<PAGE> 1
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Variable Account - II
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
o American Century VP Balanced
o American Century VP Income & Growth
o American Century VP International
o American Century VP Value
DREYFUS
o Dreyfus Investment Portfolios - European Equity Portfolio
o The Dreyfus Socially Responsible Growth Fund, Inc.
o Dreyfus Stock Index Fund, Inc.
o Dreyfus Variable Investment Fund - Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio)
o Dreyfus Variable Investment Fund - Growth & Income Portfolio*
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Equity-Income Portfolio
o VIP Growth Portfolio
o VIP High Income Portfolio*
o VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
o VIP II Asset Manager Portfolio
o VIP II Contrafund(R) Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
o VIP III Growth Opportunities Portfolio
JANUS ASPEN SERIES
o Janus Aspen Series - Capital Appreciation Portfolio: Service Shares
o Janus Aspen Series - Global Technology Portfolio: Service Shares
o Janus Aspen Series - International Growth Portfolio: Service Shares
MORGAN STANLEY
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS, INC.)
o Emerging Markets Debt Portfolio
VAN KAMPEN LIFE INVESTMENT TRUST
o Morgan Stanley Real Estate Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
o Capital Appreciation Fund
o Government Bond Fund
o Money Market Fund
o Total Return Fund
o Nationwide Mid Cap Index Fund (subadviser: The Dreyfus Corporation)
o Nationwide Multi Sector Bond Fund (subadviser: Miller, Anderson and
Sherrerd, LLP)
2
<PAGE> 2
o Nationwide Small Cap Growth Fund (subadvisers: Franklin Advisers, Inc.,
Miller, Anderson & Sherrerd, LLP, Neuberger Berman, LLC)
o Nationwide Small Cap Value Fund (sub-adviser: The Dreyfus Corporation)
o Nationwide Small Company Fund (sub-advisers: The Dreyfus Corporation,
Neuberger Berman, LLC., Lazard Asset Management and Strong Capital
Management, Inc.)
o Nationwide Strategic Growth Fund (subadviser: Strong Capital Management,
Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o AMT Growth Portfolio
o AMT Guardian Portfolio
o AMT Limited Maturity Bond Portfolio
o AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
o Oppenheimer Aggressive Growth Fund /VA
o Oppenheimer Bond Fund/VA
o Oppenheimer Capital Appreciation Fund/VA (formerly, Oppenheimer Growth
Fund)
o Oppenheimer Global Securities Fund/VA
o Oppenheimer Main Street Growth & Income Fund/VA
o Oppenheimer Multiple Strategies Fund/VA
STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.)
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
o Small Company Growth Portfolio
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
o American Century VP Capital Appreciation
STRONG VARIABLE INSURANCE FUNDS, INC.
o Strong Discovery Fund II, Inc.
o International Stock Fund II
WARBURG PINCUS TRUST
o Global Post-Venture Capital Portfolio (formerly, Post-Venture Capital
Portfolio)
o International Equity Portfolio
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account-II ("variable account") may be allocated to the
fixed account.
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 46.
For general information or to obtain FREE copies of the:
o Statement of Additional Information;
o prospectus, annual report or semi-annual report for any underlying mutual
fund; and
o required Nationwide forms,
call: 1-800-848-6331
1-800-238-3035 (TDD)
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 1-05-P1
COLUMBUS, OHIO 43215
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
Information about this and other Best of America products can be found at:
www.bestofamerica.com
3
<PAGE> 3
THIS ANNUITY IS NOT:
o A BANK DEPOSIT
o ENDORSED BY A BANK OR GOVERNMENT AGENCY
o FEDERALLY INSURED
o AVAILABLE IN 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.
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.
4
<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit of measure used to calculate the variable
annuity payments.
CONTRACT VALUE- The total value of all accumulation units in a contract plus any
amount held in the fixed account.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) if the Internal
Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as an Individual Retirement Annuity, 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 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-II, 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.
5
<PAGE> 5
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.....................................................
SUMMARY OF CONTRACT EXPENSES..................................................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES........................................
EXAMPLE.......................................................................
SYNOPSIS OF THE CONTRACTS.....................................................
FINANCIAL STATEMENTS..........................................................
CONDENSED FINANCIAL INFORMATION...............................................
NATIONWIDE LIFE INSURANCE COMPANY.............................................
NATIONWIDE INVESTMENT SERVICES CORPORATION....................................
TYPES OF CONTRACTS............................................................
Non-Qualified Annuity Contracts
Individual Retirement Annuities (IRAs)
Roth IRAs
Tax Sheltered Annuities
INVESTING IN THE CONTRACT.....................................................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
CHARGES AND DEDUCTIONS........................................................
Mortality and Expense Risk Charge
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP............................................................
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT.....................................................
Minimum Initial and Subsequent Purchase Payments
Guaranteed Term Options
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Requests
RIGHT TO REVOKE...............................................................
SURRENDERS (REDEMPTIONS)......................................................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE................................................................
Minimum and Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Interest
Loan Repayment
Distributions and Annuity Payments
Transferring the Contract
Grace Period and Loan Default
ASSIGNMENT....................................................................
CONTRACT OWNER SERVICES.......................................................
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE.....................................................
ANNUITIZING THE CONTRACT......................................................
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Assumed Investment Rate
Value of an Annuity Unit
Exchanges among Underlying Mutual Funds
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS................................................................
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
How the Death Benefit Value is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS........................................................
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
6
<PAGE> 6
Required Distributions for Individual Retirement Annuities
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS....................................................
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS........................................................
LEGAL PROCEEDINGS.............................................................
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY...............................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION......................
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS............................
APPENDIX B: CONDENSED FINANCIAL INFORMATION...................................
7
<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless the contract owner
meets an available exception under the contract.
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 COMPLETED YEARS FROM CDSC
DATE OF PURCHASE PAYMENT PERCENTAGE
- -------------------------------- ------------------------
0 7%
- -------------------------------- ------------------------
1 6%
- -------------------------------- ------------------------
2 5%
- -------------------------------- ------------------------
3 4%
- -------------------------------- ------------------------
4 3%
- -------------------------------- ------------------------
5 2%
- -------------------------------- ------------------------
6 1%
- -------------------------------- ------------------------
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.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of daily net assets of the variable account)
Mortality and Expense Risk Charges.............1.25%
Administration Charge..........................0.15%
Total Variable Account Charges............1.40%
(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.
8
<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.-American 0.90% 0.00% 0.00% 0.90%
Century VP Balanced
- ------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Capital Appreciation
- ------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
- ------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American 1.34% 0.00% 0.00% 1.34%
Century VP International
- ------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Value
- ------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
- ------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Appreciation Portfolio 0.43% 0.35% 0.00% 0.78%
(formerly, Dreyfus Variable Investment Fund- Capital
Appreciation Portfolio)
- ------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Growth & Income Portfolio 0.75% 0.04% 0.00% 0.79%
- ------------------------------------------------------------------------------------------------------------------------
Dreyfus European Equity Portfolio 1.00% 0.50% 0.00% 1.50%
- ------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.04% 0.00% 0.79%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.48% 0.08% 0.00% 0.56%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.58% 0.07% 0.00% 0.65%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0.53% 0.09% 0.00% 0.62%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio 0.58% 0.07% 0.00% 0.65%
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.10% 0.00% 0.68%
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital Appreciation Portfolio: 0.65% 0.04% 0.25% 0.94%
Service Shares
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Global Technology Portfolio: Service 0.65% 0.13% 0.25% 1.03%
Shares
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - International Growth Portfolio: 0.65% 0.11% 0.25% 1.01%
Service Shares
- ------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc.- Emerging 0.45% 0.98% 0.00% 1.43%
Markets Debt Portfolio
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund 0.60% 0.14% 0.00% 0.74%
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 0.50% 0.15% 0.00% 0.65%
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 0.39% 0.15% 0.00% 0.54%
- ------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.88% 0.15% 0.00% 1.03%
- ------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
- ------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund 1.10% 0.20% 0.00% 1.30%
- ------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Company Fund 0.98% 0.17% 0.00% 1.15%
- ------------------------------------------------------------------------------------------------------------------------
NSAT- Total Return Fund 0.58% 0.14% 0.00% 0.72%
- ------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- Growth Portfolio 0.84% 0.08% 0.00% 0.92%
- ------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- Limited Maturity Bond Portfolio 0.65% 0.11% 0.00% 0.76%
- ------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT-Partners Portfolio 0.80% 0.07% 0.00% 0.87%
- ------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.66% 0.01% 0.00% 0.67%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds- Oppenheimer Bond 0.72% 0.01% 0.00% 0.73%
Fund/VA
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- Oppenheimer 0.68% 0.02% 0.00% 0.70%
Capital Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- Oppenheimer Global 0.67% 0.02% 0.00% 0.69%
Securities Fund/VA
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA 0.73% 0.05% 0.00% 0.78%
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- Oppenheimer 0.72% 0.01% 0.00% 0.73%
Multiple Strategies Fund/VA
- --------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.14% 0.00% 1.14%
- --------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- Discovery Fund 1.00% 0.14% 0.00% 1.14%
II, Inc.
- --------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-International 1.00% 0.16% 0.00% 1.16%
Stock Fund II
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide Bond Fund 1.00% 0.22% 0.00% 1.22%
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide Emerging 1.00% 0.34% 0.00% 1.34%
Markets Fund
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide Hard 1.00% 0.26% 0.00% 1.26%
Assets Fund
- --------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust- Morgan Stanley Real 0.97% 0.13% 0.00% 1.10%
Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International Equity Portfolio 1.00% 0.32% 0.00% 1.32%
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Global Post-Venture Capital 1.07% 0.33% 0.00% 1.40%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Small Company Growth Portfolio 0.90% 0.24% 0.00% 1.14%
- --------------------------------------------------------------------------------------------------------------------
</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.
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 Mutual
Fees Expenses Fees Fund Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus: European Equity Portfolio 1.00% 3.17% 0.00% 4.17%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.48% 0.09% 0.00% 0.57%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.58% 0.08% 0.00% 0.66%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio 0.58% 0.09% 0.00% 0.67%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.11% 0.00% 0.69%
- --------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging 0.80% 0.98% 0.00% 1.78%
Markets Debt Portfolio
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.88% 0.86% 0.00% 1.74%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.27% 0.00% 1.02%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund 1.10% 1.30% 0.00% 2.40%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.33% 0.00% 1.23%
- --------------------------------------------------------------------------------------------------------------------
NSAT-Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Emerging 1.00% 0.54% 0.00% 1.54%
Markets Fund
- --------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real 1.00% 0.13% 0.00% 1.13%
Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Global Post-Venture Capital 1.25% 0.33% 0.00% 1.58%
Portfolio
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 10
EXAMPLE
The following chart shows the 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 variable account charges of 1.40%. Deductions
for premium taxes are not reflected but may apply.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
applicable time period applicable time period time period
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 87 119 154 272 24 74 127 272 * 74 127 272
Portfolios, Inc.- American
Century VP Balanced
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 88 122 159 282 25 77 132 282 * 77 132 282
Portfolios, Inc.- American
Century VP Capital
Appreciation
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 85 113 144 250 22 68 117 250 * 68 117 250
Portfolios, Inc.- American
Century VP Income & Growth
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 92 133 177 317 29 88 150 317 * 88 150 317
Portfolios, Inc.- American
Century VP International
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 88 122 159 282 25 77 132 282 * 77 132 282
Portfolios, Inc.- American
Century VP Value
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 80 99 120 202 17 54 93 202 * 54 93 202
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 86 116 148 259 23 71 121 259 * 71 121 259
Fund- Appreciation Portfolio
(formerly, Dreyfus Variable
Investment Fund- Capital
Appreciation Portfolio)
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 86 116 148 260 23 71 121 260 * 71 121 260
Fund- Growth & Income
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 86 116 148 260 23 71 121 260 * 71 121 260
Responsible Growth Fund, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios 91 130 172 308 28 85 145 308 * 85 145 308
- - European Equity Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 84 109 136 235 21 64 109 235 * 64 109 235
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 85 111 141 245 22 66 114 245 * 66 114 245
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 85 113 143 249 22 68 116 249 * 68 116 249
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 87 118 153 268 24 73 126 268 * 73 126 268
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 84 110 139 242 21 65 112 242 * 65 112 242
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) 85 111 141 245 22 66 114 245 * 66 114 245
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 11
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
applicable time period applicable time period time period
- ---------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP III Growth 85 112 143 248 22 67 116 245 * 67 116 248
Opportunities Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital 85 113 143 249 22 68 116 249 * 68 116 249
Appreciation Portfolio:
Service Shares
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Global 86 116 148 259 23 71 121 259 * 71 121 259
Technology Portfolio: Service
Shares
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - 86 115 147 257 23 70 120 257 * 70 120 257
International Growth
Portfolio: Service Shares
- ---------------------------------------------------------------------------------------------------------------------------
The Universal Institutional 93 136 182 326 30 91 155 326 * 91 155 326
Funds, Inc.- Emerging Markets
Debt Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation 85 114 146 255 22 69 119 255 * 69 119 255
Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 85 111 141 245 22 66 114 245 * 66 114 245
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 83 108 135 233 20 63 108 233 * 63 108 233
- ---------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index 89 123 161 285 26 78 134 285 * 78 134 285
Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector 87 119 154 272 24 74 127 272 * 74 127 272
Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap 91 132 175 313 28 87 148 313 * 87 148 313
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Cap 89 124 162 287 26 79 135 287 * 79 135 287
Value Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 90 127 167 298 27 82 140 298 * 82 140 298
Company Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 88 122 159 282 25 77 132 282 * 77 132 282
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
NSAT- Total Return Fund 85 114 145 253 22 69 118 253 * 69 118 253
- ---------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT-Growth 87 120 155 274 24 75 128 274 * 75 128 274
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 88 122 159 282 25 77 132 282 * 77 132 282
Guardian Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT-Limited 86 115 147 257 23 70 120 257 * 70 120 257
Maturity Bond Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 87 118 153 268 24 73 126 268 * 73 126 268
Partners Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer VAF-Oppenheimer 85 112 142 247 22 67 115 247 * 67 115 247
Aggressive Growth Fund/VA
- ---------------------------------------------------------------------------------------------------------------------------
Oppenheimer VAF-Oppenheimer 85 114 145 254 22 69 118 254 * 69 118 254
Bond Fund/VA
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 12
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oppenheimer VAF- Oppenheimer 85 113 143 249 22 68 116 249 * 68 116 249
Global Securities Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- Oppenheimer 85 113 144 250 22 68 117 250 * 68 117 250
Capital Appreciation Fund/VA
(formerly Oppenheimer Growth
Fund)
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer VAF-Oppenheimer 86 116 148 259 23 71 121 259 * 71 121 259
Main Street Growth & Income
Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer VAF-Oppenheimer 85 114 145 254 22 69 118 254 * 69 118 254
Multiple Strategies Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, 90 127 167 297 27 82 140 297 * 82 140 297
Inc.
- --------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 90 127 167 297 27 82 140 297 * 82 140 297
Funds, Inc.- Discovery Fund
II, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 90 128 168 299 27 83 141 299 * 83 141 299
Funds, Inc.- International
Stock Fund II
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 91 129 171 305 28 84 144 305 * 84 144 305
Trust- Worldwide Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 92 133 177 317 29 88 150 317 * 88 150 317
Trust- Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 91 131 173 309 28 86 146 309 * 86 146 309
Trust- Worldwide Hard Assets
Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment 89 126 165 292 26 81 138 292 * 81 138 292
Trust- Morgan Stanley Real
Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 92 133 176 315 29 88 149 315 * 88 149 315
Trust-International Equity
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Global 92 135 180 323 29 90 153 323 * 90 153 323
Post-Venture Capital Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Small 90 127 167 297 27 82 140 297 * 82 140 297
Company Growth Portfolio
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Contracts sold under this prospectus do not permit annuitization during the
first two contract years.
13
<PAGE> 13
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)" and
"contract owner(s)" will mean "participant(s)," unless the plan otherwise
permits or requires the contract owner to exercise contract rights under the
authority of the plan terms.
The contracts can be categorized as:
o Non-Qualified;
o 401(a) Investment-only;
o IRAs, with contributions rolled over or transferred from certain
tax-qualified plans;
o Roth IRAs; and
o Tax Sheltered Annuities, with contributions rolled over or transferred
from other Tax Sheltered Annuity plans.
For more detailed information with regard to the differences in 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 $15,000 $1,000
- -------------------- ----------------- ------------------
IRA $15,000 $1,000
- -------------------- ----------------- ------------------
Roth IRA $15,000 $1,000
- -------------------- ----------------- ------------------
Tax Sheltered $15,000 $1,000
Annuity
- -------------------- ----------------- ------------------
Charitable $0 $0
Remainder Trust
- -------------------- ----------------- ------------------
401(a) $15,000 $1,000
Investment-only
- -------------------- ----------------- ------------------
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 1.25% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
Nationwide deducts an Administration Charge equal to an annual rate of 0.15% of
the daily net assets of the variable account. Nationwide assesses this charge in
return for incurring administrative expenses related to contract issuance and
maintenance.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued and the
purpose for which the contract is purchased. Nationwide will charge against the
contract any premium taxes levied by any governmental authority (see "Federal
Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
14
<PAGE> 14
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 variable
account charges, which may vary from contract to contract (for more information
on the calculation of accumulation unit values, see "Variable Payment Annuity").
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 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, a SEP 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.
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:
o the contract is not transferable by the owner;
o the premiums are not fixed;
o the annual premium cannot exceed $2,000 (although rollovers of greater amounts
from qualified plans, tax-sheltered annuities and other IRAs can be received);
o certain minimum distribution requirements must be satisfied after the owner
attains the age of 70 1/2;
o the entire interest of the owner in the contract is nonforfeitable; and
o 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
15
<PAGE> 15
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:
o the contract is not transferable by the owner;
o the premiums are not fixed;
o the annual premium cannot exceed $2,000 (although rollovers of greater amounts
from other Roth IRAs and IRAs can be received);
o the entire interest of the owner in the contract is nonforfeitable; and
o 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.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-II is a variable account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on October 7, 1981, 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
IRAs, Investment-
16
<PAGE> 16
only contracts, Roth IRAs, and Tax Sheltered Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of the underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus should be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the
17
<PAGE> 17
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 after the maturity date.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, dollar
cost averaging, or systematic withdrawals.
Guaranteed Term Options are not available in the states of Oregon or Washington.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to 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 rates(s) depending on the following
categories of fixed account allocations:
o 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.
o Variable Account to Fixed Rate - Allocations transferred from any of the
underlying mutual funds 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.
o Renewal Rate - The rate available for maturing fixed account allocations
that 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 underlying mutual fund options.
o Dollar Cost Averaging - From time to time, Nationwide may offer a more
favorable rate
18
<PAGE> 18
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 which the 12 month anniversary of 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 investment income earned by the fixed account will be allocated to the
contracts at varying rate(s) set by Nationwide. 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.
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 1.25% of the daily net assets of the variable account.
The Mortality Risk Charge is equal to an annual rate of 0.80% 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 payees or the general population.
The Expense Risk Charge is equal to an annual rate of 0.45% of the daily net
assets of the variable account. 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.
ADMINISTRATION CHARGE
Nationwide deducts an Administration Charge from the variable account. This
amount is computed on a daily basis and is equal to an annual rate of 0.15% of
the daily net assets of the variable account.
The Administration Charge compensates Nationwide for expenses related to
contract issuance and maintenance.
If this charge is insufficient to cover actual expenses, the loss is borne by
Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by 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, but 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.)
19
<PAGE> 19
The CDSC applies as follows:
- ----------------------------- ---------------------------
NUMBER OF YEARS FROM DATE CDSC
OF PURCHASE PAYMENT PERCENTAGE
- ----------------------------- ---------------------------
0 7%
- ----------------------------- ---------------------------
1 6%
- ----------------------------- ---------------------------
2 5%
- ----------------------------- ---------------------------
3 4%
- ----------------------------- ---------------------------
4 3%
- ----------------------------- ---------------------------
5 2%
- ----------------------------- ---------------------------
6 1%
- ----------------------------- ---------------------------
7 0%
- ----------------------------- ---------------------------
The CDSC is used to cover sales expenses, including commissions (maximum of 6.5%
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
(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.
For Tax Sheltered Annuity contracts issued prior to February 20, 1996, or issued
in state jurisdictions prior to the approval by insurance regulatory authorities
of applicable contract forms, Nationwide will waive the CDSC when:
(a) the plan participant experiences a case of hardship (as provided in
Internal Revenue Code Section 403(b) and as defined for purposes of
Internal Revenue Code Section 401(k));
(b) the plan participant becomes disabled (within the meaning of Internal
Revenue Code Section 72(m)(7));
(c) the plan participant attains age 59 1/2 and has participated in the
contract for at least 5 years, as determined from the contract
anniversary date immediately preceding the distribution;
(d) the plan participant has participated in the contract for at least
15 years as determined from the contract anniversary date immediately
preceding the distribution;
(e) the plan participant dies; or
(f) the contract is annuitized after 2 years from the inception of the
contract.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
20
<PAGE> 20
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.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such other date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract including the right to
designate and change any designations of the contract owner, contingent owner,
annuitant, contingent annuitant, beneficiary, contingent beneficiary, annuity
payment option, and annuity commencement date. 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:
o on a Nationwide form;
o signed by the contract owner; and
o received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is Charitable Remainder Trust.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract. If a contract owner
who is NOT the annuitant dies before the annuitization date, the joint owner
becomes the contract owner.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
o joint owners can only be named for Non-Qualified Contracts;
o joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint owners;
o the exercise of any ownership right in the contract will generally
require a written request signed by both joint owners;
o an election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently of either joint owner; and
o 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. However, if the contingent owner dies
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before the contract owner, and there is no surviving joint owner, all of the
contract benefits that would have gone to the contingent owner will go to the
contract owner's estate.
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.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, 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. The beneficiaries will share
the death benefit equally, unless otherwise specified.
If no beneficiary survives the annuitant, the contingent beneficiary receives
the death benefit. Contingent beneficiaries will share the death benefit
equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survives 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.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
- -------------------- ----------------- ------------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- -------------------- ----------------- ------------------
Non-Qualified $15,000 $1,000
- -------------------- ----------------- ------------------
IRA $15,000 $1,000
- -------------------- ----------------- ------------------
Roth IRA $15,000 $1,000
- -------------------- ----------------- ------------------
Tax Sheltered $15,000 $1,000
Annuity
- -------------------- ----------------- ------------------
Charitable $0 $0
Remainder Trust
- -------------------- ----------------- ------------------
401(a) $15,000 $1,000
Investment-only
- -------------------- ----------------- ------------------
Subsequent purchase payments are not permitted in the State of New York.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the
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delay. The purchase payment will be returned unless the prospective purchaser
specifically allows Nationwide to hold the purchase payment until the
application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts 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:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the contract owner 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, the 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
for any contract owner. 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 contract value, Nationwide will deduct a proportionate amount from
each sub-account, the fixed account and any Guaranteed Term Option based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
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<PAGE> 23
(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 of 1.40% of the daily net assets of
the variable account.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
(1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
(2) adding any interest earned on the amounts allocated.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
(1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment); and
(2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option.
TRANSFERS PRIOR TO ANNUITIZATION
Transfers from the Fixed Account to the Variable Account
Fixed account allocations may be transferred to the variable account 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; however, Nationwide may, under certain economic conditions and at its
discretion, limit the maximum transferable amount. The maximum transferable
amount will not be less than 10% of the fixed account allocation reaching the
end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Transfers from the Variable Account 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.
Under no circumstances will the transfer limit be less 10% of the current value
of the variable account and Guaranteed Term Option allocation, for any 12 month
period which the transfer limit is imposed, but not including transfers made
prior to the imposition of the transfer limit. However, Nationwide may refuse
transfers or purchase payments to the fixed account 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 prior to maturity are subject to a
market value adjustment.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term
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<PAGE> 24
Options) under the terms of that program (see "Dollar Cost Averaging").
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 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.
For transfers involving the variable account, Nationwide determines contract
value as of the date the completed transfer request is received.
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 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:
o submitted by any agent acting under a power of attorney on behalf of more than
one contract owner; or
o 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.
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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 IRA and Roth IRA refunds will be
a return of purchase payments. State and/or federal law may provide additional
free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDERS (REDEMPTIONS)
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 direct Nationwide to deduct the CDSC
from either:
(a) the amount requested; or
(b) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds. A CDSC may apply.
SURRENDERS UNDER A 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
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January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
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 AND 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 may charge a Loan Processing Fee at the time each new loan is
processed. If assessed it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
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.
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%.
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Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the NSAT-Money Market
Fund unless the contract owner directs otherwise.
DISTRIBUTIONS AND 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:
o the contract is surrendered;
o the contract owner/annuitant dies;
o the contract owner who is not the annuitant dies prior to annuitization;
or
o annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD AND 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. Investment-only Contracts, IRAs, Roth
IRAs, and Tax Sheltered Annuities may not be assigned, pledged or otherwise
transferred except where allowed by law.
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.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
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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 certain sub-accounts and/or the fixed account 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, Fidelity VIP High Income Portfolio, NSAT- Government
Bond Fund, NSAT- Money Market Fund, Neuberger Berman AMT Limited Maturity Bond
Portfolio to any other underlying mutual fund. Dollar cost averaging transfers
may not be directed to Guaranteed Term Options.
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 as to whether any enhanced rate dollar cost
averaging programs are available.
Enhanced Rate Dollar Cost Averaging Program
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. Dollar cost averaging transfers for this program may only be made from
the fixed account. Such enhanced rate dollar cost averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
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.
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SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date;
2) an amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age, as
shown in the table below:
----------------------------- -----------------------
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.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a Tax
Sheltered Annuity plan, annuitization may occur during the first 2 years subject
to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
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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 payment
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.
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.
The assumed investment rate of 3.5% 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 based on whether actual investment
performance is higher or lower than the assumed investment rate of 3.5%.
VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
o 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
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o 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.
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. IRAs 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.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
HOW THE DEATH BENEFIT VALUE IS DETERMINED
The death benefit value is determined as of the date the home office receives:
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(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required forms(s).
If the annuitant dies after the annuitization date, payment will be determined
according to the selected annuity payment option.
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.
DEATH BENEFIT PAYMENT
For contracts issued on or after May 1, 1998 or the date on which state
insurance authorities approved applicable contract modifications:
If the annuitant dies prior to his or her 86th birthday, the dollar amount of
the death benefit will be the greatest of:
(1) the contract value;
(2) the sum of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the contract value as of the most recent five year contract
anniversary, less an adjustment for amounts surrendered since that five
year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above
in the same proportion that the contract value was reduced on the date(s)
of the partial surrender(s).
If the annuitant dies on or after his or her 86th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to the
contract value.
For contracts issued prior to May 1, 1998 or a date prior to which state
insurance authorities approved applicable contract modifications:
If the annuitant dies prior to his or her 86th birthday, the dollar amount of
the death benefit will be the greatest of:
(1) the contract value;
(2) the sum of all purchase payments, less amounts surrendered; or
(3) the contract value as of the most recent five year contract
anniversary, less amounts surrendered since that five year contract
anniversary.
If the annuitant dies on or after his or her 86th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to the
contract value.
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; or
(b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to become
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the contract owner instead of receiving a death benefit. Any
distributions required under these distribution rules will be made
upon that spouse's death.
In the event that the contract owner is not a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
(a) the death of the annuitant will be treated as the death of a contract
owner;
(b) any change of annuitant will be treated as the death of a contract
owner; and
(c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option over a period not longer than:
(a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
(b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's designated
beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
(a) or (b), the payments will begin on the required beginning date. The required
beginning date is the later of:
(a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70 1/2; or
(b) the annuitant's retirement date.
Provision (b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Distributions commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distribution cannot be less than the amount determined by dividing the
annuitant's interest in the Tax Sheltered Annuity 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)
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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
(2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of the
year in which the contract owner would have reached age 70 1/2; or
(b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract owner's
death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity 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 nontaxable 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.
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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-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:
o the type of contract purchased;
o the purposes for which the contract is purchased; and
o 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:
o Individual Retirement Annuities;
o SEP IRAs;
o Roth IRAs;
o Tax Sheltered Annuities; and
o "Non-Qualified Annuities."
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IRAs and SEP IRAs
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:
o made to a beneficiary on or after the death of the owner;
o attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
o 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;
o used for qualified higher education expenses; or
o used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
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:
o it is made on or after the date on which the contract owner attains
age 59 1/2;
o it is made to a beneficiary (or the contract owner's estate) on or after the
death of the contract owner; o it is attributable to the contract owner's
disability; or
o 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:
o made to a beneficiary on or after the death of the owner;
o attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
o 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;
o for qualified higher education expenses; or
o used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
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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:
o made to a beneficiary on or after the death of the owner;
o attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
o 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;
o for qualified higher education expenses;
o used for expenses attributable to the purchase of a home for a qualified
first-time buyer; or
o 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:
o the result of a contract owner's death;
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o the result of a contract owner's disability, as defined in the Internal
Revenue Code;
o 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
o 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
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:
o acquired by the estate of a decedent by reason of the death of the decedent;
o issued in connection with certain qualified retirement plans and individual
retirement plans; or
o 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:
o the distribution is made directly to another Tax Sheltered Annuity or an IRA;
or
o 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.
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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:
o a transfer of the contract from one contract owner to another; or
o a distribution to someone other than a contract owner.
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:
o 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
o 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
o the failure to diversify was accidental;
o the failure is corrected; and
o 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.
40
<PAGE> 40
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
o statements showing the contract's quarterly activity;
o confirmation statements showing transactions that affect the contract's
value. Confirmation statements will not be sent for recurring
transactions (i.e., dollar cost averaging or salary reduction programs).
Instead, confirmation of recurring transactions will appear in the
contract's quarterly statements;
o semi-annual reports as of June 30 containing financial statements for the
variable account; and
o 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
41
<PAGE> 41
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 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:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
o Donoghue's;
o 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;
o LIMRA;
o Value;
o Best's Agent Guide;
o Western Annuity Guide;
42
<PAGE> 42
o Comparative Annuity Reports;
o Wall Street Journal;
o Barron's;
o Investor's Daily;
o Standard & Poor's Outlook; and
o Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total 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 deduction of all charges that could be made to the contracts,
except for premium taxes, which may be imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $25,000 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 (reduced by the same charges except the CDSC) 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 return is not annualized. The CDSC is not reflected because
the contracts are designed for long term investment. The CDSC, if reflected,
would decrease the level of performance shown. An initial investment of $25,000
is assumed because that amount is closer to the size of a typical contract than
$1,000, which was used in calculating the standardized average annual total
return.
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.
43
<PAGE> 43
SUB-ACCOUNT PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------
10 Years or Date Date Fund
Fund Available in Available in
1 Year To 5 Years To Variable Account the Variable
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Account
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, 2.22% 12.99% 9.56% 05-01-92
Inc.- American Century VP Balanced
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 55.92% 12.39% 9.84% 12-01-87
Inc.- American Century VP Capital
Appreciation
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 10.07% N/A 11.83% 05-01-98
Inc.- American Century VP Income & Growth
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 55.45% 22.32% 19.11% 08-01-94
Inc.- American Century VP International
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, -8.38% N/A 7.32% 12-23-96
Inc.- American Century VP Value
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 12.62% 26.07% 20.62% 09-20-93
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 3.60% N/A 14.38% 07-14-97
Fund-Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund-Capital
Appreciation Portfolio)
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 8.95% N/A 12.26% 12-23-96
Fund - Growth & Income Portfolio
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 21.96% 26.65% 22.31% 10-01-93
Fund, Inc.
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio -1.46% 16.66% 12.89% 05-01-87
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 29.21% 27.72% 18.26% 12-01-87
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.34% 8.93% 10.86% 05-01-87
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 34.33% 15.43% 9.87% 05-01-87
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 3.24% 13.69% 11.57% 09-01-89
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio 16.22% N/A 22.79% 07-03-95
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities -3.49% N/A 12.45% 07-14-97
Portfolio
- -------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc.- 21.27% N/A -6.64% 07-14-97
Emerging Markets Debt Portfolio
- -------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund -3.48% 22.38% 16.03% 05-01-92
- -------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund -9.75% 5.53% 6.16% 11-15-82
- -------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund -2.92% 3.29% 3.54% 02-25-82
- -------------------------------------------------------------------------------------------------------------
NSAT Small Cap Value Fund 19.75% N/A 1.21% 10-31-97
- -------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Company Fund 35.71% N/A 21.15% 10-23-95
- -------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund -0.85% 18.82% 13.18% 11-15-82
- -------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Growth Portfolio 41.99% 24.37% 13.99% 12-01-87
- -------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 7.02% N/A -0.17% 05-01-98
- -------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Limited Maturity Bond -6.24% 3.58% 4.38% 12-01-87
Portfolio
- -------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio -0.43% 19.07% 17.59% 08-01-94
- -------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 44
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
- -------------------------------------------------------------------------------------------------------------
10 Years or Date Date Fund
Fund Available in Available in
1 Year To 5 Years To Variable Account the Variable
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Account
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer VAF - Oppenheimer Bond Fund/VA -8.99% 5.16% 6.25% 09-01-89
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- Oppenheimer Global 49.97% 19.71% 17.90% 10-01-93
Securities Fund/VA
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- Oppenheimer Capital 33.37% N/A 25.06% 07-14-97
Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- Oppenheimer Multiple 3.93% 12.46% 9.28% 09-01-89
Strategies Fund/VA
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 26.72% 21.38% 19.33% 05-08-92
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- -2.68% 9.42% 8.99% 05-08-92
Discovery Fund II, Inc.
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- 78.29% N/A 12.16% 10-23-95
International Stock II
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -14.78% 3.11% 3.96% 09-01-89
Worldwide Bond Fund
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 91.19% N/A 2.91% 12-23-96
Worldwide Emerging Markets Fund
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 13.01% -0.49% 1.61% 09-01-89
Worldwide Hard Assets Fund
- -------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust- Morgan -10.69% N/A 8.71% 07-03-95
Stanley Real Estate Securities Portfolio
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International Equity 44.99% N/A 12.86% 07-03-95
Portfolio
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Global 54.91% N/A 23.40% 12-23-96
Post-Venture Capital Portfolio
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth 60.42% N/A 22.76% 07-03-95
Portfolio
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------
10 Years or Date
Fund Available in
1 Year To 5 Years To Variable Account Date Fund
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Effective
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.- 8.52% 13.32% 9.91% 05-01-91
American Century VP Balanced
- --------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.- 62.22% 12.73% 9.84% 11-20-87
American Century VP Capital Appreciation
- --------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.- 16.37% N/A 22.96% 10-30-97
American Century VP Income & Growth
- --------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.- 61.75% 22.56% 18.39% 05-01-94
American Century VP International
- --------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.- -2.24% N/A 9.55% 05-01-96
American Century VP Value
- --------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 18.92% 26.28% 16.05% 09-29-89
- --------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- 9.90% 23.78% 18.39% 04-05-93
Appreciation Portfolio (formerly, Dreyfus
Variable Investment Fund-Capital
Appreciation Portfolio)
- --------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 15.25% 22.59% 19.24% 05-02-94
Fund - Growth & Income Portfolio
- --------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 28.26% 26.86% 22.36% 10-06-93
Fund, Inc.
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 4.84% 16.95% 12.89% 10-09-86
- --------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 45
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
10 Years or Date
Fund Available in
1 Year To 5 Years To Variable Account Date Fund
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Effective
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Growth Portfolio 35.51% 27.92% 18.26% 10-09-86
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 6.64% 9.31% 10.86% 09-19-85
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 40.63% 15.73% 9.87% 01-28-87
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 9.54% 14.01% 11.57% 09-06-89
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio 22.52% N/A 25.97% 01-03-95
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 2.81% N/A 19.83% 01-03-95
Portfolio
- --------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc.- 27.57% N/A -4.02% 06-16-97
Emerging Markets Debt Portfolio
- --------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund 2.82% 22.62% 15.64% 04-15-92
- --------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund -3.71% 5.96% 6.16% 11-08-82
- --------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 3.38% 3.76% 3.54% 11-10-81
- --------------------------------------------------------------------------------------------------------------
NSAT Small Cap Value Fund 26.05% N/A 8.05% 10-31-97
- --------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Company Fund 42.01% N/A 21.50% 10-23-95
- --------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 5.45% 19.09% 13.18% 11-08-82
- --------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Growth Portfolio 48.29% 24.60% 13.99% 09-10-84
- --------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 13.32% N/A 22.32% 11-03-97
- --------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Limited Maturity Bond 0.06% 4.05% 4.38% 09-10-84
Portfolio
- --------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 5.87% 19.33% 15.84% 03-22-94
- --------------------------------------------------------------------------------------------------------------
Oppenheimer VAF - Oppenheimer Bond Fund/VA -2.90% 5.60% 6.25% 04-30-85
- --------------------------------------------------------------------------------------------------------------
Oppenheimer VAF - Oppenheimer Global 56.27% 19.97% 15.16% 11-12-90
Securities Fund/VA
- --------------------------------------------------------------------------------------------------------------
Oppenheimer VAF - Oppenheimer Capital 39.67% 28.84% 16.81% 04-03-85
Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
- --------------------------------------------------------------------------------------------------------------
Oppenheimer VAF - Oppenheimer Multiple 10.23% 12.79% 9.28% 02-09-87
Strategies Fund/VA
- --------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 33.02% 21.63% 19.33% 05-08-92
- --------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- 3.62% 9.79% 8.99% 05-08-92
Discovery Fund II, Inc.
- --------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- 84.59% N/A 12.60% 10-20-95
International Stock II
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -9.11% 3.59% 3.96% 12-21-95
Worldwide Bond Fund
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 97.49% N/A 8.40% 10-27-95
Worldwide Emerging Markets Fund
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 19.31% 0.06% 1.61% 09-01-89
Worldwide Hard Assets Fund
- --------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust- Morgan -4.73% N/A 9.15% 07-03-95
Stanley Real Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International Equity 51.29% N/A 13.23% 06-30-95
Portfolio
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Global 61.21% N/A 20.64% 09-30-96
Post-Venture Capital Portfolio
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth 66.72% N/A 23.00% 06-30-95
Portfolio
- --------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 46
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History...........................................1
Services..................................................................1
Purchase of Securities Being Offered......................................2
Underwriters..............................................................2
Calculations of Performance...............................................2
Annuity Payments..........................................................3
Financial Statements......................................................4
47
<PAGE> 47
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There can be no assurance that the investment objectives will be achieved.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., 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 BALANCED
Investment Objective: Capital growth and current income. The Fund will seek
to achieve its objective by maintaining approximately 60% of the assets of
the Fund in common stocks (including securities convertible into common
stocks and other equity equivalents) that are considered by management to
have better-than-average prospects for appreciation and approximately 40% in
fixed income securities. A minimum of 25% of the fixed income portion of the
Fund will be invested in fixed income senior securities. There can be no
assurance that the Fund will achieve its investment objective.
-AMERICAN CENTURY VP CAPITAL APPRECIATION (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR
AFTER SEPTEMBER 27, 1999)
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion of
the Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it is
unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least three
years continuous operation. There can be no assurance that the Fund will
achieve its investment objective.
-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.
48
<PAGE> 48
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 INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans. Individuals may not purchase shares
directly from the Fund. The Dreyfus Corporation serves as the Fund's investment
adviser.
-EUROPEAN EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth. To
pursue this goal, the Portfolio generally invests at least 80% of its total
assets in stocks included within the universe of the 300 largest European
companies. The Portfolio may invest up to 10% of its total assets in the
stocks of non- European companies. The Portfolio's stock investments may
include common stocks, preferred stocks and convertible securities.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
Capital Appreciation Portfolio's subadviser and provides day-to-day management
of this Portfolio.
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<PAGE> 49
-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.
-GROWTH & INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current income and
growth of income, consistent with reasonable investment risk. The Portfolio
invests in equity securities, debt securities and money market instruments of
domestic and foreign issuers. The proportion of the Portfolio's assets
invested in each type of security will vary from time to time in accordance
with Dreyfus' assessment of economic conditions and investment opportunities.
In purchasing equity securities, Dreyfus will invest in common stocks,
preferred stocks and securities convertible into common stocks, particularly
those which offer opportunities for capital appreciation and growth of
earnings, while paying current dividends. The Portfolio will generally invest
in investment-grade debt obligations, except that it may invest up to 35% of
the value of its net assets in convertible debt securities rated not lower
than Caa by Moody's Investor Service, Inc. or CCC by Standard & Poor's
Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps Credit Rating
Co., or if unrated, deemed to be of comparable quality by Dreyfus. These
securities are considered to have predominantly speculative characteristics
with respect to capacity to pay interest and repay principal and are
considered to be of poor standing. See "Investment Considerations and
Risks-Lower Rated Securities" in the Portfolio's prospectuses.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of life
in America. Current income is secondary to the primary goal.
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 it's
portfolios.
-VIP EQUITY-INCOME PORTFOLIO
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal is
to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
-VIP GROWTH PORTFOLIO
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
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<PAGE> 50
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 most sense for you if you can afford to ride out changes in
the stock market, because it invests primarily in common stocks. FMR can also
make temporary investments in securities such as investment-grade bonds,
high-quality preferred stocks and short-term notes, for defensive purposes
when it believes market conditions warrant.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily in
high-risk, lower-rated, high-yielding, fixed-income securities, while also
considering growth of capital. FMR will seek high current income normally by
investing the Portfolio's assets as follows:
-at least 65% in income-producing debt securities and preferred stocks,
including convertible securities; and
-up to 20% in common stocks and other equity securities when consistent with
the Portfolio's primary objective or acquired as part of a unit combining
fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Services, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
also purchase lower-quality bonds such as those rated Ca3 by Moody's or C- by
Standard & Poor's which provide poor protection for payment of principal and
interest (commonly referred to as "junk bonds"). For a further discussion of
lower-rated securities, please see the "Risks of Lower-Rated Debt Securities"
section of the Portfolio's prospectus.
-VIP OVERSEAS PORTFOLIO
Investment Objective: Long-term capital growth primarily through investments
in foreign securities. This Portfolio provides a means for investors to
diversify their own portfolios by participating in companies and economies
outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds
and short-term fixed income instruments.
-VIP II CONTRAFUND(R) PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily in
companies that the 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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
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<PAGE> 51
-VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common stocks
and securities convertible into common stocks. The Portfolio, under normal
conditions, will invest at least 65% of its total assets in securities of
companies that FMR believes have long-term growth potential. Although the
Portfolio invests primarily in common stock and securities convertible into
common stock, it has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth. The Portfolio may
invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
-CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in common stocks selected for their growth potential. The
Portfolio may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.
-GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies selected for
their growth potential. Under normal circumstances, the portfolio invests
at least 65% of its total assets in securities of companies that the
portfolio manager believes will benefit significantly from advances or
improvements in technology.
-INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing at
least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio
intends to invest substantially all of its assets in issuers located
outside the United States, it may invest in U.S. issuers and it may at
times invest all of its assets in fewer than five countries, or even a
single country.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
The Universal Institutional Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
-EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar and
non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic, financial,
political, social or other conditions in the country in which the issuer is
located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Villanova Mutual
Fund Capital Trust ("VMF"), an indirect subsidiary of Nationwide Financial
Services, Inc.
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<PAGE> 52
-CAPITAL APPRECIATION FUND
Investment Objective: The Capital Appreciation Fund seeks long-term capital
appreciation.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of securities
issued or backed by the U.S. Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: The Fund seeks as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity.
-NATIONWIDE MID CAP INDEX FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match the
performance of the Standard & Poor's MidCap 400 Index. To pursue this goal,
the Fund generally is fully invested in all 400 stocks included in this index
in proportion to their weighting in the index, and in futures whose
performance is tied to the index. The Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation.
-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 CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies represented
by the Russell 2000, known has small cap companies. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the
equity securities of small cap companies. The balance of the Fund's assets
may be invested in equity securities of larger cap companies.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median market
capitalization of approximately $1 billion. The Fund intends to pursue its
investment objective by investing, under normal market conditions, at least
75% of the Fund's total assets in equity securities of companies whose equity
market capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index. The Fund
will invest in equity securities of domestic and foreign issuers
characterized as "value" companies according to criteria established by The
Dreyfus Corporation, the Fund's subadviser.
-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%
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<PAGE> 53
of its total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
-NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser extent,
in companies in which significant further growth is not anticipated but whose
market value is thought to be undervalued. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities,
including common stocks, preferred stocks, and securities convertible into
common or preferred stocks, such as warrants and convertible bonds. The Fund
may invest up to 35% of its total assets in debt obligations, including
intermediate to long-term corporate or U.S. Government debt securities.
-TOTAL RETURN FUND
Investment Objective: The investment objective of the Fund is to obtain a
reasonable, long-term total return on invested capital.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("Neuberger Berman AMT") is an
open-end, diversified management investment company consisting of several
series. Shares of the series of Neuberger Berman AMT are offered in connection
with certain variable annuity contracts and variable life insurance policies
issued through life insurance company separate accounts and are also offered
directly to qualified pension and retirement plans outside of the separate
account context.
The Guardian and Partners Portfolios of Neuberger Berman AMT invest all of their
investable assets in a corresponding series of Advisers Managers Trust managed
by Neuberger Berman Management Incorporated ("Neuberger Berman 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 for all the
portfolios is Neuberger Berman Management.
-AMT GROWTH PORTFOLIO
Investment Objective: Seeks capital growth through investments in common
stocks of companies that the investment adviser believes will have above
average earnings or otherwise provide investors with above average potential
for capital appreciation. To maximize this potential, the investment adviser
may also utilize, from time to time, securities convertible into common
stocks, warrants and options to purchase such stocks.
-AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
Neuberger Berman Management uses a value-oriented investment approach in
selecting securities, looking for low price-to-earnings ratios, strong
balance sheets, solid management, and consistent earnings.
-AMT LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide high level of current income, consistent
with low risk to principal and liquidity. As a secondary objective, it also
seeks to enhance its total return through capital appreciation when market
factors, such as falling interest rates and rising bond prices, indicate that
capital appreciation may be available without
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<PAGE> 54
significant risk to principal. It seeks to achieve its objectives through
investments in a diversified portfolio of limited maturity debt securities.
-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 only to provide benefits under variable life insurance
policies and variable annuity contracts. OppenheimerFunds, Inc. is investment
adviser.
-OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable long-term
prospects for increasing demand for their goods or services, or to be
developing new products, services or markets and normally retain a relatively
larger portion of their earnings for research, development and investment in
capital assets. The Fund may also invest in cyclical industries in "special
situations" that OppenheimerFunds, Inc. believes present opportunities for
capital growth.
-OPPENHEIMER BOND FUND/VA
Investment Objective: Primarily seeks a high level of current income by
investing at least 65% of its total assets in investment grade debt
securities, U.S. government securities and money market instruments.
Investment grade debt securities would include those rated in one of the four
highest ranking categories by any nationally recognized rating organization
or if unrated or split-rated (rated investment grade and below investment
grade by different rating organizations), determined by OppenheimerFunds,
Inc. to be of comparable quality. The Fund may invest up to 35% of its total
assets in debt securities rated less than investment grade when consistent
with the Fund's investment objectives. The Fund seeks capital growth as a
secondary objective when consistent with its primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND/VA
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers, "growth-type"
companies, cyclical industries and special situations which are considered to
have appreciation possibilities. Current income is not an objective. These
securities may be considered to be speculative.
-OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY OPPENHEIMER GROWTH FUND)
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (companies which
have an operating history of at least five years including predecessors).
Current income is a secondary consideration in the selection of the Fund's
portfolio securities.
-OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities and
U.S. debt obligations, and cash and cash equivalents. From time to time, the
Fund may focus on small to medium capitalization issuers, the securities of
which
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<PAGE> 55
may be subject to greater price volatility than those of larger capitalized
issuers.
-OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. Strong Opportunity Fund II, Inc. was incorporated
in Wisconsin and may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts and variable
life insurance policies. Strong Capital Management Inc. is the investment
advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC. (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999)
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management
investment company commonly referred to as a mutual fund. Incorporated in the
State of Wisconsin, the Corporation has been authorized to issue shares of
common stock and series and classes of series of common stock. The International
Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by
the Corporation to insurance company separate accounts for the purpose of
funding variable life insurance policies and variable annuity contracts. Strong
Capital Management, Inc. is the investment advisor to the Funds.
-DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of its
total assets in equity securities including common stocks, preferred stocks
and securities convertible into common or preferred stocks. Although the Fund
normally emphasizes investment in equity securities, the Fund has the
flexibility to invest in any type of security that the Advisor believes has
the potential for capital appreciation including up to 100% of its total
assets in debt obligations, including intermediate to long-term corporate or
U.S. government debt securities.
-INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in the
equity securities of issuers located outside the United States.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck Trust") is an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Shares of Van Eck Trust are
offered only to separate accounts of various insurance companies to fund the
benefits of life insurance policies and variable annuity contracts. The
investment advisor and manager is Van Eck Associates Corporation.
-WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy of
investing globally, primarily in debt securities.
-WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The Fund
specifically emphasizes investment in countries that, compared to the world's
major economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Description: Seeks long-term capital appreciation by investing,
primarily in "Hard Assets Securities." For the Fund's
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purpose, "Hard Assets" are real estate, energy, timber, and industrial and
precious metals. Income is a secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen American Capital Asset Management, Inc. serves as the Portfolio's
investment adviser.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in a
diversified portfolio of securities of companies operating in the real estate
industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of its
assets (marked to market), gross income or net profits from the ownership,
construction, management or sale of residential, commercial or industrial
real estate. Under normal market conditions, at least 65% of the Portfolio's
total assets will be invested in Real Estate Securities, primarily equity
securities of real estate investment trusts. The Portfolio may invest up to
25% of its total assets in securities issued by foreign issuers, some or all
of which may also be Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The 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.
-GLOBAL POST-VENTURE CAPITAL PORTFOLIO (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR
AFTER SEPTEMBER 27, 1999)
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies considered to be
in their post-venture capital stage of development. The Portfolio will
invest in at least three countries, including the United States.
-SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: Capital growth by investing in a portfolio of equity
securities of small-sized domestic companies. The Portfolio ordinarily will
invest at least 65% of its total assets in common stocks or warrants of
small-sized companies (i.e., companies having stock market capitalizations of
between $25 million and $1 billion at the time of purchase) that represent
attractive opportunities for capital growth. The Portfolio intends to invest
primarily in companies whose securities are traded on domestic stock
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exchanges or in the over-the-counter market. The Portfolio's investments will
be made on the basis of their equity characteristics and securities ratings
generally will not be a factor in the selection process.
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APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century Variable 17.180551 18.643877 8.52% 2,229,877 1999
Portfolios, Inc. - -----------------------------------------------------------------------------------
American Century 15.050621 17.180551 14.15% 3,311,879 1998
VP Balanced-Q -----------------------------------------------------------------------------------
13.180739 15.050621 14.19% 2,000,046 1997
-----------------------------------------------------------------------------------
11.914266 13.180739 10.63% 1,516,835 1996
-----------------------------------------------------------------------------------
9.975959 11.914266 19.43% 602,257 1995
-----------------------------------------------------------------------------------
10.055760 9.975959 -0.79% 190,646 1994
-----------------------------------------------------------------------------------
10.000000 10.055760 0.56% 0 1993
- -------------------------------------------------------------------------------------------------------------------
American Century 17.180551 18.643877 8.52% 3,104,126 1999
Variable Portfolios, -----------------------------------------------------------------------------------
Inc.-American Century 15.050621 17.180551 14.15% 2,684,128 1998
VP Balanced-NQ -----------------------------------------------------------------------------------
13.180739 15.050621 14.19% 2,838,431 1997
-----------------------------------------------------------------------------------
11.914266 13.180739 10.63% 2,144,874 1996
-----------------------------------------------------------------------------------
9.975959 11.914266 19.43% 989,420 1995
-----------------------------------------------------------------------------------
10.055760 9.975959 -0.79% 353,974 1994
-----------------------------------------------------------------------------------
10.000000 10.055760 0.56% 0 1993
- -------------------------------------------------------------------------------------------------------------------
American Century 11.105046 18.015046 62.22 2,124,515 1999
Variable Portfolios, -----------------------------------------------------------------------------------
Inc.- American Century 11.511011 11.105046 -3.53% 5,691,252 1998
VP Capital -----------------------------------------------------------------------------------
Appreciation-Q 12.067726 11.511011 -4.61% 2,614,244 1997
-----------------------------------------------------------------------------------
12.792935 12.067726 -5.67% 2,639,035 1996
-----------------------------------------------------------------------------------
9.896469 12.792935 29.27% 1,787,046 1995
-----------------------------------------------------------------------------------
10.155359 9.896469 -2.55% 581,271 1994
-----------------------------------------------------------------------------------
10.000000 10.155359 1.55% 0 1993
- -------------------------------------------------------------------------------------------------------------------
American Century 11.105046 18.015046 62.22 3,403,398 1999
Variable Portfolios, -----------------------------------------------------------------------------------
Inc.- American Century 11.511011 11.105046 -3.53% 3,199,790 1998
VP Capital Appreciation - NQ -----------------------------------------------------------------------------------
12.067726 11.511011 -4.61% 3,809,872 1997
-----------------------------------------------------------------------------------
12.792935 12.067726 -5.67% 4,282,747 1996
-----------------------------------------------------------------------------------
9.896469 12.792935 29.27% 2,955,898 1995
-----------------------------------------------------------------------------------
10.155359 9.896469 -2.55% 984,162 1994
-----------------------------------------------------------------------------------
10.000000 10.155359 1.55% 0 1993
- -------------------------------------------------------------------------------------------------------------------
American Century Variable 10.818483 12.589315 16.37% 1,671,694 1999
Portfolios, Inc. - American -----------------------------------------------------------------------------------
Century VP Income & Growth 10.000000 10.818483 8.18% 851,923 1998(2)
Fund - Q -----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
American Century Variable 10.818483 12.589315 16.37% 1,490,691 1999
Portfolios, Inc. - American -----------------------------------------------------------------------------------
Century VP Income & Growth 10.000000 10.818483 8.18% 1,195,005 1998(2)
Fund - NQ -----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
American Century 16.049229 25.959887 61.75% 3,535,992 1999
Variable Portfolios, -----------------------------------------------------------------------------------
Inc.- American Century 13.705793 16.049229 17.10% 4,804,748 1998
VP International-Q -----------------------------------------------------------------------------------
11.716901 13.705793 16.97% 2,815,042 1997
-----------------------------------------------------------------------------------
10.387676 11.716901 12.80% 1,434,727 1996
-----------------------------------------------------------------------------------
9.388381 10.387676 10.64% 647,594 1995
-----------------------------------------------------------------------------------
10.000000 9.388381 -6.12% 93,487 1994
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 59
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century 16.049229 25.959887 61.75% 5,086,548 1999
Variable Portfolios, -----------------------------------------------------------------------------------
Inc.- American Century 13.705793 16.049229 17.10% 3,904,415 1998
VP International-NQ -----------------------------------------------------------------------------------
11.716901 13.705793 16.97% 4,053,845 1997
-----------------------------------------------------------------------------------
10.387676 11.716901 12.80% 2,170,866 1996
-----------------------------------------------------------------------------------
9.388381 10.387676 10.64% 1,011,780 1995
-----------------------------------------------------------------------------------
10.000000 9.388381 -6.12% 227,593 1994
- -------------------------------------------------------------------------------------------------------------------
American Century 13.030493 12.738880 -2.24% 1,129,610 1999
Variable Portfolio, -----------------------------------------------------------------------------------
Inc.- American Century 12.608786 13.030493 3.34% 1,289,505 1998
VP Value-Q -----------------------------------------------------------------------------------
10.142340 12.608786 24.32% 1,430,623 1997
-----------------------------------------------------------------------------------
10.000000 10.142340 1.42% 4,681 1996(1)
- -------------------------------------------------------------------------------------------------------------------
American Century 13.030493 12.738880 -2.24% 1,432,698 1999
Variable Portfolio, Inc. - -----------------------------------------------------------------------------------
American Century VP 12.608786 13.030493 3.34% 1,042,979 1998
Value-NQ -----------------------------------------------------------------------------------
10.142340 12.608786 24.32% 1,650,353 1997
-----------------------------------------------------------------------------------
10.000000 10.142340 1.42% 10,752 1996(1)
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 27.128900 32.260809 18.92% 14,668,287 1999
Fund, Inc.-Q -----------------------------------------------------------------------------------
21.459607 27.128900 26.42% 16,760,500 1998
-----------------------------------------------------------------------------------
16.369120 21.459607 31.10% 11,980,808 1997
-----------------------------------------------------------------------------------
13.549203 16.369120 20.81% 5,666,553 1996
-----------------------------------------------------------------------------------
10.046079 13.549203 34.87% 1,651,153 1995
-----------------------------------------------------------------------------------
10.099271 10.046079 -0.53% 142,221 1994
-----------------------------------------------------------------------------------
10.000000 10.099271 0.99% 0 1993
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 27.128900 32.260809 18.92% 20,456,947 1999
Fund, Inc.-NQ -----------------------------------------------------------------------------------
21.459607 27.128900 26.42% 11,496,653 1998
-----------------------------------------------------------------------------------
16.369120 21.459607 31.10% 16,840,871 1997
-----------------------------------------------------------------------------------
13.549203 16.369120 20.81% 8,243,399 1996
-----------------------------------------------------------------------------------
10.046079 13.549203 34.87% 2,487,342 1995
-----------------------------------------------------------------------------------
10.099271 10.046079 -0.53% 276,005 1994
-----------------------------------------------------------------------------------
10.000000 10.099271 0.99% 0 1993
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 13.079978 14.374409 9.90% 2,795,489 1999
Fund - Appreciation -----------------------------------------------------------------------------------
Portfolio-Q(1) 10.187254 13.079978 28.40% 3,218,773 1998
-----------------------------------------------------------------------------------
10.000000 10.187254 1.87% 282,102 1997(1)
-----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 13.079978 14.374409 9.90% 4,202,770 1999
Fund - Appreciation -----------------------------------------------------------------------------------
Portfolio-NQ(1) 10.187254 13.079978 28.40% 3,158,512 1998
-----------------------------------------------------------------------------------
10.000000 10.187254 1.87% 346,889 1997(1)
-----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 12.616052 14.539855 15.25% 1,464,304 1999
Investment Fund- -----------------------------------------------------------------------------------
Growth & Income 11.443262 12.616052 10.25% 1,530,286 1998
Portfolio-Q -----------------------------------------------------------------------------------
9.986704 11.443262 14.58% 1,288,755 1997
-----------------------------------------------------------------------------------
10.000000 9.986704 -0.13% 1,683 1996(1)
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 12.616052 14.539855 15.25% 2,079,004 1999
Investment Fund- -----------------------------------------------------------------------------------
Growth & Income 11.443262 12.616052 10.25% 1,010,647 1998
Portfolio-NQ -----------------------------------------------------------------------------------
9.986704 11.443262 14.58% 1,736,408 1997
-----------------------------------------------------------------------------------
10.000000 9.986704 -0.13% 1,403 1996(1)
- -------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 25.996040 33.342555 28.26% 2,307,767 1999
Responsible Growth -----------------------------------------------------------------------------------
Fund, Inc.-Q 20.377644 25.996040 27.57% 3,208,339 1998
-----------------------------------------------------------------------------------
16.091197 20.377644 26.64% 1,955,501 1997
-----------------------------------------------------------------------------------
13.462638 16.091197 19.52% 863,844 1996
-----------------------------------------------------------------------------------
10.146464 13.462638 32.68% 195,462 1995
-----------------------------------------------------------------------------------
10.138790 10.146464 0.08% 56,245 1994
-----------------------------------------------------------------------------------
10.000000 10.138790 1.39% 0 1993
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
60
<PAGE> 60
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Dreyfus Socially 25.996040 33.342555 28.26% 3,065,919 1999
Responsible Growth ------------------------------------------------------------------------------------
Fund, Inc.-NQ 20.377644 25.996040 27.57% 1,734,954 1998
------------------------------------------------------------------------------------
16.091197 20.377644 26.64% 2,524,371 1997
------------------------------------------------------------------------------------
13.462638 16.091197 19.52% 1,278,742 1996
------------------------------------------------------------------------------------
10.146464 13.462638 32.68% 331,788 1995
------------------------------------------------------------------------------------
10.138790 10.146464 0.08% 106,285 1994
------------------------------------------------------------------------------------
10.000000 10.138790 1.39% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity- 22.453988 23.541057 4.84% 18,744,521 1999
Income Portfolio-Q ------------------------------------------------------------------------------------
20.400657 22.453988 10.07% 23,119,147 1998
------------------------------------------------------------------------------------
16.150507 20.400657 26.32% 21,713,028 1997
------------------------------------------------------------------------------------
14.333670 16.150507 12.68% 16,618,114 1996
------------------------------------------------------------------------------------
10.760332 14.333670 33.21% 8,772,439 1995
------------------------------------------------------------------------------------
10.192462 10.760332 5.57% 2,320,419 1994
------------------------------------------------------------------------------------
10.000000 10.192462 1.92% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity- 22.453988 23.541057 4.84% 26,435,673 1999
Income Portfolio-NQ ------------------------------------------------------------------------------------
20.400657 22.453988 10.07% 17,190,931 1998
------------------------------------------------------------------------------------
16.150507 20.400657 26.32% 29,805,895 1997
------------------------------------------------------------------------------------
14.333670 16.150507 12.68% 22,169,855 1996
------------------------------------------------------------------------------------
10.760332 14.333670 33.21% 12,709,387 1995
------------------------------------------------------------------------------------
10.192462 10.760332 5.57% 3,315,450 1994
------------------------------------------------------------------------------------
10.000000 10.192462 1.92% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 25.487577 34.539423 35.51% 16,102,523 1999
Portfolio-Q ------------------------------------------------------------------------------------
18.531166 25.487577 37.54% 17,532,628 1998
------------------------------------------------------------------------------------
15.220265 18.531166 21.75% 13,935,642 1997
------------------------------------------------------------------------------------
13.458405 15.220265 13.09% 12,013,122 1996
------------------------------------------------------------------------------------
10.082986 13.458405 33.48% 6,525,239 1995
------------------------------------------------------------------------------------
10.227729 10.082986 -1.42% 2,012,595 1994
------------------------------------------------------------------------------------
10.000000 10.227729 2.28% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 25.487577 34.539423 35.51% 22,795,122 1999
Portfolio-NQ ------------------------------------------------------------------------------------
18.531166 25.487577 37.54% 11,328,287 1998
------------------------------------------------------------------------------------
15.220265 18.531166 21.75% 19,539,694 1997
------------------------------------------------------------------------------------
13.458405 15.220265 13.09% 17,297,852 1996
------------------------------------------------------------------------------------
10.082986 13.458405 33.48% 10,395,158 1995
------------------------------------------------------------------------------------
10.227729 10.082986 -1.42% 3,322,957 1994
------------------------------------------------------------------------------------
10.000000 10.227729 2.28% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP High 14.405141 15.361833 6.64% 8,271,114 1999
Income Portfolio-Q ------------------------------------------------------------------------------------
15.270686 14.405141 -5.67% 6,464,105 1998
------------------------------------------------------------------------------------
13.162137 15.270686 16.02% 10,404,298 1997
------------------------------------------------------------------------------------
11.707151 13.162137 12.43% 8,108,419 1996
------------------------------------------------------------------------------------
9.844496 11.707151 18.92% 4,074,649 1995
------------------------------------------------------------------------------------
10.140663 9.844496 -2.92% 1,188,719 1994
------------------------------------------------------------------------------------
10.000000 10.140663 1.41% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP High 14.405141 15.361833 6.64% 13,454,975 1999
Income Portfolio-NQ ------------------------------------------------------------------------------------
15.270686 14.405141 -5.67% 6,457,997 1998
------------------------------------------------------------------------------------
13.162137 15.270686 16.02% 15,763,691 1997
------------------------------------------------------------------------------------
11.707151 13.162137 12.43% 11,738,433 1996
------------------------------------------------------------------------------------
9.844496 11.707151 18.92% 5,647,831 1995
------------------------------------------------------------------------------------
10.140663 9.844496 -2.92% 1,667,761 1994
------------------------------------------------------------------------------------
10.000000 10.140663 1.41% 0 1993
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE> 61
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 15.553060 21.872670 40.63% 3,667,413 1999
Portfolio-Q ------------------------------------------------------------------------------------
13.990014 15.553060 11.17% 11,283,013 1998
------------------------------------------------------------------------------------
12.718928 13.990014 9.99% 4,225,490 1997
------------------------------------------------------------------------------------
11.394419 12.718928 11.62% 3,807,002 1996
------------------------------------------------------------------------------------
10.536141 11.394419 8.15% 3,053,190 1995
------------------------------------------------------------------------------------
10.504149 10.536141 0.30% 1,746,850 1994
------------------------------------------------------------------------------------
10.000000 10.504149 5.04% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 15.553060 21.872670 40.63% 5,639,452 1999
Portfolio-NQ ------------------------------------------------------------------------------------
13.990014 15.553060 11.17% 9,318,467 1998
------------------------------------------------------------------------------------
12.718928 13.990014 9.99% 6,516,303 1997
------------------------------------------------------------------------------------
11.394419 12.718928 11.62% 5,707,057 1996
------------------------------------------------------------------------------------
10.536141 11.394419 8.15% 4,289,622 1995
------------------------------------------------------------------------------------
10.504149 10.536141 0.30% 2,782,899 1994
------------------------------------------------------------------------------------
10.000000 10.504149 5.04% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 16.832250 18.437523 9.54% 7,152,076 1999
Manager Portfolio-Q ------------------------------------------------------------------------------------
14.837912 16.832250 13.44% 18,785,187 1998
------------------------------------------------------------------------------------
12.472730 14.837912 18.96% 8,255,827 1997
------------------------------------------------------------------------------------
11.038610 12.472730 12.99% 6,899,163 1996
------------------------------------------------------------------------------------
9.571852 11.038610 15.32% 5,437,140 1995
------------------------------------------------------------------------------------
10.337032 9.571852 -7.40% 3,610,795 1994
------------------------------------------------------------------------------------
10.000000 10.337032 3.37% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 16.832250 18.437523 9.54% 9,494,041 1999
Portfolio-NQ ------------------------------------------------------------------------------------
14.837912 16.832250 13.44% 10,977,395 1998
------------------------------------------------------------------------------------
12.472730 14.837912 18.96% 10,687,021 1997
------------------------------------------------------------------------------------
11.038610 12.472730 12.99% 9,363,900 1996
------------------------------------------------------------------------------------
9.571852 11.038610 15.32% 7,152,807 1995
------------------------------------------------------------------------------------
10.337032 9.571852 -7.40% 5,121,023 1994
------------------------------------------------------------------------------------
10.000000 10.337032 3.37% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) 20.762500 25.437333 22.52% 13,246,393 1999
Portfolio-Q ------------------------------------------------------------------------------------
16.200355 20.762500 28.16% 15,609,123 1998
------------------------------------------------------------------------------------
13.235075 16.200355 22.40% 12,933,714 1997
------------------------------------------------------------------------------------
11.065996 13.235075 19.60% 8,168,270 1996
------------------------------------------------------------------------------------
10.000000 11.065996 10.66% 1,651,204 1995
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) 20.762500 25.437333 22.52% 18,358,303 1999
Portfolio-NQ ------------------------------------------------------------------------------------
16.200355 20.762500 28.16% 11,340,649 1998
------------------------------------------------------------------------------------
13.235075 16.200355 22.40% 17,222,256 1997
------------------------------------------------------------------------------------
11.065996 13.235075 19.60% 11,178,148 1996
------------------------------------------------------------------------------------
10.000000 11.065996 10.66% 2,730,876 1995
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 13.426082 13.803637 2.81% 3,074,953 1999
Opportunities Portfolio-Q ------------------------------------------------------------------------------------
10.926972 13.426082 22.87% 2,942,745 1998
------------------------------------------------------------------------------------
10.000000 10.926972 9.27% 1,110,975 1997(1)
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 13.426082 13.803637 2.81% 4,552,923 1999
Opportunities Portfolio-NQ ------------------------------------------------------------------------------------
10.926972 13.426082 22.87% 2,183,868 1998
------------------------------------------------------------------------------------
10.000000 10.926972 9.27% 1,433,477 1997(1)
- --------------------------------------------------------------------------------------------------------------------
The Universal Institutional 6.924574 8.833418 27.57% 153,956 1999
Funds, Inc.- Emerging ------------------------------------------------------------------------------------
Debt Portfolio-Q 9.805852 6.924574 -29.38% 417,556 1998
------------------------------------------------------------------------------------
10.000000 9.805852 -1.94% 116,227 1997(1)
- --------------------------------------------------------------------------------------------------------------------
The Universal Institutional 6.924574 8.833418 27.57% 387,856 1999
Funds, Inc.- Emerging Markets ------------------------------------------------------------------------------------
Debt Portfolio-NQ 9.805858 6.924574 -29.38% 283,779 1998
------------------------------------------------------------------------------------
10.000000 9.805852 -1.94% 317,019 1997(1)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE> 62
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT- 27.075632 27.838556 2.82% 3,732,455 1999
Capital Appreciation ------------------------------------------------------------------------------------
Fund-Q 21.128614 27.075632 28.15% 6,725,123 1998
------------------------------------------------------------------------------------
15.932775 21.128614 32.61% 3,473,388 1997
------------------------------------------------------------------------------------
12.811228 15.932775 24.37% 1,424,586 1996
------------------------------------------------------------------------------------
10.044095 12.811228 27.55% 217,088 1995
------------------------------------------------------------------------------------
10.278752 10.044095 -2.28% 147,498 1994
------------------------------------------------------------------------------------
10.000000 10.278752 2.79% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- 27.075632 27.838556 2.82% 4,968,186 1999
Capital Appreciation ------------------------------------------------------------------------------------
Fund-NQ 21.128614 27.075632 28.15% 5,812,770 1998
------------------------------------------------------------------------------------
15.932775 21.128614 32.61% 4,537,489 1997
------------------------------------------------------------------------------------
12.811228 15.932775 24.37% 1,750,256 1996
------------------------------------------------------------------------------------
10.044095 12.811228 27.55% 324,265 1995
------------------------------------------------------------------------------------
10.278752 10.044095 -2.28% 182,857 1994
------------------------------------------------------------------------------------
10.000000 10.278752 2.79% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- Government 13.264325 12.771605 -3.71% 4,980,532 1999
Bond Fund-Q ------------------------------------------------------------------------------------
12.352251 13.264325 7.38% 4,202,514 1998
------------------------------------------------------------------------------------
11.423331 12.352251 8.13% 3,380,799 1997
------------------------------------------------------------------------------------
11.196001 11.423331 2.03% 2,626,441 1996
------------------------------------------------------------------------------------
9.562079 11.196001 17.09% 1,375,356 1995
------------------------------------------------------------------------------------
10.021251 9.562079 -4.58% 592,092 1994
------------------------------------------------------------------------------------
10.000000 10.021251 0.21% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- Government 13.264325 12.771605 -3.71% 6,771,077 1999
Bond Fund-NQ ------------------------------------------------------------------------------------
12.352251 13.264325 7.38% 3,353,428 1998
------------------------------------------------------------------------------------
11.423331 12.352251 8.13% 3,808,969 1997
------------------------------------------------------------------------------------
11.196001 11.423331 2.03% 3,145,104 1996
------------------------------------------------------------------------------------
9.562079 11.196001 17.09% 1,845,640 1995
------------------------------------------------------------------------------------
10.021251 9.562079 -4.58% 794,271 1994
------------------------------------------------------------------------------------
10.000000 10.021251 0.21% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- Money Market 11.927856 12.331041 3.38% 19,142,838 1999
Fund-Q* ------------------------------------------------------------------------------------
11.491365 11.927856 3.80% 10,938,889 1998
------------------------------------------------------------------------------------
11.072205 11.491365 3.79% 11,607,724 1997
------------------------------------------------------------------------------------
10.683538 11.072205 3.64% 12,748,020 1996
------------------------------------------------------------------------------------
10.254838 10.683538 4.18% 7,418,948 1995
------------------------------------------------------------------------------------
10.011385 10.254838 2.43% 3,886,019 1994
------------------------------------------------------------------------------------
10.000000 10.011385 0.11% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- Money Market 11.927856 12.331041 3.38% 28,039,121 1999
Fund-NQ* ------------------------------------------------------------------------------------
11.491365 11.927856 3.80% 12,513,821 1998
------------------------------------------------------------------------------------
11.072205 11.491365 3.79% 17,151,671 1997
------------------------------------------------------------------------------------
10.683538 11.072205 3.64% 18,836,301 1996
------------------------------------------------------------------------------------
10.254838 10.683538 4.18% 11,573,455 1995
------------------------------------------------------------------------------------
10.011385 10.254838 2.43% 7,565,949 1994
------------------------------------------------------------------------------------
10.000000 10.011385 0.11% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap 8.523007 10.743114 26.05% 967,163 1999
Value Fund - Q ------------------------------------------------------------------------------------
10.000000 8.523007 -14.77% 405,997 1998(2)
- --------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap 8.523007 10.743114 26.05% 1,274,231 1999
Value Fund - NQ ------------------------------------------------------------------------------------
10.000000 8.523007 -14.77% 600,393 1998(2)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 63
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT- Nationwide Small 15.920417 22.607920 42.01% 3,356,307 1999
Company Fund-Q ------------------------------------------------------------------------------------
15.985143 15.920417 -0.40% 4,961,782 1998
------------------------------------------------------------------------------------
13.815158 15.985143 15.71% 4,030,537 1997
------------------------------------------------------------------------------------
11.408018 13.815158 21.10% 2,079,253 1996
------------------------------------------------------------------------------------
10.000000 11.408018 14.08% 61,355 1995
- --------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 15.920417 22.607920 42.01% 4,099,453 1999
Company Fund-NQ ------------------------------------------------------------------------------------
15.985146 15.920417 -0.40% 3,151,728 1998
------------------------------------------------------------------------------------
13.815158 15.985143 15.71% 5,436,630 1997
------------------------------------------------------------------------------------
11.408018 13.815158 21.10% 3,209,131 1996
------------------------------------------------------------------------------------
10.000000 11.408018 14.08% 274,709 1995
- --------------------------------------------------------------------------------------------------------------------
NSAT- Total 22.849095 24.093443 5.45% 9,240,684 1999
Return Fund-Q ------------------------------------------------------------------------------------
19.626064 22.849095 16.42% 4,459,090 1998
------------------------------------------------------------------------------------
15.378605 19.626064 27.62% 9,306,942 1997
------------------------------------------------------------------------------------
12.801951 15.378605 20.13% 4,698,191 1996
------------------------------------------------------------------------------------
10.057257 12.801951 27.29% 1,799,440 1995
------------------------------------------------------------------------------------
10.091256 10.057257 -0.34% 441,098 1994
------------------------------------------------------------------------------------
10.000000 10.091256 0.91% 0 1993
- --------------------------------------------------------------------------------------------------------------------
NSAT- Total 22.849095 24.093443 5.45% 11,092,594 1999
Return Fund-NQ ------------------------------------------------------------------------------------
19.626064 22.849095 16.42% 3,296,114 1998
------------------------------------------------------------------------------------
15.378605 19.626064 27.62% 11,239,856 1997
------------------------------------------------------------------------------------
12.801951 15.378605 20.13% 6,080,735 1996
------------------------------------------------------------------------------------
10.057257 12.801951 27.29% 2,431,303 1995
------------------------------------------------------------------------------------
10.091256 10.057257 -0.34% 657,733 1994
------------------------------------------------------------------------------------
10.000000 10.091256 0.91% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 19.155589 28.406340 48.29% 2,191,851 1999
Growth Portfolio-Q ------------------------------------------------------------------------------------
16.816500 19.155589 13.91% 4,739,527 1998
------------------------------------------------------------------------------------
13.220449 16.816500 27.20% 2,761,902 1997
------------------------------------------------------------------------------------
12.286164 13.220449 7.60% 1,819,563 1996
------------------------------------------------------------------------------------
9.458916 12.286164 29.89% 1,628,798 1995
------------------------------------------------------------------------------------
10.096549 9.458916 -6.32% 264,982 1994
------------------------------------------------------------------------------------
10.000000 10.096549 0.97% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 19.155589 28.406340 48.29% 3,249,330 1999
Growth Portfolio-NQ ------------------------------------------------------------------------------------
16.816500 19.155589 13.91% 3,535,046 1998
------------------------------------------------------------------------------------
13.220449 16.816500 27.20% 4,175,280 1997
------------------------------------------------------------------------------------
12.286164 13.220449 7.60% 3,383,799 1996
------------------------------------------------------------------------------------
9.458916 12.286164 29.89% 2,653,678 1995
------------------------------------------------------------------------------------
10.096549 9.458916 -6.32% 616,908 1994
------------------------------------------------------------------------------------
10.000000 10.096549 0.97% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman - AMT 9.276124 10.512151 13.32% 1,174,502 1999
Guardian Portfolio-Q ------------------------------------------------------------------------------------
10.000000 9.276124 -7.24% 928,355 1998(2)
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman - AMT 9.276124 10.512151 13.32% 1,148,237 1999
Guardian Portfolio-NQ ------------------------------------------------------------------------------------
10.000000 9.276124 -7.24% 782,161 1998(2)
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 12.016412 12.023258 0.06% 1,753,284 1999
Limited Maturity Bond ------------------------------------------------------------------------------------
Portfolio-Q 11.674415 12.016412 2.93% 3,027,892 1998
------------------------------------------------------------------------------------
11.092313 11.674415 5.25% 2,638,749 1997
------------------------------------------------------------------------------------
10.786223 11.092313 2.84% 2,722,579 1996
------------------------------------------------------------------------------------
9.860649 10.786223 9.39% 2,080,555 1995
------------------------------------------------------------------------------------
10.015749 9.860649 -1.55% 1,228,030 1994
------------------------------------------------------------------------------------
10.000000 10.015749 0.16% 0 1993
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 64
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT- 12.016412 12.023258 0.06% 3,083,884 1999
Limited Maturity Bond ------------------------------------------------------------------------------------
Portfolio-NQ 11.674415 12.016412 2.93% 2,828,271 1998
------------------------------------------------------------------------------------
11.092313 11.674415 5.25% 3,901,992 1997
------------------------------------------------------------------------------------
10.786223 11.092313 2.84% 4,876,119 1996
------------------------------------------------------------------------------------
9.860649 10.786223 9.39% 3,264,440 1995
------------------------------------------------------------------------------------
10.015749 9.860649 -1.55% 1,355,362 1994
------------------------------------------------------------------------------------
10.000000 10.015749 0.16% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 22.890094 24.233053 5.87% 4,926,644 1999
Partners Portfolio-Q ------------------------------------------------------------------------------------
22.277405 22.890094 2.75% 7,610,496 1998
------------------------------------------------------------------------------------
17.213970 22.277405 29.41% 7,939,693 1997
------------------------------------------------------------------------------------
13.474969 17.213970 27.75% 3,997,138 1996
------------------------------------------------------------------------------------
10.013591 13.474969 34.57% 1,257,295 1995
------------------------------------------------------------------------------------
10.000000 10.013591 0.14% 33,992 1994
- --------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 22.890094 24.233053 5.87% 7,215,015 1999
Partners Portfolio-NQ ------------------------------------------------------------------------------------
22.277405 22.890094 2.75% 5,337,515 1998
------------------------------------------------------------------------------------
17.213970 22.277405 29.41% 11,091,380 1997
------------------------------------------------------------------------------------
13.474969 17.213970 27.75% 5,741,323 1996
------------------------------------------------------------------------------------
10.013591 13.474969 34.57% 1,579,425 1995
------------------------------------------------------------------------------------
10.000000 10.013591 0.14% 89,689 1994
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 13.161293 12.779991 -2.90% 4,920,397 1999
Funds- Oppenheimer Bond ------------------------------------------------------------------------------------
Fund/VA-Q 12.497968 13.161293 5.31% 4,366,241 1998
------------------------------------------------------------------------------------
11.601791 12.497968 7.72% 5,296,817 1997
------------------------------------------------------------------------------------
11.228877 11.601791 3.32% 3,583,135 1996
------------------------------------------------------------------------------------
9.733460 11.228877 15.36% 1,725,638 1995
------------------------------------------------------------------------------------
10.066342 9.733460 -3.31% 438,846 1994
------------------------------------------------------------------------------------
10.000000 10.066342 0.66% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 13.161293 12.779991 -2.90% 7,205,678 1999
Funds- Oppenheimer Bond ------------------------------------------------------------------------------------
Fund/VA -NQ 12.497968 13.161293 5.31% 3,654,118 1998
------------------------------------------------------------------------------------
11.601791 12.497968 7.72% 6,726,718 1997
------------------------------------------------------------------------------------
11.228877 11.601791 3.32% 4,341,063 1996
------------------------------------------------------------------------------------
9.733460 11.228877 15.36% 2,135,137 1995
------------------------------------------------------------------------------------
10.066342 9.733460 -3.31% 538,413 1994
------------------------------------------------------------------------------------
10.000000 10.066342 0.66% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer 16.529444 25.830374 56.27% 6,498,893 1999
Variable Account ------------------------------------------------------------------------------------
Funds- Oppenheimer 14.691771 16.529444 12.51% 9,503,851 1998
Global Securities ------------------------------------------------------------------------------------
Fund/VA -Q 12.171005 14.691771 20.71% 6,984,145 1997
------------------------------------------------------------------------------------
10.479380 12.171005 16.14% 4.661,410 1996
------------------------------------------------------------------------------------
10.394970 10.479380 0.81% 2,901,407 1995
------------------------------------------------------------------------------------
11.182167 10.394970 -7.04% 1,500,105 1994
------------------------------------------------------------------------------------
10.000000 11.182167 11.82% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer 16.529444 25.830374 56.27% 8,973,439 1999
Variable Account ------------------------------------------------------------------------------------
Funds- Oppenheimer 14.691771 16.529444 12.51% 5,697,473 1998
Global Securities ------------------------------------------------------------------------------------
Fund/VA -NQ 12.171005 14.691771 20.71% 9,087,704 1997
------------------------------------------------------------------------------------
10.479380 12.171005 16.14% 6,079,421 1996
------------------------------------------------------------------------------------
10.394970 10.479380 0.81% 3,528,736 1995
------------------------------------------------------------------------------------
11.182167 10.394970 -7.04% 2,319,507 1994
------------------------------------------------------------------------------------
10.000000 11.182167 11.82% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 12.743636 17.799664 39.67% 2,617,309 1999
Funds- Oppenheimer Capital ------------------------------------------------------------------------------------
Appreciation Fund/VA 10.422959 12.743636 22.27% 1,553,053 1998
(formerly Oppenheimer Growth ------------------------------------------------------------------------------------
Fund)- Q 10.000000 10.422959 4.23% 291,665 1997*
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 65
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer Variable Account 12.743636 17.799664 39.67% 3,228,130 1999
Funds - Oppenheimer Capital ------------------------------------------------------------------------------------
Appreciation Fund/VA 10.422959 12.743636 22.27% 1,122,440 1998
(formerly Oppenheimer Growth ------------------------------------------------------------------------------------
Fund)- NQ 10.000000 10.422959 4.23% 463,976 1997*
------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 16.281980 17.948145 10.23% 3,468,280 1999
Funds - Oppenheimer Multiple ------------------------------------------------------------------------------------
Strategies Fund/VA-Q 15.482895 16.281980 5.16% 4,734,705 1998
------------------------------------------------------------------------------------
13.395639 15.482895 15.58% 4,408,475 1997
------------------------------------------------------------------------------------
11.763879 13.395639 13.87% 2,607,467 1996
------------------------------------------------------------------------------------
9.830640 11.763879 19.67% 1,296,727 1995
------------------------------------------------------------------------------------
10.167774 9.830640 -3.32% 567,718 1994
------------------------------------------------------------------------------------
10.000000 10.167774 1.68% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 16.281980 17.948145 10.23% 4,370,474 1999
Funds - Oppenheimer Multiple ------------------------------------------------------------------------------------
Strategies Fund - NQ 15.482895 16.281980 5.16% 3,383,989 1998
------------------------------------------------------------------------------------
13.395639 15.482895 15.58% 5,254,667 1997
------------------------------------------------------------------------------------
11.763879 13.395639 13.87% 3,408,601 1996
------------------------------------------------------------------------------------
9.830640 11.763879 19.67% 1,911,329 1995
------------------------------------------------------------------------------------
10.167774 9.830640 -3.32% 737,041 1994
------------------------------------------------------------------------------------
10.000000 10.167774 1.68% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, 21.434632 28.512432 33.02% 4,869,488 1999
Inc.- Q ------------------------------------------------------------------------------------
19.146013 21.434632 11.95% 10,757,453 1998
------------------------------------------------------------------------------------
15.477893 19.146013 23.70% 5,827,943 1997
------------------------------------------------------------------------------------
13.287288 15.477893 16.49% 5,059,293 1996
------------------------------------------------------------------------------------
10.710138 13.287288 24.06% 3,116,534 1995
------------------------------------------------------------------------------------
10.484543 10.710138 2.15% 1,448,992 1994
------------------------------------------------------------------------------------
10.000000 10.484543 4.85% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, 21.434632 28.512432 33.02% 6,478,747 1999
Inc.- NQ ------------------------------------------------------------------------------------
19.146046 21.434632 11.95% 6,829,157 1998
------------------------------------------------------------------------------------
15.477893 19.146013 23.70% 8,020,904 1997
------------------------------------------------------------------------------------
13.287288 15.477893 16.49% 6,638,439 1996
------------------------------------------------------------------------------------
10.710138 13.287288 24.06% 4,296,074 1995
------------------------------------------------------------------------------------
10.484543 10.710138 2.15% 2,121,641 1994
------------------------------------------------------------------------------------
10.000000 10.484543 4.85% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Strong Variable 15.507147 16.068225 3.62% 1,328,451 1999
Insurance Funds, Inc.- ------------------------------------------------------------------------------------
Discovery Fund II, Inc.- Q 14.662845 15.507147 5.76% 3,330,495 1998
------------------------------------------------------------------------------------
13.350547 14.662845 9.83% 2,014,470 1997
------------------------------------------------------------------------------------
13.432714 13.350547 -0.61% 2,193,936 1996
------------------------------------------------------------------------------------
10.071698 13.432714 33.37% 1,701,819 1995
------------------------------------------------------------------------------------
10.796000 10.071698 -6.71% 521,530 1994
------------------------------------------------------------------------------------
10.000000 10.796000 7.96% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Strong Variable 15.507147 16.068225 3.62% 1,902,709 1999
Insurance Funds, Inc.- ------------------------------------------------------------------------------------
Discovery Fund II, Inc.- NQ 14.662845 15.507147 5.76% 2,561,304 1998
------------------------------------------------------------------------------------
13.350547 14.662845 9.83% 3,067,461 1997
------------------------------------------------------------------------------------
13.432714 13.350547 -0.61% 3,358,454 1996
------------------------------------------------------------------------------------
10.071698 13.432714 33.37% 2,670,161 1995
------------------------------------------------------------------------------------
10.796000 10.071698 -6.71% 904,088 1994
------------------------------------------------------------------------------------
10.000000 10.796000 7.96% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 8.908351 16.443689 84.59% 1,261,581 1999
Funds, Inc.- International ------------------------------------------------------------------------------------
Stock Fund II - Q 9.488178 8.908351 -6.11% 1,115,317 1998
------------------------------------------------------------------------------------
11.127252 9.488178 -14.73% 11,758,187 1997
------------------------------------------------------------------------------------
10.224570 11.127252 8.83% 1,170,883 1996
------------------------------------------------------------------------------------
10.000000 10.224570 2.25% 25,615 1995
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 66
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Strong Variable Insurance 8.908351 16.443689 84.59% 1,797,088 1999
Funds, Inc.- International ------------------------------------------------------------------------------------
Stock Fund II-NQ 9.488178 8.908351 -6.11% 824,150 1998
------------------------------------------------------------------------------------
11.127252 9.488178 -14.73% 15,775,187 1997
------------------------------------------------------------------------------------
10.224570 11.127252 8.83% 1,645,592 1996
------------------------------------------------------------------------------------
10.000000 10.224570 2.25% 53,080 1995
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 13.016609 11.830291 -9.11% 914,353 1999
Insurance Trust - ------------------------------------------------------------------------------------
Worldwide Bond 11.708039 13.016609 11.18% 1,824,058 1998
Fund-Q ------------------------------------------------------------------------------------
11.597396 11.708039 0.95% 1,224,872 1997
------------------------------------------------------------------------------------
11.473340 11.597396 1.08% 1,142,334 1996
------------------------------------------------------------------------------------
9.919400 11.473340 15.67% 688,208 1995
------------------------------------------------------------------------------------
10.194477 9.919400 -2.70% 237,637 1994
------------------------------------------------------------------------------------
10.000000 10.194477 1.94% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 13.016609 11.830291 -9.11% 1,558,403 1999
Insurance Trust - ------------------------------------------------------------------------------------
Worldwide Bond 11.708039 13.016609 11.18% 1,736,777 1998
Fund-NQ ------------------------------------------------------------------------------------
11.597396 11.708039 0.95% 1,881,869 1997
------------------------------------------------------------------------------------
11.473340 11.597396 1.08% 1.639,285 1996
------------------------------------------------------------------------------------
9.919400 11.473340 15.67% 986,151 1995
------------------------------------------------------------------------------------
10.194477 9.919400 -2.70% 473,752 1994
------------------------------------------------------------------------------------
10.000000 10.194477 1.94% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 5.704452 11.265493 97.49% 2,477,889 1999
Insurance Trust - Worldwide ------------------------------------------------------------------------------------
Emerging Markets Fund-Q 8.783348 5.704452 -35.05% 1,862,823 1998
------------------------------------------------------------------------------------
10.077608 8.783348 -12.84% 1,951,581 1997
------------------------------------------------------------------------------------
10.000000 10.077608 0.78% 343,730 1996*
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 5.704452 11.265493 97.49% 3,263,317 1999
Insurance Trust - Worldwide ------------------------------------------------------------------------------------
Emerging Markets Fund-NQ 8.783348 5.704452 -35.05% 1,394,148 1998
------------------------------------------------------------------------------------
10.077608 8.783348 -12.84% 2,439,264 1997
------------------------------------------------------------------------------------
10.000000 10.077608 0.78% 353,687 1996*
- -------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 8.796887 10.495465 19.31% 716,194 1999
Insurance Trust - ------------------------------------------------------------------------------------
Worldwide Hard Assets 12.924490 8.796887 -31.94% 1,976,563 1998
Fund-Q ------------------------------------------------------------------------------------
13.331794 12.924490 -3.06% 1,258,548 1997
------------------------------------------------------------------------------------
11.453100 13.331794 16.40% 1,203,366 1996
------------------------------------------------------------------------------------
10.464922 11.453100 9.44% 720,611 1995
------------------------------------------------------------------------------------
11.147499 10.464922 -6.12% 416,949 1994
------------------------------------------------------------------------------------
10.000000 11.147499 11.47% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 8.796887 10.495465 19.31% 1,323,974 1999
Insurance Trust - -----------------------------------------------------------------------------------
Worldwide Hard Assets 12.924490 8.796887 -31.94% 1,953,375 1998
Fund-NQ ------------------------------------------------------------------------------------
13.331794 12.924490 -3.06% 2,082,493 1997
------------------------------------------------------------------------------------
11.453100 13.331794 16.40% 1,997,123 1996
------------------------------------------------------------------------------------
10.464922 11.453100 9.44% 1,314,047 1995
------------------------------------------------------------------------------------
11.147499 10.464922 -6.12% 771,280 1994
------------------------------------------------------------------------------------
10.000000 11.147499 11.47% 0 1993
- --------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment 15.560452 14.825198 -4.73% 1,432,926 1999
Trust-Morgan Stanley Real ------------------------------------------------------------------------------------
Estate Securities Portfolio-Q 17.856659 15.560452 -12.86% 2,429,141 1998
------------------------------------------------------------------------------------
14.908696 17.856659 19.77% 3,169,047 1997
------------------------------------------------------------------------------------
10.759998 14.908696 38.56% 1,646,291 1996
------------------------------------------------------------------------------------
10.000000 10.759998 7.60% 69,755 1995
- --------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment 15.560452 14.825198 -4.73% 2,198,091 1999
Trust-Morgan Stanley Real ------------------------------------------------------------------------------------
Estate Securities Portfolio- NQ 17.856559 15.560452 -12.86% 2,423,893 1998
------------------------------------------------------------------------------------
14.908696 17.856659 19.77% 4,254,738 1997
------------------------------------------------------------------------------------
10.759998 14.908696 38.56% 2,361,457 1996
------------------------------------------------------------------------------------
10.000000 10.759998 7.60% 131,252 1995
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 67
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT ACCUMULATION CHANGE IN ACCUMULATION
BEGINNING OF UNIT VALUE AT ACCUMULATION UNITS AT END OF
UNDERLYING MUTUAL FUND PERIOD END OF PERIOD UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust- 11.567145 17.499626 51.29% 3,168,692 1999
International Equity ------------------------------------------------------------------------------------
Portfolio-Q 11.135857 11.567145 3.87% 4,923,915 1998
------------------------------------------------------------------------------------
11.554772 11.135857 -3.63% 5,873,960 1997
------------------------------------------------------------------------------------
10.655759 11.554772 8.44% 4,575,313 1996
------------------------------------------------------------------------------------
10.000000 10.655759 6.56% 707,567 1995
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 11.567145 17.499626 51.29% 5,861,047 1999
International Equity ------------------------------------------------------------------------------------
Portfolio-NQ 11.135857 11.567145 3.87% 3,738,519 1998
------------------------------------------------------------------------------------
11.554772 11.135857 -3.63% 8,729,469 1997
------------------------------------------------------------------------------------
10.655759 11.554772 8.44% 7,026,060 1996
------------------------------------------------------------------------------------
10.000000 10.655759 6.56% 1,351,263 1995
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Global 11.927880 19.229243 61.21% 776,179 1999
Post-Venture Capital ------------------------------------------------------------------------------------
Portfolio-Q 11.357831 11.927880 5.02% 531,483 1998
------------------------------------------------------------------------------------
10.163549 11.357831 11.75% 267,447 1997
------------------------------------------------------------------------------------
10.000000 10.163549 1.64% 258,812 1996*
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Global 11.927880 19.229243 61.21% 874,495 1999
Post-Venture Capital ------------------------------------------------------------------------------------
Portfolio-NQ 11.357897 11.927880 5.02% 448,154 1998
------------------------------------------------------------------------------------
10.163549 11.357831 11.75% 313,129 1997
------------------------------------------------------------------------------------
10.000000 10.163549 1.64% 266,629 1996*
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 15.240137 25.407601 66.72% 3,631,606 1999
Small Company Growth ------------------------------------------------------------------------------------
Portfolio-Q 15.910364 15.240137 -4.21% 5,715,168 1998
------------------------------------------------------------------------------------
13.952718 15.910364 14.03% 4,888,419 1997
------------------------------------------------------------------------------------
12.423899 13.952718 12.31% 3,578,020 1996
------------------------------------------------------------------------------------
10.000000 12.423899 24.24% 972,182 1995
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 15.240137 25.407601 66.72% 5,844,172 1999
Small Company Growth ------------------------------------------------------------------------------------
Portfolio-NQ 15.910364 15.240137 -4.21% 4,595,026 1998
------------------------------------------------------------------------------------
13.952718 15.910364 14.03% 7,458,638 1997
------------------------------------------------------------------------------------
12.423899 13.952718 12.31% 5,095,747 1996
------------------------------------------------------------------------------------
10.000000 12.423899 24.24% 1,536,271 1995
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Dreyfus Variable Investment Fund - Capital Appreciation Portfolio,
Fidelity Variable Insurance Products Fund III - Growth Opportunities
Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio, and Oppenheimer Variable Account Funds Oppenheimer
Capital Appreciation Fund/VA (formerly - Oppenheimer Growth Fund) were added
to the variable account on July 14, 1997. Consequently, the condensed
financial information reflect the reporting period from July 14, 1997 to
December 31, 1997. The American Century Variable Portfolio, Inc. - American
Century VP Value, Dreyfus Variable Investment Fund - Growth & Income
Portfolio, Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets
Fund, and Warburg Pincus Trust - Post-Venture Capital Portfolio were added
to variable account on December 23, 1996. Consequently, the condensed
financial information reflects the reporting period from December 23, 1996
to December 31, 1996.
(2) The American Century Variable Portfolios, Inc. - American Century VP Income
& Growth, NSAT - Nationwide Small Cap Value Fund and Neuberger & Berman
AMT - Guardian Portfolio were added to the variable account on May 1, 1998.
Consequently the condensed financial information reflects the reporting
period from May 1, 1998 through December 31, 1998.
* The 7-day yield on the NSAT Money Market Fund as of December 31, 1999 was
3.97%.
68
