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NATIONWIDE LIFE INSURANCE COMPANY
Modified 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, 2000.
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY 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
- Dreyfus Variable Investment Fund - Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Growth Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Contrafund(R) Portfolio: Service Class
NATIONWIDE SEPARATE ACCOUNT TRUST
- Money Market Fund
- Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
- Nationwide High Income Bond Fund* (subadviser: Federated Investment
Counseling)
- Nationwide Multi Sector Bond Fund (subadviser: Miller, Anderson &
Sherrerd, LLP)
- Nationwide Small Company Fund (subadvisers: The Dreyfus Corporation,
Neuberger Berman, LLC, Lazard Asset Management and Strong Capital
Management, Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- AMT Mid-Cap Growth Portfolio
- AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- Oppenheimer Aggressive Growth Fund/VA (formerly, Oppenheimer Capital
Appreciation Fund)
VICTORY VARIABLE INSURANCE FUNDS
- Diversified Stock Fund: Class A
- Small Company Opportunity Fund: Class A
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999:
WARBURG PINCUS TRUST
- International Equity Portfolio
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR
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WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER MAY 1, 2000:
VICTORY VARIABLE INSURANCE FUNDS
- Investment Quality Bond Fund: Class A
Purchase payments not invested in the underlying mutual funds of the Nationwide
Variable Account-9 ("variable account") can 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, 2000) 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 49.
For general information or to obtain FREE copies of the:
- Statement of Additional Information;
- prospectus, annual report or semi-annual report for any underlying
mutual fund;
- prospectus for the Guaranteed Term Options; or
- required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 16609
COLUMBUS, OHIO 43216-6609
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
GOVERNMENT AGENCY EVERY 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.
In the future, additional underlying mutual funds managed by certain financial
institutions or brokerage firms may be added to the variable account. These
additional underlying mutual funds may be offered exclusively to purchasing
customers of the particular financial institution or brokerage firm.
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.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the variable
account contract value 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 of measure used to calculate variable annuity
payments.
CONTRACT VALUE- The total value of all accumulation units plus 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 which 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, IRA, Roth 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.
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 - each sub-account corresponds to a single underlying
mutual fund.
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.
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TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.........................3
SUMMARY OF STANDARD CONTRACT
EXPENSES..................................6
ADDITIONAL CONTRACT OPTIONS.......................7
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES..................................8
EXAMPLE...........................................9
SYNOPSIS OF THE CONTRACTS........................11
FINANCIAL STATEMENTS.............................12
CONDENSED FINANCIAL INFORMATION..................12
NATIONWIDE LIFE INSURANCE COMPANY................12
NATIONWIDE INVESTMENT SERVICES
CORPORATION.................................12
TYPES OF CONTRACTS...............................12
Non-Qualified Annuity Contracts
Individual Retirement Annuities (IRAs)
Roth IRAs
Tax Sheltered Annuities
Qualified Plans
INVESTING IN THE CONTRACT........................14
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS..................16
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND
DEDUCTIONS..................................18
Death Benefit Option
Guaranteed Minimum Income Benefit Options
Spousal Protection Annuity Option
CONTRACT OWNERSHIP...............................19
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT........................20
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Requests
RIGHT TO REVOKE..................................24
SURRENDER (REDEMPTION)...........................24
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...................................26
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.......................................27
CONTRACT OWNER SERVICES..........................28
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE........................29
ANNUITIZING THE CONTRACT.........................30
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Options ("GMIB")
Annuity Payment Options
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DEATH BENEFITS...................................35
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS...........................37
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.......................40
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS...........................44
LEGAL PROCEEDINGS................................45
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY..46
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION.................................49
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS.......................................50
APPENDIX B: CONDENSED FINANCIAL INFORMATION......55
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SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- the contract owner meets an available exception under the contract; 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:
Number of Years from Date CDSC
of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
(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 as Tax Sheltered Annuities
or other Qualified Plans due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of the daily net assets of the variable account)
Mortality and Expense Risk Charges............1.20%
Total Variable Account Charges.............1.20%3
LOAN PROCESSING FEE
(per loan transaction).........................$254
(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 One-Year Step Up Death Benefit which is standard to
every contract (see "Death Benefit Payment").
(4)Nationwide assesses a $25 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 permit Nationwide to assess a loan processing fee (see "Loan
Privilege").
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ADDITIONAL CONTRACT OPTIONS
The following options are available to contract owners. Some options assess an
additional charge. These options must be elected at the time of application and
will replace the corresponding standard contract benefit.
If the contract owner chooses an optional benefit, a corresponding charge will
be deducted. The charge for an optional benefit is IN ADDITION TO the standard
variable account charges. Except as otherwise noted, optional benefit charges
will only apply to allocations made to the underlying mutual funds and are
charged as a percentage of the average variable account value.
DEATH BENEFIT OPTION
An applicant may choose the Optional 5% Enhanced Death Benefit instead of the
One-Year Step Up Death Benefit that is standard to every contract.
Optional 5% Enhanced Death
Benefit.......................................0.05%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit only).............................1.25%
GUARANTEED MINIMUM INCOME BENEFIT OPTIONS
An applicant may elect one of two Guaranteed Minimum Income Benefit options (see
"Guaranteed Minimum Income Benefit Options").
Guaranteed Minimum Income Benefit
Option.....................................10.45%
Total Variable Account Charges
(including Guaranteed Minimum
Income Benefit Option 1 only).............1.65%
Guaranteed Minimum Income Benefit
Option 2....................................0.30%
Total Variable Account Charges
(including Guaranteed Minimum
Income Benefit Option 2 only).............1.50%
SPOUSAL PROTECTION ANNUITY OPTION - AVAILABLE WITH THE STANDARD DEATH BENEFIT
ONLY
An applicant for an Individual Retirement Annuity or a non-qualified contract
may elect the Spousal Protection Annuity Option at no additional cost (see
"Spousal Protection Annuity Option").
Spousal Protection Annuity Option.............0.00%
Total Variable Account Charges (including Spousal Protection Annuity Option
only)......................................1.20%
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<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND AVERAGE NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
Management Other 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American Century 0.70% 0.00% 0.00% 0.70%
VP Income & Growth
American Century Variable Portfolios, Inc. - American Century 1.34% 0.00% 0.00% 1.34%
VP International
American Century Variable Portfolios, Inc. - American Century 1.00% 0.00% 0.00% 1.00%
VP Value
Dreyfus Variable Investment Fund - Appreciation Portfolio 0.43% 0.35% 0.00% 0.78%
(formerly, Dreyfus Variable Investment Fund - Capital
Appreciation Portfolio)
Fidelity VIP Growth Portfolio: Service Class 0.58% 0.07% 0.10% 0.75%
Fidelity VIP II Contrafund(R)Portfolio: Service Class 0.58% 0.07% 0.10% 0.75%
NSAT Money Market Fund 0.39% 0.15% 0.00% 0.54%
NSAT Nationwide Equity Income Fund 0.80% 0.15% 0.00% 0.95%
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 Small Company Fund 0.98% 0.17% 0.00% 1.15%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT Partners Portfolio 0.80% 0.07% 0.00% 0.87%
Oppenheimer Variable Account Funds - Oppenheimer Aggressive 0.66% 0.01% 0.00% 0.67%
Growth Fund/VA (formerly, Oppenheimer Variable Account Funds -
Oppenheimer Capital Appreciation Fund)
Victory Variable Insurance Funds - Diversified Stock Fund: 0.00% 0.78% 0.00% 0.78%
Class A
Victory Variable Insurance Funds - Investment Quality Bond 0.00% 0.60% 0.00% 0.60%
Fund: Class A
Victory Variable Insurance Funds - Small Company Opportunity 0.00% 0.75% 0.00% 0.75%
Fund: Class A
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.32% 0.00% 1.32%
</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 in calculating 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.
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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 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
<S> <C> <C> <C> <C>
Fidelity VIP Growth Portfolio: Service Class 0.58% 0.09% 0.10% 0.77%
Fidelity VIP II Contrafund(R)Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
NSAT Nationwide Equity Income Fund 0.80% 0.29% 0.00% 1.09%
NSAT Nationwide High Income Bond Fund 0.80% 0.50% 0.00% 1.30%
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.27% 0.00% 1.02%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.93% 0.15% 0.00% 1.08%
Victory Variable Insurance Funds - Diversified Stock Fund: 0.30% 6.68% 0.00% 6.98%
Class A
Victory Variable Insurance Funds - Investment Quality Bond 0.20% 8.70% 0.00% 8.90%
Fund: Class A
Victory Variable Insurance Funds - Small Company Opportunity 0.30% 9.33% 0.00% 9.63%
Fund: Class A
</TABLE>
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 example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects an assumed variable account charge of 1.70%,
which is the maximum variable account charge for the maximum number of rider
options.
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.
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
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 88 131 168 282 25 77 132 282 * 77 132 282
Portfolios, Inc. - American
Century VP Income & Growth
American Century Variable 95 152 201 346 32 98 165 346 * 98 165 346
Portfolios, Inc. - American
Century VP International
American Century Variable 91 141 184 313 28 87 148 313 * 87 148 313
Portfolios, Inc. - American
Century VP Value
Dreyfus Variable Investment 89 134 173 290 26 80 137 290 * 80 137 290
Fund - Appreciation Portfolio
(formerly, Dreyfus Variable
Investment Fund - Capital
Appreciation Portfolio)
Fidelity VIP Growth 89 133 171 287 26 79 135 287 * 79 135 287
Portfolio: Service Class
</TABLE>
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<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
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>
Fidelity VIP II Contrafund(R) 89 133 171 287 26 79 135 287 * 79 135 287
Portfolio: Service Class
NSAT Money Market Fund 87 126 160 265 24 72 124 265 * 72 124 265
NSAT Nationwide Equity Income 91 139 181 308 28 85 145 308 * 85 145 308
Fund
NSAT Nationwide High Income 91 139 181 308 28 85 145 308 * 85 145 308
Bond Fund
NSAT Nationwide Multi Sector 90 138 179 303 27 84 143 303 * 84 143 303
Bond Fund
NSAT Nationwide Small Company 93 146 192 328 30 92 156 328 * 92 156 328
Fund
Neuberger Berman AMT Mid-Cap 91 141 184 313 28 87 148 313 * 87 148 313
Growth Portfolio
Neuberger Berman AMT Partners 90 137 177 300 27 83 141 300 * 83 141 300
Portfolio
Oppenheimer Variable Account 88 131 167 279 25 77 131 279 * 77 131 279
Funds - Oppenheimer
Aggressive Growth Fund/VA
(formerly, Oppenheimer
Variable Account Funds -
Oppenheimer Capital
Appreciation Fund)
Victory Variable Insurance 89 134 173 290 26 80 137 290 * 80 137 290
Funds - Diversified Stock
Fund: Class A
Victory Variable Insurance 87 128 163 272 24 74 127 272 * 74 127 272
Funds - Investment Quality
Bond Fund: Class A
Victory Variable Insurance 89 133 171 287 26 79 135 287 * 79 135 287
Funds - Small Company
Opportunity Fund: Class A
Warburg Pincus Trust - 95 151 200 345 32 97 164 345 * 97 164 345
International Equity Portfolio
</TABLE>
*Annuitization is not permitted during the first two contract years.
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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 follows:
- Non-Qualified;
- Investment-only;
- 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 Annuities; and
- Charitable Remainder Trusts.
For more detailed information with regard to the differences in the contract
types, please see "Types of Contracts" later in this prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
Non-Qualified $10,000 $1,000
Investment-only $10,000 $1,000
IRA $10,000 $1,000
Roth IRA $10,000 $1,000
Tax Sheltered Annuity $10,000 $1,000
Charitable Remainder $10,000 $1,000
Trust
Subsequent purchase payments are not permitted in Oregon, and may not be
permitted in other states under certain circumstances.
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 1.20% of the daily net assets of the variable account. Nationwide assesses
this charge in return for bearing certain mortality and expense risks, as well
as for administrative expenses.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide will 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.
An optional death benefit is available under the contract. Nationwide will
deduct an additional charge equal to an annual rate of 0.05% of the daily net
assets of the variable account if the contract owner elects the 5% Enhanced
Death Benefit (see "Death Benefit Payment").
Two Guaranteed Minimum Income Benefit options are available under the contract.
If the contract owner elects one of the Guaranteed Minimum Income Benefit
options, Nationwide will deduct an additional charge at an annual rate of 0.45%
or 0.30% of the daily net assets of the variable account, depending on which
option was chosen (see "Guaranteed Minimum Income Benefits").
Upon annuitization of the contract, any amounts assessed for any rider options
elected will be waived and only those charges applicable to the base contract
will be assessed.
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 a contract is taxed depends on the type of contract issued and the purpose
for which the contract is purchased. Nationwide will charge against the contract
any premium taxes levied by a state or other governmental entity (see
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<PAGE> 12
"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 other amounts 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.
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 INVESTMENT SERVICES CORPORATION
The contracts are distributed by the general distributor, Nationwide Investment
Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For
contracts issued in the State of Michigan, all references to NISC shall mean
Nationwide Investment Svcs. Corporation.) NISC is a wholly owned subsidiary of
Nationwide.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
NON-QUALIFIED ANNUITY CONTRACTS
A Non-Qualified Annuity Contract is a contract that does not qualify for certain
tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth
IRA or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Annuity Contract, mandatory
distribution requirements are imposed to ensure distribution of the entire
balance in the contract within a required period of time.
Non-Qualified Annuity contracts that are owned by natural persons allow for the
deferral of taxation on the income earned in the contract until it is
distributed or deemed to be distributed.
INDIVIDUAL RETIREMENT ANNUITIES (IRAS)
Individual Retirement Annuities are contracts that are issued by insurance
companies and satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs can
be received);
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- - certain minimum distribution requirements must be satisfied after the
owner attains the age of 70 1/2;
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax Sheltered Annuities, and
from qualified retirement plans, including 401(k) plans.
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
TAX SHELTERED ANNUITIES
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70 1/2, and
after the death of the owner. Additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
statutory period of time.
QUALIFIED PLANS
Contracts that are owned by Qualified Plans are not intended to confer tax
benefits on the beneficiaries of the plan; they are used as investment vehicles
for the plan. The income tax consequences to the beneficiary of a Qualified Plan
are controlled by the operation of the plan, not by operation of the assets in
which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of
the plan to
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obtain and review the plan, trust, summary plan description and other documents
for the tax and other consequences of being a participant in a qualified plan.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-9 is a variable account that contains the underlying
mutual funds listed in Appendix A. The variable account was established on May
22, 1997, pursuant to Ohio law. Although the variable 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, each corresponding to a
single underlying mutual fund. 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, 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 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 allowing Nationwide 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 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 the underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
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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.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus should be read in conjunction 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 for any reason 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 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
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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 the 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 surrenders and any applicable charges
including CDSC.
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 1.20% of the daily net assets of the variable account.
The Mortality Risk Charge compensates Nationwide for guaranteeing the annuity
purchase rates of the contracts. This guarantee ensures that the annuity
purchase rates will not change regardless of the death rates of annuity
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payees or the general population. The Mortality Risk Charge also compensates
Nationwide for risks assumed in connection with the standard death benefit, but
only partially compensates Nationwide in connection with the optional death
benefit, for which there is a separate charge.
The Expense Risk Charge compensates Nationwide for guaranteeing that 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, with certain exceptions, deduct a CDSC, as
described below. 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. Earnings are not subject to the CDSC, however, earnings may not be
distributed prior to the distribution of all purchase payments. For tax
purposes, a surrender is usually treated as a withdrawal of earnings first.
The CDSC applies as follows:
Number of Years from Date CDSC
of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
The CDSC is used to cover sales expenses, including commissions (maximum of
7.00% 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 account, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10%
penalty tax.
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.
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
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(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.
Long Term Care Facility Provisions
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, 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 office prior to waiver of the CDSC.
For those contracts that have a non-natural person as the contract owner acting
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.
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
5.0%. 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.
Nationwide currently deducts 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
DEATH BENEFIT OPTION
If the contract owner chooses the 5% Enhanced Death Benefit, Nationwide will
deduct an additional charge equal to an annual rate of 0.05% of the daily net
assets of the variable account. This charge reimburses Nationwide for increased
expenses and mortality risks. The following death benefit may not be available
in every state.
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.
GUARANTEED MINIMUM INCOME BENEFIT OPTIONS
The contract owner can purchase one of two Guaranteed Minimum Income Benefit
options at the time of application. If elected, Nationwide
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will deduct an additional charge of either 0.45% or 0.30% of the daily net
assets of the variable account, depending on which option was chosen. Guaranteed
Minimum Income Benefit options provide 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.
Upon annuitization of the contract, any amounts assessed for any rider options
elected will be waived and only those charges applicable to the base contract
will be assessed.
SPOUSAL PROTECTION ANNUITY OPTION - AVAILABLE WITH THE STANDARD DEATH BENEFIT
ONLY
AN APPLICANT FOR AN INDIVIDUAL RETIREMENT ANNUITY OR A NON-QUALIFIED CONTRACT
MAY ELECT THE SPOUSAL PROTECTION OPTION AT NO ADDITIONAL COST. IF THE SPOUSAL
PROTECTION ANNUITY OPTION IS ELECTED THE CONTRACT MUST MEET THE FOLLOWING
REQUIREMENTS:
1. One or both of the spouses must be named as the contract owner. For
contracts issued as Individual Retirement Annuities, only the person for
whom the Individual Retirement Annuity is established may be named as the
sole contract owner.
2. Both spouses must be named as co-annuitants and both must be age 85 or
younger at the time the contract is issued.
3. No other person may be named as contract owner, joint owner, contingent
owner, annuitant, co-annuitant or primary beneficiary.
4. If both spouses are alive upon annuitization, the contract owner(s) must
specify which spouse is the annuitant upon whose continuation of life any
annuity payments involving life contingencies depend. For contracts issued
as Individual Retirement Annuities, the person to receive annuity payments
at the time of annuitization must be the contract owner.
Election of the Spousal Protection Annuity Option permits the following:
If one annuitant dies prior to annuitization of the contract, the surviving
spouse may continue the contract as the sole contract owner. If the surviving
spouse chooses to continue the contract, he or she may name a new beneficiary
but may not name another co-annuitant.
If the standard death benefit is higher than the contract value at the time of
the death of any annuitant, the contract value will be adjusted to equal the
standard death benefit amount.
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.
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,
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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; and
- 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 effect 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), 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 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
effect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM MINIMUM
CONTRACT INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENTS
PAYMENT
Non-Qualified $10,000 $1,000
Investment-only $10,000 $1,000
IRA $10,000 $1,000
Roth IRA $10,000 $1,000
Tax Sheltered Annuity $10,000 $1,000
Charitable Remainder $10,000 $1,000
Trust
Subsequent purchase payments may not be permitted in states under certain
circumstances.
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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. The application and all necessary information must be
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 consents to allow
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 issued by Nationwide 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 New York Stock
Exchange is open, contract value may be affected since the contract owner will
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 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;
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 of the sub-accounts, and amounts from the fixed account and Guaranteed
Term Options 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
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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 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; and
(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 1.20% to
1.70% of the daily net assets of the variable account, depending on
which contract features the contract owner chose.
Based on 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.
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account, minus any amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
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);
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 PRIOR TO ANNUITIZATION
Transfers from the Fixed Account to the Variable Account or a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account or 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
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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.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation period.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
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.
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 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
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<PAGE> 24
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 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.
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.
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<PAGE> 25
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:
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
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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 $1,000, 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:
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
NON-ERISA PLANS up to up to 80% of contract
$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*)
*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 charges a $25 loan processing fee at the time each new loan is
processed. 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.
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. The interest rate is guaranteed
never to fall below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
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<PAGE> 27
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 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, 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
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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. 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, 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.
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.
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 to or less than 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. Contract owners may participate in this program if their contract
value is $10,000 or more. 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
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<PAGE> 29
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 that follows:
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
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%
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 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.
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<PAGE> 30
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, 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 A
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 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
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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 may only be made 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 OPTIONS ("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?
There are two options available at the time of application. The Guaranteed
Annuitization Value is determined differently based on which option the contract
owner elects.
Calculation Under GMIB Option 1
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 reduction to (a) due to surrenders made from the contract. All
such reductions 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 GMIB Option 1
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.
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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.
Calculation Under GMIB Option 2
The Guaranteed Annuitization Value will be equal to the highest contract value
on any contract anniversary occurring prior to the annuitant's 86th birthday,
less an adjustment for amounts surrendered, plus purchase payments received
after that contract anniversary. If the contract owner elects to annuitize the
contract using this GMIB option prior to the first contract anniversary, the
Guaranteed Annuitization Value will be equal to the amount of purchase payments
paid, less an adjustment for amounts surrendered.
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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 a GMIB.
The illustrations assume the following:
- An initial purchase payment of $100,000 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> <C>
55 62 $4.72 $664.15
65 72 $5.96 $838.63
70 77 $5.79 $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> <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> <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 also 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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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; and
- 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 82 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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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 a 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> 36
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 Annuitant -
Non-Qualified Contracts" provision.
A joint owner will receive a death benefit if a contract owner/annuitant dies
before the annuitization date.
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 two 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 One-Year Step Up 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).
If a contract owner who is also the annuitant dies, and the beneficiary is the
contract owner/ annuitant's spouse who is:
(a) eligible to continue the contract; and
(b) entitled to a death benefit,
then the spousal-beneficiary shall have the option of continuing the contract
with the contract value adjusted to include the difference between the death
benefit (if greater than the contract value) and the contract value at the time
of the contract owner/annuitant's death.
One-Year Step Up Death Benefit (Standard 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 prior to
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 annuitant's 86th birthday, less an adjustment for amounts
subsequently surrendered, plus purchase payments received since
that contract anniversary.
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<PAGE> 37
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; and
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 annuity payment option selected 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 life expectancies of the annuitant and the
annuitant's designated beneficiary.
Required distributions will not be withdrawn from this contract if they are
being withdrawn from another Tax Sheltered Annuity of the annuitant.
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<PAGE> 38
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
Distributions from an Individual Retirement Annuity 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 must be distributed by December 31 of the calendar
year in which the fifth anniversary of the contract owner's death occurs,
unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity
established for his or her benefit; or
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<PAGE> 39
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 will not be withdrawn from this contract if they are
being withdrawn from another Individual Retirement Annuity or Individual
Retirement Account 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)(1) 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 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 nontaxable distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity distributions will not receive the favorable tax
treatment of a lump sum distribution from a Qualified Plan. 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 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 "non-
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<PAGE> 40
qualified distributions" (see "Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- - the type of contract purchased;
- - the purposes for which the contract is purchased; and
- - the personal circumstances of individual investors having interests in the
contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans are permitted to purchase investments other than annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- - Individual Retirement Annuities;
- - Roth IRAs;
- - Tax Sheltered Annuities; and
- - "Non-Qualified Annuities."
Individual Retirement Annuities
Distributions from Individual Retirement Annuities are generally taxed when
received. If any of the amount contributed to the IRA was nondeductible for
federal income tax purposes, then a portion of each distribution is excludable
from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59 1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. The penalty tax can be avoided
if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - used for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
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Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
- - it is made on or after the date on which the contract owner attains age 59
1/2;
- - it is made to a beneficiary (or the contract owner's estate) on or after
the death of the contract owner;
- - it is attributable to the contract owner's disability; or
- - it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified 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 non-qualified
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.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior
to January 1, 1999 if the owner elected the special 4-year income averaging
provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
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
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently
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than annually made for the life (or life expectancy) of the owner, or the
joint lives (or joint life expectancies) of the owner and his or her
designated beneficiary;
- - for qualified higher education expenses;
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer; or
- - made to the owner after separation from service with his or her employer
after age 55.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
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, any portion of the contract that is assigned or
pledged; or any portion of the contract that is 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.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable 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 as a result of the annuitant's death no more payments are due
under the contract, then the unrecovered investment in the contract may be
deducted on his or her final tax return.
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 the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date 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 Internal Revenue Code imposes 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 is:
- - the result of a contract owner's death;
- - the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- - 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; or
- - is allocable to an investment in the contract before August 14, 1982.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
Therefore, income earned under a Non-Qualified Contract that is owned by a
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<PAGE> 43
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. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, 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 persons rules also do not apply to contracts that are:
- - acquired by the estate of a decedent by reason of the death of the
decedent;
- - issued in connection with certain qualified retirement plans and individual
retirement plans;
- - purchased by an employer upon the termination of certain qualified
retirement plans.
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. If the distribution is from a Tax Sheltered Annuity,
it will be subject to mandatory 20% withholding that cannot be waived, unless:
- - the distribution is made directly to another Tax Sheltered Annuity or IRA;
or
- - the distribution satisfies the minimum distribution requirements imposed by
the Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal Revenue Service notifies Nationwide that mandatory
back-up withholding is required). 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.
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Upon the contract owner's death, the value of the contract may 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).
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.
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 all 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
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<PAGE> 45
Averaging or salary reduction programs). Instead, confirmation of
recurring transactions will appear in the contract's quarterly
statements;
- semi-annual reports as of June 30 containing financial statements for
the variable account; and
- annual reports as of December 31 containing financial statements 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.
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 November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract 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 sought to
represent a class of variable life insurance contract 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, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000 Nationwide and American Century settled this lawsuit now limited
to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was 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). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the court denied the motion to
dismiss the amended complaint filed by Nationwide and other named
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<PAGE> 46
defendants. 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, NISC, 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; and
> News and World Report;
- LIMRA;
- Value;
- 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.
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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
charges that could be assessed to a contract if the maximum rider options are
chosen (1.70%). 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 1.20% 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. If the underlying mutual fund has been available in the
variable account for less than one year (or if the underlying mutual fund has
been effective for less than one year) standardized and non-standardized
performance is not annualized.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1999.
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.
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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 12/31/99 to 12/31/99 to 12/31/99 Account
<S> <C> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 9.72% N/A 3.82% 11/03/97
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 54.97% N/A 24.37% 11/03/97
Century VP International
American Century Variable Portfolios, Inc. - American -8.65% N/A -11.52% 11/03/97
Century VP Value
Dreyfus Variable Investment Fund - Appreciation Portfolio 3.27% N/A 1.88% 11/03/97
(formerly, Dreyfus Variable Investment Fund - Capital
Appreciation Portfolio)
Fidelity VIP Growth Portfolio: Service Class 28.67% N/A 10.81% 11/03/97
Fidelity VIP II Contrafund(R)Portfolio: Service Class 15.75% N/A 3.83% 11/03/97
NSAT Money Market Fund -3.21% N/A -0.12% 10/31/97
NSAT Nationwide Equity Income Fund 10.19% N/A -0.66% 11/03/97
NSAT Nationwide High Income Bond Fund -4.86% N/A -3.72% 11/03/97
NSAT Nationwide Multi Sector Bond Fund -6.46% N/A -4.27% 11/03/97
NSAT Nationwide Small Company Fund 35.28% N/A 3.12% 11/03/97
Neuberger Berman AMT Mid-Cap Growth Portfolio 44.98% N/A 28.98% 11/03/97
Neuberger Berman AMT Partners Portfolio -0.74% N/A -10.31% 11/03/97
Oppenheimer Variable Account Funds - Oppenheimer 74.22% N/A 10.99% 11/03/97
Aggressive Growth Fund/VA (formerly, Oppenheimer Variable
Account Funds - Oppenheimer Capital Appreciation Fund)
Victory Variable Insurance Funds - Diversified Stock N/A N/A -5.60% 07/01/99
Fund: Class A
Victory Variable Insurance Funds - Investment Quality N/A N/A -8.05% 07/01/99
Bond Fund: Class A
Victory Variable Insurance Funds - Small Company N/A N/A -8.68% 07/01/99
Opportunity Fund: Class A
Warburg Pincus Trust - International Equity Portfolio 44.53% N/A 11.90% 11/03/97
</TABLE>
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NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
$25,000 INITIAL INVESTMENT, VARIABLE ACCOUNT CHARGES OF 1.20%, NO CDSC
PLEASE NOTE: THE PERFORMANCE NUMBERS BELOW REFLECT THE DEDUCTION OF THE AMOUNT
ASSESSED FOR THE BASE CONTRACT OF 1.20%. FOR CONTRACT OWNERS WHO 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.
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years
to 12/31/99
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Fund Effective
<S> <C> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 16.60% N/A 23.21% 10/30/97
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 62.08% 22.81% 18.63% 05/02/94
Century VP International
American Century Variable Portfolios, Inc. - American -2.04% N/A 9.78% 05/01/96
Century VP Value
Dreyfus Variable Investment Fund - Appreciation 10.12% 24.03% 18.63% 04/05/93
Portfolio (formerly, Dreyfus Variable Investment Fund
- Capital Appreciation Portfolio)
Fidelity VIP Growth Portfolio: Service Class 35.64% 28.13% 18.47% 10/09/86
Fidelity VIP II Contrafund(R)Portfolio: Service Class 22.66% N/A 26.18% 01/03/95
NSAT Money Market Fund 3.59% 3.98% 3.76% 11/30/81
NSAT Nationwide Equity Income Fund 17.07% N/A 14.97% 10/31/97
NSAT Nationwide High Income Bond Fund 1.95% N/A 3.97% 10/31/97
NSAT Nationwide Multi Sector Bond Fund 0.34% N/A 1.18% 10/31/97
NSAT Nationwide Small Company Fund 42.29% N/A 21.74% 10/23/95
Neuberger Berman AMT Mid-Cap Growth Portfolio 52.04% N/A 51.42% 11/03/97
Neuberger Berman AMT Partners Portfolio 6.08% 19.58% 16.08% 03/22/94
Oppenheimer Variable Account Funds - Oppenheimer 81.41% 28.16% 18.99% 08/15/86
Aggressive Growth Fund/VA (formerly, Oppenheimer
Variable Account Funds - Oppenheimer Capital
Appreciation Fund)
Victory Variable Insurance Funds - Diversified Stock N/A N/A 0.60% 07/01/99
Fund-Class A
Victory Variable Insurance Funds - Investment Quality N/A N/A -0.69% 07/01/99
Bond Fund-Class A
Victory Variable Insurance Funds - Small Company N/A N/A -1.03% 07/01/99
Opportunity Fund-Class A
Warburg Pincus Trust - International Equity Portfolio 51.59% N/A 13.46% 06/30/95
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
<S> <C>
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
</TABLE>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual fundxs 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 CENTURY(SM)
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
which 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 VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("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
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<PAGE> 51
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.
APPRECIATION PORTFOLIO (FORMERLY, 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.
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 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.
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(R) 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 of security that may produce capital appreciation.
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 Villanova Mutual
Fund Capital Trust ("VMF"), an indirect subsidiary of Nationwide Financial
Services, Inc.
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<PAGE> 52
MONEY MARKET FUND
Investment Objective: As high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity.
SUBADVISED NATIONWIDE FUNDS
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 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 discussion of lower-rated securities, please see the "High
Yield Securities" section of the Fund's prospectus.
NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Miller, Anderson & Sherrerd, LLP
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 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.
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Lazard Asset
Management and Strong Capital 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.
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
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also offered directly to qualified pension and retirement plans outside of the
separate account context.
The 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 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 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.
VICTORY VARIABLE INSURANCE FUNDS
The Victory Variable Insurance Funds (the "Trust") is a Delaware business trust
formed on February 11, 1998. The Trust is offered exclusively through contracts
offered by the separate accounts of participating insurance companies. Key Asset
Management Inc. serves as the investment adviser for each fund offered through
the Trust.
DIVERSIFIED STOCK FUND: CLASS A
Investment Objective: Seeks to provide long-term growth of capital. The
Fund pursues its objective by investing primarily
53
<PAGE> 54
in equity securities and securities convertible into common stocks traded
on U.S. exchanges and issued by large, established companies.
INVESTMENT QUALITY BOND FUND: CLASS A (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR
AFTER MAY 1, 2000)
Investment Objective: Seeks to provide a high level of income. The Fund
pursues its objective by investing primarily in investment-grade bonds
issued by corporations and the U.S. Government and its agencies or
instrumentalities.
SMALL COMPANY OPPORTUNITY FUND: CLASS A
Investment Objective: Seeks to provide capital appreciation. The Fund
pursues its objective by investing primarily in common stocks of smaller
companies that show the potential for high earnings growth in relation to
their price-earnings ratio.
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 purpose of funding variable annuity and variable
life contracts. Its portfolios are managed by Credit Suisse Asset Management,
LLC ("Credit Suisse").
INTERNATIONAL EQUITY PORTFOLIO (NOT AVAILABLE IN CONNECTION WITH CONTRACTS
FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999)
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 Credit Suisse 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.
54
<PAGE> 55
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
NO OPTIONAL BENEFITS ELECTED (TOTAL 1.20%)
(VARIABLE ACCOUNT CHARGES OF 1.20% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT BEGINNING VALUE AT END OF IN ACCUMULATION ACCUMULATION
OF PERIOD PERIOD UNIT VALUE UNITS AT END OF
PERIOD
<S> <C> <C> <C> <C> <C>
American Century Variable 12.431326 14.495483 16.60% 7,880 1999
Portfolios, Inc. - American
Century VP Income & Growth - Q
American Century Variable 12.431326 14.495483 16.60% 16,322 1999
Portfolios, Inc. - American
Century VP Income & Growth - NQ
American Century Variable 10.904652 17.674116 62.08% 2,182 1999
Portfolios, Inc. - American
Century VP International - Q
American Century Variable 10.904652 17.674116 62.08% 11,522 1999
Portfolios, Inc. - American
Century VP International - NQ
American Century Variable 11.497731 11.263216 -2.04% 2,975 1999
Portfolios, Inc. - American
Century VP Value - Q
American Century Variable 11.497731 11.263216 -2.04% 4,394 1999
Portfolios, Inc. - American
Century VP Value - NQ
Dreyfus Variable Investment 12.207586 13.442893 10.12% 4,088 1999
Fund -Appreciation Portfolio
- - Q(1)
Dreyfus Variable Investment 12.207586 13.442893 10.12% 13,257 1999
Fund -Appreciation Portfolio - NQ(1)
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
55
<PAGE> 56
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT BEGINNING VALUE AT END OF IN ACCUMULATION ACCUMULATION
OF PERIOD PERIOD UNIT VALUE UNITS AT END OF
PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Growth 13.015101 17.653733 35.64% 9,712 1999
Portfolio: Service Class - Q
Fidelity VIP Growth 13.015101 17.653733 35.64% 21,093 1999
Portfolio: Service Class - NQ
Fidelity VIP II Contrafund(R) 12.602507 15.457984 22.66% 18,806 1999
Portfolio: Service Class - Q
Fidelity VIP II Contrafund(R) 12.602507 15.457984 22.66% 23,364 1999
Portfolio: Service Class - NQ
NSAT Money Market Fund - Q* 10.126097 10.489614 3.59% 11,414 1999
NSAT Money Market Fund - NQ* 10.126097 10.489614 3.59% 4,032 1999
NSAT Nationwide Equity 11.927845 13.963829 17.07% 6,957 1999
Income Fund - Q
NSAT Nationwide Equity 11.927845 13.963829 17.07% 13,200 1999
Income Fund - NQ
NSAT Nationwide High Income 10.558563 10.764664 1.95% 4,534 1999
Bond Fund - Q
NSAT Nationwide High Income 10.558563 10.764664 1.95% 8,123 1999
Bond Fund - NQ
NSAT Nationwide Multi Sector 10.475252 10.510552 0.34% 4,401 1999
Bond Fund - Q
</TABLE>
*The 7 day yield for the NSAT Money Market Fund as of December 31, 1999 was
4.18%.
56
<PAGE> 57
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT BEGINNING VALUE AT END OF IN ACCUMULATION ACCUMULATION
OF PERIOD PERIOD UNIT VALUE UNITS AT END OF
PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Multi Sector 10.475252 10.510552 0.34% 5,783 1999
Bond Fund - NQ
NSAT Nationwide Small 12.016781 17.099098 42.29% 208 1999
Company Fund - Q
NSAT Nationwide Small 12.016781 17.099098 42.29% 3,202 1999
Company Fund - NQ
Neuberger Berman AMT Mid-Cap 13.702754 20.834304 52.04% 1,400 1999
Growth Portfolio - Q
Neuberger Berman AMT Mid-Cap 13.702754 20.834304 52.04% 18,869 1999
Growth Portfolio - NQ
Neuberger Berman AMT 11.821068 12.539993 6.08% 3,238 1999
Partners Portfolio - Q
Neuberger Berman AMT 11.821068 12.539993 6.08% 3,705 1999
Partners Portfolio - NQ
Oppenheimer Variable Account 12.961315 23.512658 81.41% 2,414 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA -
Q(1)
Oppenheimer Variable Account 12.961315 23.512658 81.41% 12,069 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA -
NQ(1)
</TABLE>
(1) Formerly, Oppenheimer Variable Account Funds - Oppenheimer Capital
Appreciation Fund.
57
<PAGE> 58
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT BEGINNING VALUE AT END OF IN ACCUMULATION ACCUMULATION
OF PERIOD PERIOD UNIT VALUE UNITS AT END OF
PERIOD
<S> <C> <C> <C> <C> <C>
Victory Variable Insurance 10.000000 10.060160 0.60% 69,363 1999
Funds - Diversified Stock
Fund: Class A - Q
Victory Variable Insurance 10.000000 10.060160 0.60% 219,452 1999
Funds - Diversified Stock
Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.930934 -0.69% 21,371 1999
Funds - Investment Quality
Bond Fund: Class A - Q
Victory Variable Insurance 10.000000 9.930934 -0.69% 50,141 1999
Funds - Investment Quality
Bond Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.896766 -1.03% 2,419 1999
Funds - Small Company
Opportunity Fund: Class A - Q
Victory Variable Insurance 10.000000 9.896766 -1.03% 33,474 1999
Funds - Small Company
Opportunity Fund: Class A -
NQ
Warburg Pincus Trust - 10.801619 16.374564 51.59% 1,716 1999
International Equity
Portfolio - Q
Warburg Pincus Trust - 10.801619 16.374564 51.59% 6,645 1999
International Equity
Portfolio - NQ
</TABLE>
58
<PAGE> 59
OPTIONAL BENEFITS ELECTED (TOTAL 1.25%)
(VARIABLE ACCOUNT CHARGES OF 1.25% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
American Century Variable 12.429254 14.485724 16.55% 0 1999
Portfolios, Inc. - American
Century VP Income & Growth - Q
American Century Variable 12.429254 14.485724 16.55% 2,511 1999
Portfolios, Inc. - American
Century VP Income & Growth -
NQ
American Century Variable 10.902825 17.662250 62.00% 0 1999
Portfolios, Inc. - American
Century VP International - Q
American Century Variable 10.902825 17.662250 62.00% 0 1999
Portfolios, Inc. - American
Century VP International - NQ
American Century Variable 11.495807 11.255628 -2.09% 0 1999
Portfolios, Inc - American
Century VP Value - Q
American Century Variable 11.495807 11.255628 -2.09% 1,466 1999
Portfolios, Inc - American
Century VP Value - NQ
Dreyfus Variable Investment 12.205549 13.433832 10.06% 0 1999
Fund -Appreciation Portfolio
- - Q(1)
Dreyfus Variable Investment 12.205549 13.433832 10.06% 287 1999
Fund -Appreciation Portfolio - NQ(1)
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
59
<PAGE> 60
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Growth 13.012933 17.641868 35.57% 0 1999
Portfolio: Service Class - Q
Fidelity VIP Growth 13.012933 17.641868 35.57% 872 1999
Portfolio: Service Class - NQ
Fidelity VIP II Contrafund(R) 12.600399 15.447579 22.60% 0 1999
Portfolio: Service Class - Q
Fidelity VIP II Contrafund(R) 12.600399 15.447579 22.60% 217 1999
Portfolio: Service Class - NQ
NSAT Nationwide High Income 10.556787 10.757403 1.90% 0 1999
Bond Fund - Q
NSAT Nationwide High Income 10.556787 10.757403 1.90% 1,538 1999
Bond Fund - NQ
NSAT Nationwide Multi Sector 10.473496 10.503468 0.29% 0 1999
Bond Fund - Q
NSAT Nationwide Multi Sector 10.473496 10.503468 0.29% 0 1999
Bond Fund - NQ
NSAT Money Market Fund - Q* 10.124383 10.482530 3.54% 0 1999
NSAT Money Market Fund - NQ* 10.124383 10.482530 3.54% 0 1999
NSAT Nationwide Equity 11.925844 13.954430 17.01% 0 1999
Income Fund - Q
</TABLE>
* The 7 day yield for the NSAT Nationwide Money Market Fund as of December 31,
1999 was 4.13%
60
<PAGE> 61
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Equity 11.925844 13.954430 17.01% 52 1999
Income Fund - NQ
NSAT Nationwide Small 12.014774 17.087592 42.22% 0 1999
Company Fund - Q
NSAT Nationwide Small 12.014774 17.087592 42.22% 0 1999
Company Fund - NQ
Neuberger Berman AMT Mid-Cap 13.700471 20.820318 51.97% 0 1999
Growth Portfolio - Q
Neuberger Berman AMT Mid-Cap 13.700471 20.820318 51.97% 0 1999
Growth Portfolio - NQ
Neuberger Berman AMT 11.819096 12.531553 6.03% 0 1999
Partners Portfolio - Q
Neuberger Berman AMT 11.819096 12.531553 6.03% 1,364 1999
Partners Portfolio - NQ
Oppenheimer Variable Account 12.959156 23.496887 81.31% 0 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA - Q(1)
Oppenheimer Variable Account 12.959156 23.496887 81.31% 782 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA - NQ(1)
</TABLE>
(1) Formerly, Oppenheimer Variable Account Funds - Oppenheimer Capital
Appreciation Fund.
61
<PAGE> 62
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Victory Variable Insurance 10.000000 10.057633 0.58% 0 1999
Funds - Diversified Stock
Fund: Class A - Q
Victory Variable Insurance 10.000000 10.057633 0.58% 4,891 1999
Funds - Diversified Stock
Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.928452 -0.72% 0 1999
Funds - Investment Quality
Bond Fund: Class A - Q
Victory Variable Insurance 10.000000 9.928452 -0.72% 883 1999
Funds - Investment Quality
Bond Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.894290 -1.06% 0 1999
Funds - Small Company
Opportunity Fund: Class A - Q
Victory Variable Insurance 10.000000 9.894290 -1.06% 772 1999
Funds - Small Company
Opportunity Fund: Class A -
NQ
Warburg Pincus Trust - 10.799816 16.363554 51.52% 0 1999
International Equity
Portfolio - Q
Warburg Pincus Trust - 10.799816 16.363554 51.52% 0 1999
International Equity
Portfolio - NQ
</TABLE>
62
<PAGE> 63
OPTIONAL BENEFITS ELECTED (TOTAL 1.50%)
(VARIABLE ACCOUNT CHARGES OF 1.50% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
American Century Variable 12.502898 14.534695 16.25% 0 1999
Portfolios, Inc. - American
Century VP Income & Growth - Q
American Century Variable 12.502898 14.534695 16.25% 270 1999
Portfolios, Inc. - American
Century VP Income & Growth - NQ
American Century Variable 12.049887 19.471172 61.59% 0 1999
Portfolios, Inc. - American
Century VP International - Q
American Century Variable 12.049887 19.471172 61.59% 93 1999
Portfolios, Inc. - American
Century VP International - NQ
American Century Variable 11.268440 11.005082 -2.34% 0 1999
Portfolios, Inc. - American
Century VP Value - Q
American Century Variable 11.268440 11.005082 -2.34% 0 1999
Portfolios, Inc. - American
Century VP Value - NQ
Dreyfus Variable Investment 12.377494 13.588614 9.78% 0 1999
Fund -Appreciation Portfolio - Q(1)
Dreyfus Variable Investment 12.377494 13.588614 9.78% 0 1999
Fund -Appreciation Portfolio - NQ(1)
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
63
<PAGE> 64
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Growth 12.901477 17.446540 35.23% 0 1999
Portfolio: Service Class - Q
Fidelity VIP Growth 12.901477 17.446540 35.23% 0 1999
Portfolio: Service Class - NQ
Fidelity VIP II Contrafund(R) 12.784276 15.633362 22.29% 0 1999
Portfolio: Service Class - Q
Fidelity VIP II Contrafund(R) 12.784276 15.633362 22.29% 65 1999
Portfolio: Service Class - NQ
NSAT Money Market Fund - Q* 10.085474 10.415808 3.28% 0 1999
NSAT Money Market Fund - NQ* 10.085474 10.415808 3.28% 0 1999
NSAT Nationwide Equity 11.834345 13.812331 16.71% 0 1999
Income Fund - Q
NSAT Nationwide Equity 11.834345 13.812331 16.71% 0 1999
Income Fund - NQ
NSAT Nationwide High Income 10.329379 10.499020 1.64% 0 1999
Bond Fund - Q
NSAT Nationwide High Income 10.329379 10.499020 1.64% 845 1999
Bond Fund - NQ
NSAT Nationwide Multi Sector 10.235484 10.238786 0.03% 0 1999
Bond Fund - Q
</TABLE>
* The 7 day yield for the NSAT Money Market Fund as of December 31, 1999 was
3.87%
64
<PAGE> 65
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Multi Sector 10.235484 10.238786 0.03% 510 1999
Bond Fund - NQ
NSAT Nationwide Small 12.110854 17.180698 41.86% 0 1999
Company Fund - Q
NSAT Nationwide Small 12.110854 17.180698 41.86% 0 1999
Company Fund - NQ
Neuberger Berman AMT Mid-Cap 14.063808 21.318413 51.58% 0 1999
Growth Portfolio - Q
Neuberger Berman AMT Mid-Cap 14.063808 21.318413 51.58% 84 1999
Growth Portfolio - NQ
Neuberger Berman AMT 11.846069 12.528364 5.76% 0 1999
Partners Portfolio - Q
Neuberger Berman AMT 11.846069 12.528364 5.76% 0 1999
Partners Portfolio - NQ
Oppenheimer Variable Account 13.178533 23.834283 80.86% 0 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA - Q(1)
Oppenheimer Variable Account 13.178533 23.834283 80.86% 0 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA -
NQ(1)
</TABLE>
(1) Formerly, Oppenheimer Variable Account Funds - Oppenheimer Capital
Appreciation Fund.
65
<PAGE> 66
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Victory Variable Insurance 10.000000 10.045034 0.45% 1,414 1999
Funds - Diversified Stock
Fund: Class A - Q
Victory Variable Insurance 10.000000 10.045034 0.45% 3,685 1999
Funds - Diversified Stock
Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.916014 -0.84% 390 1999
Funds - Investment Quality
Bond Fund: Class A - Q
Victory Variable Insurance 10.000000 9.916014 -0.84% 0 1999
Funds - Investment Quality
Bond Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.881888 -1.18% 208 1999
Funds - Small Company
Opportunity Fund: Class A - Q
Victory Variable Insurance 10.000000 9.881888 -1.18% 638 1999
Funds - Small Company
Opportunity Fund: Class A - NQ
Warburg Pincus Trust - 11.540306 17.441358 51.13% 0 1999
International Equity
Portfolio - Q
10.000000 11.540306 15.40% 0 1998
Warburg Pincus Trust - 11.540306 17.441358 51.13% 0 1999
International Equity
Portfolio - NQ
10.000000 11.540306 15.40% 0 1998
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
OPTIONAL BENEFITS ELECTED (TOTAL 1.65%)
(VARIABLE ACCOUNT CHARGES OF 1.65% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT)
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
American Century Variable 12.498159 14.507084 16.07% 0 1999
Portfolios, Inc. - American
Century VP Income & Growth - Q
1998
American Century Variable 12.498159 14.507084 16.07% 0 1999
Portfolios, Inc. - American
Century VP Income & Growth -
NQ
American Century Variable 12.045328 19.434239 61.34% 0 1999
Portfolios, Inc. - American
Century VP International - Q
American Century Variable 12.045328 19.434239 61.34% 0 1999
Portfolios, Inc. - American
Century VP International - NQ
American Century Variable 11.264161 10.984159 -2.49% 40 1999
Portfolios, Inc. - American
Century VP Value - Q
American Century Variable 11.264161 10.984159 -2.49% 0 1999
Portfolios, Inc. - American
Century VP Value - NQ
Dreyfus Variable Investment 12.372807 13.562791 9.62% 0 1999
Fund -Appreciation Portfolio
- - Q(1)
Dreyfus Variable Investment 12.372807 13.562791 9.62% 0 1999
Fund -Appreciation Portfolio
- - NQ(1)
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
67
<PAGE> 68
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Growth 12.896602 17.413426 35.02% 0 1999
Portfolio: Service Class - Q
Fidelity VIP Growth 12.896602 17.413426 35.02% 0 1999
Portfolio: Service Class - NQ
NSAT Money Market Fund - Q* 10.081601 10.395950 3.12% 0 1999
NSAT Money Market Fund - NQ* 10.081601 10.395950 3.12% 1,267 1999
NSAT Nationwide Equity Income 11.829858 13.786084 16.54% 32 1999
Fund - Q
NSAT Nationwide Equity Income 11.829858 13.786084 16.54% 658 1999
Fund - NQ
NSAT Nationwide High Income 10.325454 10.479056 1.49% 0 1999
Bond Fund - Q
NSAT Nationwide High Income 10.325454 10.479056 1.49% 777 1999
Bond Fund - NQ
NSAT Nationwide Multi Sector 10.231592 10.219313 -0.12% 0 1999
Bond Fund - Q
NSAT Nationwide Multi Sector 10.231592 10.219313 -0.12% 744 1999
Bond Fund - NQ
NSAT Nationwide Small Company 12.106268 17.148084 41.65% 0 1999
Fund - Q
</TABLE>
* The 7 day yield for the NSAT Money Market Fund as December 31, 1999 was 3.72%.
68
<PAGE> 69
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small Company 12.106268 17.148084 41.65% 0 1999
Fund - NQ
Neuberger Berman AMT Mid-Cap 14.058496 21.277954 51.35% 23 1999
Growth Portfolio - Q
Neuberger Berman AMT Mid-Cap 14.058496 21.277954 51.35% 0 1999
Growth Portfolio - NQ
Neuberger Berman AMT Partners 11.841583 12.504542 5.60% 0 1999
Portfolio - Q
Neuberger Berman AMT Partners 11.841583 12.504542 5.60% 0 1999
Portfolio - NQ
Oppenheimer Variable Account 13.173548 23.789077 80.58% 21 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA - Q(1)
Oppenheimer Variable Account 13.173548 23.789077 80.58% 0 1999
Funds - Oppenheimer
Aggressive Growth Fund/VA -
NQ1
Victory Variable Insurance 10.000000 10.037475 0.37% 0 1999
Funds - Diversified Stock
Fund: Class A - Q
Victory Variable Insurance 10.000000 10.037475 0.37% 1,948 1999
Funds - Diversified Stock
Fund: Class A - NQ
</TABLE>
(1) Formerly, Oppenheimer Variable Account Funds - Oppenheimer Capital
Appreciation Fund.
69
<PAGE> 70
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
Victory Variable Insurance 10.000000 9.908553 -0.91% 0 1999
Funds - Investment Quality
Bond Fund: Class A - Q
Victory Variable Insurance 10.000000 9.908553 -0.91% 750 1999
Funds - Investment Quality
Bond Fund: Class A - NQ
Victory Variable Insurance 10.000000 9.874460 -1.26% 0 1999
Funds - Small Company
Opportunity Fund: Class A - Q
Victory Variable Insurance 10.000000 9.874460 -1.26% 432 1999
Funds - Small Company
Opportunity Fund: Class A - NQ
Warburg Pincus Trust - Global 12.821248 20.617144 60.80% 0 1999
Post-Venture Capital
Portfolio - Q(1)
Warburg Pincus Trust - Global 12.821248 20.617144 60.80% 0 1999
Post-Venture Capital
Portfolio - NQ(1)
Warburg Pincus Trust - 11.535935 17.408242 50.90% 0 1999
International Equity
Portfolio - Q
Warburg Pincus Trust - 11.535935 17.408242 50.90% 531 1999
International Equity
Portfolio - NQ
</TABLE>
(1) Formerly, Warburg Pincus Trust -Post-Venture Capital Portfolio.
70
