9,203 1997
Dreyfus Stock Index 10.342079 13.120640 26.87% 913,818 1998
Fund, Inc. - NQ 10.000000 10.342079 3.42% 13,090 1997
Dreyfus Variable 10.248351 13.205079 28.85% 131,684 1998
Investment Fund - 10.000000 10.248351 2.48% 3,777 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.248351 13.205079 28.85% 246,123 1998
Investment Fund - 10.000000 10.248351 2.48% 706 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.336779 11.408770 10.37% 524,588 1998
Equity-Income 10.000000 10.336779 3.37% 18,611 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.336779 11.408770 10.37% 864,765 1998
Equity-Income 10.000000 10.336779 3.37% 36,514 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.029235 13.831860 37.92% 253,263 1998
Portfolio: Service 10.000000 10.029235 0.29% 4,718 1997
Class - Q
Fidelity VIP Growth 10.029235 13.831860 37.92% 343,224 1998
Portfolio: Service 10.000000 10.029235 0.29% 9,713 1997
Class - NQ
Fidelity VIP High 10.125013 9.575458 -5.43% 376,294 1998
Income Portfolio: 10.000000 10.125013 1.25% 2,418 1997
Service Class - Q
Fidelity VIP High 10.125013 9.575458 -5.43% 598,620 1998
Income Portfolio: 10.000000 10.125013 1.25% 12,697 1997
Service Class - NQ
</TABLE>
84
<PAGE> 85
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.900760 11.034969 11.46% 91,010 1998
Portfolio: Service 10.000000 9.900760 -0.99% 887 1997
Class - Q
Fidelity VIP Overseas 9.900760 11.034969 11.46% 137,943 1998
Portfolio: Service 10.000000 9.900760 -0.99% 9,071 1997
Class - NQ
Fidelity VIP II 9.953285 12.797393 28.57% 214,618 1998
Contrafund Portfolio: 10.000000 9.953285 -0.47% 12,678 1997
Service Class - Q
Fidelity VIP II 9.953285 12.797393 28.57% 446,178 1998
Contrafund Portfolio: 10.000000 9.953285 -0.47% 14,306 1997
Service Class - NQ
Fidelity VIP III 10.398800 12.811215 23.20% 231,845 1998
Growth Opportunities 10.000000 10.398800 3.99% 8,419 1997
Portfolio: Service
Class - Q
Fidelity VIP III 10.398800 12.811215 23.20% 295,189 1998
Growth Opportunities 10.000000 10.398800 3.99% 13,599 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.423780 7.387124 -29.13% 9,703 1998
Witter Universal 10.000000 10.423780 4.24% 204 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - Q
Morgan Stanley Dean 10.423780 7.387124 -29.13% 19,124 1998
Witter Universal 10.000000 10.423780 4.24% 1,531 1997
Funds, Inc. - Emerging
Markets Debt Portfolio
- - NQ
NSAT Capital 10.383931 13.353842 28.55% 391,203 1998
Appreciation Fund - Q 10.000000 10.383931 3.84% 4,967 1997
</TABLE>
85
<PAGE> 86
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.383931 13.353842 28.55% 499,622 1998
Appreciation Fund - NQ 10.000000 10.383931 3.84% 23,354 1997
NSAT Government Bond 10.141552 10.929045 7.77% 425,444 1998
Fund - Q 10.000000 10.141552 1.42% 17,678 1997
NSAT Government Bond 10.141552 10.929045 7.77% 578,467 1998
Fund - NQ 10.000000 10.141552 1.42% 21,953 1997
NSAT Money Market Fund 10.072429 10.492136 4.17% 773,874 1998
- - Q* 10.000000 10.072429 0.72% 109,198 1997
NSAT Money Market Fund 10.072429 10.492136 4.17% 932,153 1998
- - NQ* 10.000000 10.072429 0.72% 61,681 1997
NSAT Total Return Fund 10.241300 11.965436 16.84% 705,982 1998
- - Q 10.000000 10.241300 2.41% 13,269 1997
NSAT Total Return Fund 10.241300 11.965436 16.84% 695,165 1998
- - NQ 10.000000 10.241300 2.41% 37,377 1997
NSAT Nationwide 10.129053 10.831355 6.93% 123,286 1998
Balanced Fund - Q 10.000000 10.129053 1.29% 4,261 1997
NSAT Nationwide 10.129053 10.831355 6.93% 149,449 1998
Balanced Fund - NQ 10.000000 10.129053 1.29% 13,393 1997
NSAT Nationwide Equity 10.160070 11.574924 13.93% 32,573 1998
Income Fund - Q 10.000000 10.160070 1.60% 2,466 1997
NSAT Nationwide Equity 10.160070 11.574924 13.93% 46,558 1998
Income Fund - NQ 10.000000 10.160070 1.60% 2,603 1997
NSAT Nationwide Global 10.100588 11.907510 17.89% 52,138 1998
Equity Fund - Q 10.000000 10.100588 1.01% 1,682 1997
</TABLE>
86
<PAGE> 87
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.100588 11.907510 17.89% 52,521 1998
Equity Fund - NQ 10.000000 10.100588 1.01% 3,870 1997
NSAT Nationwide High 10.210867 10.689393 4.69% 168,923 1998
Income Bond Fund - Q 10.000000 10.210867 2.11% 2,873 1997
NSAT Nationwide High 10.210867 10.689393 4.69% 196,834 1998
Income Bond Fund - NQ 10.000000 10.210867 2.11% 15,172 1997
NSAT Nationwide 10.087176 10.240891 1.52% 180,699 1998
Multi-Sector Bond Fund 10.000000 10.087176 0.87% 2,097 1997
- - Q
NSAT Nationwide 10.087176 10.240891 1.52% 200,225 1998
Multi-Sector Bond Fund 10.000000 10.087176 0.87% 11,411 1997
- - NQ
NSAT Nationwide Select 9.947507 10.906928 9.64% 20,280 1998
Advisers Mid Cap Fund- 10.000000 9.947507 -0.52% 2,671 1997
Q
NSAT Nationwide Select 9.947507 10.906928 9.64% 35,289 1998
Advisers Mid Cap Fund- 10.000000 9.947507 -0.52% 1,954 1997
NQ
NSAT Nationwide Small 9.822329 9.421309 -4.08% 73,139 1998
Cap Value Fund - Q 10.000000 9.822329 -1.78% 3,373 1997
NSAT Nationwide Small 9.822329 9.421309 -4.08% 149,068 1998
Cap Value Fund - NQ 10.000000 9.822329 -1.78% 5,548 1997
NSAT Nationwide Small 9.611642 9.606706 -0.05% 103,212 1998
Company Fund - Q 10.000000 9.611642 -3.88% 453 1997
</TABLE>
87
<PAGE> 88
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.611642 9.606706 -0.05% 182,983 1998
Company Fund - NQ 10.000000 9.611642 -3.88% 12,059 1997
NSAT Nationwide 10.202497 11.568711 13.39% 28,004 1998
Strategic Growth Fund 10.000000 10.202497 2.02% 201 1997
- - Q
NSAT Nationwide 10.202497 11.568711 13.39% 14,539 1998
Strategic Growth Fund 10.000000 10.202497 2.02% 3,231 1997
- - NQ
NSAT Nationwide 10.145838 10.078441 -0.66% 36,418 1998
Strategic Value Fund - 10.000000 10.145838 1.46% 227 1997
Q
NSAT Nationwide 10.145838 10.078441 -0.66% 85,804 1998
Strategic Value Fund - 10.000000 10.145838 1.46% 5,509 1997
NQ
Neuberger Berman AMT 10.502434 13.683246 30.29% 66,839 1998
Guardian Portfolio - Q 10.000000 10.502434 5.02% 590 1997
Neuberger Berman AMT 10.502434 13.683246 30.29% 161,709 1998
Guardian Portfolio - NQ 10.000000 10.502434 5.02% 5,754 1997
Neuberger Berman AMT 11.700489 16.125954 37.82% 41,741 1998
Mid-Cap Growth 10.000000 11.700489 17.00% 3,696 1997
Portfolio - Q
Neuberger Berman AMT 11.700489 16.125954 37.82% 107,495 1998
Mid-Cap Growth 10.000000 11.700489 17.00% 6,472 1997
Portfolio - NQ
Neuberger Berman AMT 10.130813 10.446379 3.11% 269,744 1998
Partners Portfolio - Q 10.000000 10.130813 1.31% 9,975 1997
</TABLE>
88
<PAGE> 89
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.130813 10.446379 3.11% 330,876 1998
Partners Portfolio - NQ 10.000000 10.130813 1.31% 40,357 1997
Oppenheimer Variable 9.531780 10.597477 11.18% 75,188 1998
Account Funds - 10.000000 9.531780 -4.68% 3,437 1997
Oppenheimer Aggressive
Growth Fund/VA - Q
Oppenheimer Variable 9.531780 10.597477 11.18% 118,302 1998
Account Funds - 10.000000 9.531780 -4.68% 11,150 1997
Oppenheimer Aggressive
Growth Fund/VA - NQ
Oppenheimer Variable 9.825746 12.056049 22.70% 110,392 1998
Account Funds - 10.000000 9.825746 -1.74% 2,404 1997
Oppenheimer Capital
Appreciation Fund/VA -
Q
Oppenheimer Variable 9.825746 12.056049 22.70% 122,036 1998
Account Funds - 10.000000 9.825746 -1.74% 7,972 1997
Oppenheimer Capital
Appreciation Fund/VA -
NQ
Oppenheimer Variable 10.257840 10.627355 3.60% 155,966 1998
Account Funds - 10.000000 10.257840 2.58% 1,064 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - Q
Oppenheimer Variable 10.257840 10.627355 3.60% 254,947 1998
Account Funds - 10.000000 10.257840 2.58% 15,025 1997
Oppenheimer Main
Street Growth & Income
Fund/VA - NQ
Van Eck Worldwide 8.813437 5.744349 -34.82% 31,317 1998
Insurance Trust - 10.000000 8.813437 -11.87% 733 1997
Worldwide Emerging
Markets Fund - Q
</TABLE>
89
<PAGE> 90
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.813437 5.744349 -34.82% 46,981 1998
Insurance Trust - 10.000000 8.813437 -11.87% 779 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.978030 6.132522 -31.69% 10,468 1998
Insurance Trust - 10.000000 8.978030 -10.22% 206 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.978030 6.132522 -31.69% 17,880 1998
Insurance Trust - 10.000000 8.978030 -10.22% 1,789 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.337004 9.039759 -12.55% 40,468 1998
Investment Trust - 10.000000 10.337004 3.37% 416 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.337004 9.039759 -12.55% 71,613 1998
Investment Trust - 10.000000 10.337004 3.37% 10,121 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.371958 11.507907 10.95% 18,436 1998
Growth & Income 10.000000 10.371958 3.72% 2,908 1997
Portfolio - Q
Warburg Pincus Trust - 10.371958 11.507907 10.95% 71,280 1998
Growth & Income 10.000000 10.371958 3.72% 4,127 1997
Portfolio - NQ
Warburg Pincus Trust - 9.453278 9.854235 4.24% 43,919 1998
International Equity 10.000000 9.453278 -5.47% 866 1997
Portfolio - Q
Warburg Pincus Trust - 9.453278 9.854235 4.24% 82,462 1998
International Equity 10.000000 9.453278 -5.47% 5,787 1997
Portfolio - NQ
</TABLE>
90
<PAGE> 91
<TABLE>
<CAPTION>
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
- ------------------------ ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.851173 10.382320 5.39% 32,373 1998
Post-Venture Capital 10.000000 9.851173 -1.49% 830 1997
Portfolio - Q
Warburg Pincus Trust - 9.851173 10.382320 5.39% 39,431 1998
Post-Venture Capital 10.000000 9.851173 -1.49% 2,366 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
91
