<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act File No. 33-82174
'40 Act File No. 811-8666
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 9 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [X]
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, the Statement of Additional Information and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
<PAGE> 2
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
<S> <C> <C>
N-4 ITEM CAPTION
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.................................................................................Cover Page
Item 2. Definitions.................................................................Glossary of Special Terms
Item 3. Synopsis or Highlights......................................................Synopsis of the Contracts
Item 4. Condensed Financial Information.......................................Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ..........................Nationwide Life Insurance Company; Investing in the Contract
Item 6. Deductions and Expenses...............................................Standard Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.......................................Contract Ownership; Operation of the Contract
Item 8. Annuity Period...............................................................Annuitizing the Contract
Item 9. Death Benefit and Distributions........................................................Death Benefits
Item 10. Purchases and Contract Value................................................Operation of the Contract
Item 11. Redemptions....................................................................Surrender (Redemption)
Item 12. Taxes ....................................................................Federal Tax Considerations
Item 13. Legal Proceedings...................................................................Legal Proceedings
Item 14. Table of Contents of the Statement of Additional
Information.........................Table of Contents of the Statement of Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.................................................................................Cover Page
Item 16. Table of Contents...................................................................Table of Contents
Item 17. General Information and History.......................................General Information and History
Item 18. Services.....................................................................................Services
Item 19. Purchase of Securities Being Offered.............................Purchase of Securities Being Offered
Item 20. Underwriters.............................................................................Underwriters
Item 21. Calculation of Performance Information.....................................Calculation of Performance
Item 22. Annuity Payments.....................................................................Annuity Payments
Item 23. Financial Statements.............................................................Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................................Item 24
Item 25. Directors and Officers of the Depositor.......................................................Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..............................................................Item 26
Item 27. Number of Contract Owners.....................................................................Item 27
Item 28. Indemnification...............................................................................Item 28
Item 29. Principal Underwriter.........................................................................Item 29
Item 30. Location of Accounts and Records..............................................................Item 30
Item 31. Management Services...........................................................................Item 31
Item 32. Undertakings..................................................................................Item 32
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Modified Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Fidelity Advisor Variable Account
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:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio
- VIP Growth Portfolio
- VIP High Income Portfolio*
- VIP Money Market Portfolio
- VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Asset Manager Portfolio
- VIP II Asset Manager: Growth Portfolio
- VIP II Contrafund(R) Portfolio
- VIP II Investment Grade Bond Portfolio
- VIP II Index 500 Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Balanced Portfolio
- VIP III Growth & Income Portfolio
- VIP III Growth Opportunities Portfolio
*This underlying mutual fund may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Fidelity Advisor Variable Account
("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 44.
For general information or to obtain FREE copies of the:
- Statement of Additional Information;
- prospectus, annual report or semi-annual report for any underlying
mutual fund; or
- required Nationwide forms,
call: 1-800-494-1132
1-800-573-2447 (Voice Response Available 24 hours)
1-800-238-3035 (TDD)
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182610
COLUMBUS, OHIO 43216
1
<PAGE> 4
The Statement of Additional Information and other materials incorporated by
reference can be found on the SEC website at:
www.sec.gov
This annuity is NOT:
- - a bank deposit - federally insured
- - endorsed by a bank or - available in
government agency every state
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 5
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 Fidelity Advisor Variable Account, a separate
account of Nationwide that contains variable account allocations. The variable
account is divided into sub-accounts, each of which invests in shares of a
separate underlying mutual fund.
3
<PAGE> 6
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS..........................
SUMMARY OF STANDARD CONTRACT EXPENSES..............
ADDITIONAL CONTRACT OPTIONS........................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES.............
EXAMPLE............................................
SYNOPSIS OF THE CONTRACTS..........................
FINANCIAL STATEMENTS...............................
CONDENSED FINANCIAL INFORMATION....................
NATIONWIDE LIFE INSURANCE COMPANY..................
GENERAL DISTRIBUTOR................................
TYPES OF CONTRACTS.................................
Non-Qualified Contracts
Individual Retirement Annuities (IRAs)
Roth IRAs
Tax Sheltered Annuities
INVESTING IN THE CONTRACT..........................
The Variable Account and Underlying
Mutual Funds
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS....................
Mortality and Expense Risk Charge
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND
DEDUCTIONS......................................
Death Benefit Options
CONTRACT OWNERSHIP.................................
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT..........................
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE....................................
SURRENDER (REDEMPTION).............................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional
Retirement Program or a Louisiana Optional
Retirement Plan
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE.....................................
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
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
Death Benefit Payment
4
<PAGE> 7
REQUIRED DISTRIBUTIONS.............................
Required Distributions for Non-Qualified
Contracts
Required Distributions for Tax Sheltered
Annuities
Required Distributions for Individual
Retirement Annuities
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.........................
Federal Income Taxes
IRAs and Tax Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.............................
LEGAL PROCEEDINGS..................................
ADVERTISING AND SUB-ACCOUNT PERFORMANCE
SUMMARY ADVERTISING...........................
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION .........................
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS....................................
APPENDIX B: CONDENSED FINANCIAL INFORMATION........
5
<PAGE> 8
SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- the contract owner meets an available exception under the contract; or
- a contract owner has replaced a standard benefit with an available
option for an additional charge.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)..................7%(1)
Range of CDSC over time:
- ------------------------------------------------------
Number of 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 due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of daily net assets of the variable account)
Mortality and Expense Risk Charge.............1.25%
Administration Charge.........................0.15%
Total Variable Account Charges...........1.40%(3)
(2) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account. They are charged on a daily basis at
the annual rate noted above.
(3) Charges shown include the Five-Year Reset Death Benefit that is standard to
every contract (see "Death Benefit Payment").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states may
not permit Nationwide to assess a loan processing fee (see "Loan Privilege").
6
<PAGE> 9
ADDITIONAL CONTRACT OPTIONS
For an additional charge, the following death benefit options are available to
contract owners. Such options must be elected at the time of application and
will replace the Five-Year Reset Death Benefit that is standard to every
contract.
Charges for the optional death benefits are IN ADDITION to the standard variable
account charges. The optional death benefit charges will only apply to
allocations made to the variable account and are charged as a percentage of the
average variable account value. They are charged on a daily basis at the annual
rate noted below.
OPTIONAL DEATH BENEFITS
An applicant may choose among the following death benefits as a replacement for
the death benefits instead of the Five-Year Reset Death Benefit that is standard
to every contract.
The optional death benefits are:
Optional Long Term
Care Facility and One-Year Step Up
Death Benefit................................0.05%
Total Variable Account Charges
(including One-Year Step Up
Death Benefit).............................1.45%
Optional Long Term
Care Facility and 5% Enhanced Death
Benefit......................................0.10%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit)...................................1.50%
7
<PAGE> 10
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
- --------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio 0.48% 0.08% 0.00% 0.56%
- --------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 0.58% 0.07% 0.00% 0.65%
- --------------------------------------------------------------------------------------------------------------------
VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
- --------------------------------------------------------------------------------------------------------------------
VIP Money Market Portfolio 0.18% 0.09% 0.00% 0.27%
- --------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager Portfolio 0.53% 0.09% 0.00% 0.62%
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: Growth Portfolio 0.58% 0.12% 0.00% 0.70%
- --------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R)Portfolio 0.58% 0.07% 0.00% 0.65%
- --------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond Portfolio 0.43% 0.11% 0.00% 0.54%
- --------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Portfolio 0.24% 0.04% 0.00% 0.28%
- --------------------------------------------------------------------------------------------------------------------
VIP III Balanced Portfolio 0.43% 0.12% 0.00% 0.55%
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income Portfolio 0.48% 0.11% 0.00% 0.59%
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth Opportunities Portfolio 0.58% 0.10% 0.00% 0.68%
- --------------------------------------------------------------------------------------------------------------------
</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>
VIP Equity-Income Portfolio 0.48% 0.09% 0.00% 0.57%
- --------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 0.58% 0.08% 0.00% 0.66%
- --------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager Growth Portfolio 0.58% 0.13% 0.00% 0.71%
- --------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R)Portfolio 0.58% 0.09% 0.00% 0.67%
- --------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Portfolio 0.24% 0.10% 0.00% 0.34%
- --------------------------------------------------------------------------------------------------------------------
VIP III Balanced Portfolio 0.43% 0.14% 0.00% 0.57%
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income Portfolio 0.48% 0.12% 0.00% 0.60%
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth Opportunities Portfolio 0.58% 0.11% 0.00% 0.69%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
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 chart reflects expenses of both the variable
account and the underlying mutual funds. The assumed variable account charge is
1.55% which includes the optional 5% Enhanced Death Benefit.
For those contracts that do not elect the 5% Enhanced Death Benefit, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your 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>
VIP Equity-Income Portfolio 85 113 144 251 22 68 117 251 * 68 117 251
- --------------------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 86 116 149 261 23 71 122 261 * 71 122 261
- --------------------------------------------------------------------------------------------------------------------------------
VIP High Income Portfolio 87 117 151 265 24 72 124 265 * 72 124 265
- --------------------------------------------------------------------------------------------------------------------------------
VIP Money Market Portfolio 82 104 129 220 19 59 102 220 * 59 102 220
- --------------------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 88 123 160 284 25 78 133 284 * 78 133 284
- --------------------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager 86 115 147 258 23 70 120 258 * 70 120 258
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: Growth 87 118 152 266 24 73 125 266 * 73 125 266
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R)Portfolio 86 116 149 261 23 71 122 261 * 71 122 261
- --------------------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond 85 113 143 249 22 68 116 249 * 68 116 249
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Portfolio 82 104 129 221 19 59 102 221 * 59 102 221
- --------------------------------------------------------------------------------------------------------------------------------
VIP III Balanced Portfolio 85 113 144 250 22 68 117 250 * 68 117 250
- --------------------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 85 114 146 255 22 69 119 255 * 69 119 255
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
VIP III Growth Opportunities 86 117 150 264 23 72 123 264 * 72 123 264
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
9
<PAGE> 12
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
references to "contract owner" will mean "participant."
The contracts can be categorized as:
- Non-Qualified;
- 401(a) Investment-only;
- IRAs, with contributions rolled over or transferred from certain
tax-qualified plans
- Roth IRAs; or
- Tax Sheltered Annuities, with contributions rolled over or transferred
from other Tax Sheltered Annuity plans.
For more detailed information with regard to differences in contract types,
please see "Types of Contracts" later in the prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
- -----------------------------------------------------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- -----------------------------------------------------------
Non-Qualified $15,000 $1,000
- -----------------------------------------------------------
401(a)
Investment-only $15,000 $1,000
- -----------------------------------------------------------
IRA $15,000 $1,000
- -----------------------------------------------------------
Roth IRA $15,000 $1,000
- -----------------------------------------------------------
Tax Sheltered $15,000 $1,000
Annuity
- -----------------------------------------------------------
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
this charge in return for bearing certain mortality and expense 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
for reimbursement of administrative expenses relating 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.
Two optional death benefits are available under the contract. Nationwide will
deduct 0.05% if the One-Year Step Up Death Benefit is elected, or 0.10% if the
5% Enhanced Death Benefit is elected.
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 other amounts required
by law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 1 of this prospectus.
10
<PAGE> 13
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.
GENERAL DISTRIBUTOR
The contracts are distributed by the general distributor, Fidelity Investments
Institutional Services Company, Inc.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
Non-Qualified Annuity Contracts
A Non-Qualified Annuity Contract is a contract that does not qualify for certain
tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth
IRA or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Annuity Contract, mandatory
distribution requirements are imposed to ensure distribution of the entire
balance in the contract within a required period.
Non-Qualified Annuity contracts that are owned by natural persons allow for the
deferral of taxation on the income earned in the contract until it is
distributed or deemed to be distributed.
Individual Retirement Annuities (IRAs)
Individual Retirement Annuities are contracts that are issued by insurance
companies and satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs can be
received);
- - certain minimum distribution requirements must be satisfied after the owner
attains the age of 70 1/2;
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax Sheltered Annuities, and
from qualified retirement plans, including 401(k) plans.
11
<PAGE> 14
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
Roth IRAs
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
Tax Sheltered Annuities
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70 1/2, and
after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
statutory period of time.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Fidelity Advisor Variable Account is a variable account that invests
in the underlying mutual funds listed in Appendix A. Nationwide established the
variable account on July 22, 1994, 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,
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Investment-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 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.
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THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to accuracy
and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying guaranteed interest rates(s) depending on the following
categories of fixed account allocations:
- - New Money Rate - The rate credited on the fixed account allocation when the
contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than the
rate when the contract was issued, since the New Money Rate is subject to
change based on market conditions.
- - Variable Account to Fixed Rate - Allocations transferred from any of the
underlying 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.
- - 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.
- - Dollar Cost Averaging - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract when
used in conjunction with a dollar cost averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during 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 guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a mortality and expense risk charge from the variable
account. This amount is computed on a daily basis, and is equal to an
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annual rate of 1.25% of the daily net assets of the variable account.
The mortality risk charge (0.80%) 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 mortality risk charge also compensates Nationwide
for risks assumed in connection with the standard death benefit, but only
partially compensates Nationwide in connection with the two optional death
benefits, for which there are separate charges.
The expense risk charge (0.45%) 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 the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. Earnings are not subject to the CDSC, 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.)
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
6.25% 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 prior to 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;
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(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 fixed account and the variable account.
A contract held by a Charitable Remainder Trust may withdraw CDSC-free the
greater of (a) or (b) where:
(a) is the amount which would otherwise be available for withdrawal
without a CDSC; and
(b) is the difference between the total purchase payments made to the
contract as of the date of the withdrawal (reduced by previous
withdrawals) and the contract value at the close of the day prior to
the date of the withdrawal.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
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 earlier date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
DEATH BENEFIT OPTIONS
For contracts issued on or after the later of November 3, 1997 or the date on
which state insurance authorities approve contract modifications, if the
contract owner chooses an optional death benefit, Nationwide will deduct a
charge equal to an annual rate of either 0.05% or 0.10% of the daily net assets
of the variable account, depending upon the options chosen. Further information
about these benefits can be found in the "Death Benefit Payment" provision. All
of the following death benefit options may not be available in every state.
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase
payment or surrender to the most recent contract anniversary prior to
the annuitant's 86th birthday, less an adjustment for amounts
subsequently
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surrendered, plus purchase payments received since that contract
anniversary.
Long Term Care Facility Provisions
If the contract owner chooses an optional death benefit, no CDSC will be charged
on withdrawals if:
- the third contract anniversary has passed; and
- the contract owner has been confined to a long-term care facility or
hospital for a continuous 90-day period that began after the contract
issue date.
Additionally, if the contract owner chooses an optional death benefit, no CDSC
will be charged if:
- the contract owner has been diagnosed by a physician to have a
terminal illness; and
- Nationwide receives and records a letter from that physician
indicating such diagnosis.
For those contracts that have a non-natural person as contract owner (e.g. a
trust or corporation) for the benefit of a natural person, the annuitant may
exercise the rights of the contract owner for the purposes described in this
provision. If the non-natural contract owner has not been established for the
benefit of a natural person (e.g., the contract owner is a corporation or a
trust for the benefit of an entity), the annuitant may not exercise the rights
described in this provision.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract. Purchasers who name
someone other than themselves as the contract owner will have no rights under
the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, contingent
annuitant, contingent owner, beneficiary, or contingent beneficiary before the
annuitization date. These changes must be:
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is a Charitable Remainder Trust.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- joint owners can only be named for Non-Qualified Contracts;
- joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners;
- the exercise of any ownership right in the contract will generally
require a written request signed by both - joint owners;
- Nationwide will not be liable for any loss, liability, cost, or
expense for acting in
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accordance with the instructions of either joint owner; and
- an election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract, if a
contract owner who is not the annuitant dies before the annuitization date, and
there is no surviving joint owner.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be changed before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary(ies) or contingent
beneficiary(ies) 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
- ------------------------------------------------------------
401(a) $15,000 $1,000
Investment-only
- ------------------------------------------------------------
IRA $15,000 $1,000
- ------------------------------------------------------------
Roth IRA $15,000 $1,000
- ------------------------------------------------------------
Tax Sheltered $15,000 $1,000
Annuity
- ------------------------------------------------------------
Subsequent purchase payments are not permitted in the State of New York.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts issued by Nationwide on the life of any
one annuitant cannot exceed $1,000,000 without Nationwide's prior consent.
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Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, contract value may be affected since the contract owner will
not have access to their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts and/or the fixed account
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 and the fixed account. However, no change may
be made that would result in an amount less than 1% of the purchase payments
being allocated to any sub-account. Certain transactions may be subject to
conditions imposed by the underlying mutual funds, as well as those set forth in
the contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
(1) the value of amounts allocated to the sub-accounts of the variable
account; and
(2) amounts allocated to the fixed account.
If part or all of the contract value is surrendered, or charges are assessed
against the whole contract value, Nationwide will deduct a proportionate amount
from each sub-account and the fixed account based on current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(1) the net asset value of the underlying mutual fund as of the end
of the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-
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dividend date occurs during the current valuation period);
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period; and
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate ranging from 1.40% to 1.55% of the
daily net assets of the variable account, depending on which contract
features the contract owner chooses.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
(1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
(2) adding any interest earned on the amounts allocated.
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. Under no circumstances will
the maximum transferable amount be less than 10% of the fixed account allocation
reaching the end of an interest rate guarantee period. Transfers of the fixed
account allocations must be made within 45 days after reaching the end of an
interest rate guarantee period.
Contract owners who use dollar cost averaging may transfer from the fixed
account to the variable account under the terms of that program (see "Dollar
Cost Averaging").
Transfers to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account. Except as noted below, under no
circumstances will the transfer limit be less than 10% of the current value of
the variable account, less any transfers made in the 12 months preceding the
date the transfer is requested, but not including transfers made prior to the
imposition of the transfer limit. However, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account 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 Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation date.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization period.
TRANSFER REQUESTS
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine and will not be liable
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for following telephone instructions that it reasonably determined to be
genuine. Nationwide may withdraw the telephone exchange privilege upon 30 days
written notice to contract owners.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account. 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, 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.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- - submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
- - submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing firms
(or other third parties) on behalf of more than one contract owner at the
same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. All IRA and Roth IRA refunds will be a return of purchase payments. The
refunded contract value will reflect the deduction of any contract charges,
unless otherwise required by law. 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
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additional amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account. 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 TEXAS OPTIONAL RETIREMENT PROGRAM OR A LOUISIANA OPTIONAL
RETIREMENT PLAN
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
- - the participant dies;
- - the participant retires;
- - the participant terminates employment due to total disability; or
- - the participant that works in a Texas public institution of higher
education terminates employment.
A participant under a contract issued under the Louisiana Optional Retirement
Plan may only take distributions from the contract upon retirement or
termination of employment. All retirement benefits under this type of plan must
be paid as lifetime income; lump sum cash payments are not permitted, except for
death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless one of
the applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
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SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a custodial account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may
not include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) custodial accounts (except that
earnings and employer contributions as of December 31, 1988 in such
custodial 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*)
- ------------------------------------------------------------
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*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a loan processing fee at the time each new loan is
processed. If assessed, this fee compensates Nationwide for expenses related to
administering and processing loans.
The fee is taken from the sub-accounts and the fixed account in proportion to
the contract value at the time the loan is processed.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. 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%.
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.
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:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to
annuitization; or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD 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.
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ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Investment-only Contracts, IRAs, Roth IRAs, and Tax Sheltered Annuities may not
be assigned, pledged or otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account. 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, the VIP High Income Portfolio and the VIP Money Market
Portfolio to any other underlying mutual 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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Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A dollar cost
averaging program which transfers amounts from the fixed account to the variable
account is not the same as an enhanced rate dollar cost averaging program.
Contract owners that wish to utilize dollar cost averaging from the fixed
account should first inquire whether any enhanced rate dollar cost averaging
programs are available.
Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. 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 VIP Money Market Portfolio.
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.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
(1) 10% of all purchase payments made to the contract as of the withdrawal
date;
(2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
(3) a percentage of the contract value based on the contract owner's age,
as shown in the table that follows:
- ----------------------------------------------------------
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
- ----------------------------------------------------------
Under age 59 1/2 5%
- ----------------------------------------------------------
Age 59 1/2 through age 61 7%
- ----------------------------------------------------------
Age 62 through age 64 8%
- ----------------------------------------------------------
Age 65 through age 74 10%
- ----------------------------------------------------------
Age 75 and over 13%
- ----------------------------------------------------------
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of CDSC for that contract year will be
determined in accordance with that provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
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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, annuitization may occur during the first 2 years subject to
Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity 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
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<PAGE> 30
selected underlying mutual funds. Nationwide guarantees that variations in
mortality experience from assumptions used to calculate the first payment will
not affect the dollar amount of the second and subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate is the percentage rate of return required to maintain
level variable annuity payments. Subsequent variable annuity payments may be
more or less than the first payment based on whether actual investment
performance of the underlying mutual fund 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 the Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges may only be made on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- the amount to be distributed is less than $5,000, in which case
Nationwide may make one lump sum payment of the contract value; or
- an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
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
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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.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If no beneficiary(ies) survives the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiary(ies) or contingent beneficiary(ies) 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.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
DEATH BENEFIT PAYMENT
The death benefit value is determined as of the date Nationwide receives:
(1) proper proof of the annuitant's death;
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<PAGE> 32
(2) an election specifying the distribution method; and
(3) any state required form(s).
For contracts issued before the later of November 3, 1997 or the date state
insurance authorities approve contract modifications, if the annuitant dies
before his or her 86th birthday, the death benefit will be the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less any amounts surrendered; or
(3) the contract value as of the most recent five year contract anniversary,
less any amounts surrendered since that five year anniversary.
If the annuitant dies on or after his or her 86th birthday, the death benefit
will be the contract value.
For contracts issued on or after the later of November 3, 1997 or the date state
insurance authorities approve contract modifications, contract owners may select
one of three death benefits available under the contract at the time of
application (not all death benefit options may be available in all states). If
no selection is made at the time of application, the death benefit will be the
Five-Year Reset Death Benefit.
Five-Year Reset Death Benefit (Standard Contractual Death Benefit)
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the contract value as of the most recent five year contract
anniversary before the annuitant's 86th birthday, less an adjustment
for amounts surrendered, plus purchase payments received after that
five year contract anniversary.
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase
payment or surrender to the most recent contract anniversary prior to
the annuitant's 86th birthday, less an adjustment for amounts
subsequently surrendered, plus purchase payments received since that
contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
The total accumulated amount will not exceed 200% of the net of purchase
payments and amounts surrendered. The adjustment for amounts subsequently
surrendered after the most recent contract anniversary will reduce the 5%
interest anniversary value in the same proportion that the contract value was
reduced on the date(s) of the partial surrender(s).
Death Benefit After Annuitization Date
For any death benefit option, if the annuitant dies after the annuitization
date, payment will be determined based on the annuity payment option selected.
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REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and
before the entire interest in the contract has been distributed, then
the remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death
benefit or the contract value reduced by charges set forth elsewhere
in the contract) will be distributed within 5 years of the contract
owner's death, provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary. Payments must begin within one year of the contract
owner's death unless otherwise permitted by federal income tax
regulations; and
b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to become the
contract owner instead of receiving a death benefit. Any
distributions required under these distribution rules will be
made upon that spouse's death.
In the event that the contract owner is not a natural person, 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:
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a) April 1 of the calendar year following the calendar year in which
the annuitant reaches age 70 1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Distribution commencing on the required distribution date must satisfy minimum
distribution and incidental benefit provisions set forth in the Internal Revenue
Code. Those provisions require that distributions cannot be less than the amount
determined by dividing the annuitant's interest in the Tax Sheltered Annuity
determined by the end of the previous calendar year by:
a) the annuitant's life expectancy; or, if applicable,
b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Tax
Sheltered Annuity must be distributed by December 31 of the calendar year in
which the fifth anniversary of the annuitant's death occurs unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distributions from an Individual Retirement Annuity must begin no later than
April 1 of the calendar year following the calendar year in which the contract
owner reaches age 70 1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity must be distributed by December 31 of the calendar
year in which the fifth anniversary of the contract owner's death occurs,
unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity
established for his or her benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than
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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 non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity must annually report the amount of non-deductible purchase payments, the
amount of any distribution, the amount by which non-deductible purchase payments
for all years exceeds the nontaxable distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity distributions will not receive the favorable tax
treatment of a lump sum distribution from a Qualified Plan. If the contract
owner dies before the entire interest in the contract has been distributed, the
balance will also be included in his or her gross estate.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year following the year in which the contract
owner would have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her
surviving spouse and the beneficiary chooses to receive distribution
of the contract in substantially equal payments over his or her life
(or a period not longer than his or her life expectancy) beginning no
later than December 31 of the year following the year in which the
contract owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions" (see
"Federal Tax Considerations").
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FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- - the type of contract purchased;
- - the purposes for which the contract is purchased; and
- - the personal circumstances of individual investors having interests in the
contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans are permitted to purchase investments other than annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- Individual Retirement Annuities;
- Roth IRAs;
- Tax Sheltered Annuities; and
- "Non-Qualified Annuities."
Individual Retirement Annuities
Distributions from Individual Retirement Annuities are generally taxed when
received. If any of the amount contributed to the IRA was nondeductible for
federal income tax purposes, then a portion of each distribution is excludable
from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59 1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. The penalty tax can be avoided
if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - used for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
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
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<PAGE> 37
distribution" is one that satisfies the five-year rule and meets one of the
following requirements:
- - it is made on or after the date on which the contract owner attains age 59
1/2;
- - it is made to a beneficiary (or the contract owner's estate) on or after
the death of the contract owner;
- - it is attributable to the contract owner's disability; or
- - it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified distribution is not includible in gross income to the extent
that the distribution, when added to all previous distributions, does not exceed
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from a traditional
IRA prior to January 1, 1999 if the owner elected the special 4-year income
averaging provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
- for qualified higher education expenses; or
- used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- part of a series of substantially equal periodic payments made not
less frequently 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;
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<PAGE> 38
- for qualified higher education expenses;
- used for expenses attributable to the purchase of a home for a
qualified first-time buyer; or
- made to the owner after separation from service with his or her
employer after age 55.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, any portion of the contract that is assigned or
pledged; or any portion of the contract that is transferred by gift. For these
purposes, a transfer by gift may occur upon annuitization if the contract owner
and the annuitant are not the same individual.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable in income. The
maximum amount excludable from income is the investment in the contract. If the
annuitant dies before the entire investment in the contract has been excluded
from income, and as a result of the annuitant's death no more payments are due
under the contract, then the unrecovered investment in the contract may be
deducted on his or her final tax return.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date are treated first as a recovery of the
investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before
the contract owner reaches age 59 1/2. The amount of the penalty is 10% of the
portion of any distribution that is includible in gross income. The penalty tax
does not apply if the distribution is:
- - the result of a contract owner's death;
- - the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- - one of a series of substantially equal periodic payments made over the life
(or life expectancy) of the contract owner or the joint lives (or joint
life expectancies) of the contract owner and the beneficiary selected by
the contract owner to receive payment under the annuity payment option
selected by the contract owner; or
- - is allocable to an investment in the contract before August 14, 1982.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
Therefore, income earned under a Non-Qualified Contract that is owned by a
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.
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<PAGE> 39
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, allowing tax deferral. However,
this exception does not apply when the non-natural person is an employer that
holds the contract under a non-qualified deferred compensation arrangement for
one or more employees.
The non-natural persons rules also do not apply to contracts that are:
- - acquired by the estate of a decedent by reason of the death of the
decedent;
- - issued in connection with certain qualified retirement plans and individual
retirement plans; or
- - purchased by an employer upon the termination of certain qualified
retirement plans.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. If the distribution is from a Tax Sheltered Annuity,
it will be subject to mandatory 20% withholding that cannot be waived, unless:
- - the distribution is made directly to another Tax Sheltered Annuity or a
Traditional IRA; or
- - the distribution satisfies the minimum distribution requirements imposed by
the Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal Revenue Service notifies Nationwide that mandatory
back-up withholding is required). Mandatory back-up withholding rates are 31% of
income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if
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<PAGE> 40
all or a portion of the value is also subject to federal income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose only,
"contract owner" refers to any person:
- - who would be required to include the contract, death benefit, distribution,
or other payment in his or her federal gross estate at his or her death; or
- - who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., dollar cost averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
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- semi-annual reports as of June 30 containing financial statements for
the variable account; and
- annual reports as of December 31 containing financial statements for
the variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide and
the American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000 Nationwide and American Century settled this lawsuit now limited
to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the court denied the motion to
dismiss the amended complaint filed by Nationwide and other named defendants.
Nationwide intends to defend this lawsuit vigorously.
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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, Fidelity Investments Institutional Services Company,
Inc., is not engaged in any litigation of any material nature.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the Fidelity VIP Money
Market Portfolio. "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 Fidelity
VIP Money Market Portfolio's units. Yield is an annualized figure, which means
that it is assumed that the Fidelity VIP Money Market Portfolio generates the
same level of net income over a 52-week period. The "effective yield" is
calculated similarly but includes the effect of assumed compounding, calculated
under rules prescribed by the SEC. The effective yield will be slightly higher
than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.;
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
- Money;
- Forbes;
- Kiplinger's Personal Finance Magazine;
- Financial World;
- Consumer Reports;
- Business Week;
- Time;
- Newsweek;
- National Underwriter; and
- News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against
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<PAGE> 43
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 deduction of the maximum
charges that could be assessed to the contract (1.55%), which includes the
charge for the 5% Enhanced Death Benefit option, but does not reflect premium
taxes, which may be imposed by certain states.
Nonstandardized "total return" is calculated similarly to standardized "average
annual total return," except non-standardized return assumes an initial
investment of $25,000 with variable account charges of 1.40%. A CDSC is not
reflected. 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.
Both methods of calculation reflect total return for the most recent one, five
and ten year periods (or for a period covering the time the underlying mutual
fund has been in existence). For those underlying mutual funds which have not
been available for one of the prescribed periods, the nonstandardized total
return illustrations will show the investment performance the underlying mutual
funds would have achieved had they been available in the variable account for
one of the periods. If the underlying mutual fund has been available in the
variable account for less than one year (or if the underlying mutual fund has
been effective for less than one year), standardized and non-standardized
performance is not annualized.
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SUB-ACCOUNT PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/99 to 12/31/99 to 12/31/99 Account
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio -1.61% N/A 11.07% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 29.06% N/A 28.90% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP High Income Portfolio 0.19% N/A 4.56% 11/01/96
- --------------------------------------------------------------------------------------------------------------------
VIP Money Market Portfolio -2.76% N/A 2.68% 11/01/96
- --------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 34.18% N/A 19.69% 11/01/96
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager Portfolio 3.09% N/A 12.03% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: Growth Portfolio 7.19% N/A 15.33% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) Portfolio 16.06% N/A 21.88% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond Portfolio -8.70% N/A 2.80% 11/01/96
- --------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Portfolio 12.37% N/A 22.71% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP III Balanced Portfolio -3.37% N/A 11.42% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income Portfolio 1.19% N/A 18.48% 01/20/97
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth Opportunities Portfolio -3.64% N/A 19.41% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/99
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Fund Effective
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio 4.84% 16.95% 12.89% 10/09/86
- --------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 35.51% 27.92% 18.26% 10/09/86
- --------------------------------------------------------------------------------------------------------------------
VIP High Income Portfolio 6.64% 9.31% 10.86% 09/19/85
- --------------------------------------------------------------------------------------------------------------------
VIP Money Market Portfolio 3.70% 4.01% 3.82% 04/01/82
- --------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 40.63% 15.73% 9.87% 01/28/87
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager Portfolio 9.54% 14.01% 11.57% 09/06/89
- --------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: Growth Portfolio 13.64% N/A 18.51% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) Portfolio 22.52% N/A 25.97% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade Bond Portfolio -2.43% 5.80% 5.69% 12/05/88
- --------------------------------------------------------------------------------------------------------------------
VIP II Index 500 Portfolio 18.82% 26.38% 19.41% 08/27/92
- --------------------------------------------------------------------------------------------------------------------
VIP III Balanced Portfolio 3.08% N/A 11.93% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income Portfolio 7.64% N/A 20.45% 12/31/96
- --------------------------------------------------------------------------------------------------------------------
VIP III Growth Opportunities Portfolio 2.81% N/A 19.83% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 45
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History..........................................1
Services.................................................................1
Purchase of Securities Being Offered.....................................2
Underwriters.............................................................2
Calculation of Performance...............................................2
Annuity Payments.........................................................3
Financial Statements.....................................................4
43
<PAGE> 46
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
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 annuity contracts. Fidelity
Management & Research Company ("FMR") is the manager for VIP and its portfolios.
VIP EQUITY-INCOME PORTFOLIO
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, FMR will
also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield that exceeds the composite yield on the securities
comprising the Standard & Poors 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 narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in this Portfolio may involve
greater risk than is inherent in other mutual funds. It is also important
to point out that the Portfolio makes most sense for you if you can afford
to ride out changes in the stock market, because it invests primarily in
common stocks. FMR 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 MONEY MARKET PORTFOLIO
Investment Objective: As high a level of current income as is consistent
with preserving capital and providing liquidity.
44
<PAGE> 47
The Portfolio will invest only in high quality U.S. dollar-denominated
money market securities of domestic and foreign issuers while seeking to
maintain a stable $1.00 share price. Investments in the Money Market
Portfolio are neither insured nor guaranteed by the U.S. Government and
there can be no assurance that the portfolio will maintain a stable $1.00
share price.
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: 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.
----------------------------------------------------------
Asset Manager: Range Neutral Mix
----------------------------------------------------------
Stock Class 30-70% 50%
----------------------------------------------------------
Bond Class 20-60% 40%
----------------------------------------------------------
Short-term Class 0-50% 10%
----------------------------------------------------------
VIP II ASSET MANAGER: GROWTH PORTFOLIO
Investment Objective: Maximum total return over the long-term by allocating
assets among the following classes or types of investment in a neutral mix:
the stock class, the bond class, short-term class/ money market class. The
Portfolio's more aggressive approach focuses primarily on stocks for high
potential returns.
----------------------------------------------------------
Asset Manager: Range Neutral Mix
Growth
----------------------------------------------------------
Stock Class 50-100% 70%
----------------------------------------------------------
Bond Class 0-50% 25%
----------------------------------------------------------
Short-term Class 0-50% 5%
----------------------------------------------------------
VIP II CONTRAFUND(R) PORTFOLIO
Investment Objective: 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.
VIP II INDEX 500 PORTFOLIO
Investment Objective: Investment results that correspond to the total
return of common stocks that comprise the Standard & Poor's 500 Composite
Stock Price Index (S&P 500). Normally, at least 80% of the Portfolio's
assets will be invested in equity securities of companies that comprise the
S&P 500. Although the Portfolio tries to allocate its assets similarly to
those of the S&P 500, the Portfolio's composition may not always be
identical to that of the S&P. In seeking a 98% or better long-term
correlation of the fund Bankers Trust may choose, if extraordinary
circumstances warrant, to exclude a stock held in the S&P 500 and include a
similar stock if doing so will help the Portfolio achieve its objective.
VIP II INVESTMENT GRADE BOND PORTFOLIO
Investment Objective: High level of current income as is consistent with
preservation of capital by investing primarily in obligations issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities. Under normal circumstances, at least 65% of the
Portfolio's total assets will be invested in
45
<PAGE> 48
investment-grade fixed-income securities such as debentures, bonds and
notes.
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 name was changed on December 30, 1996 from the
Fidelity Advisor Annuity Fund to the Fidelity Variable Insurance Products Fund
III. VIP III's shares are purchased by insurance companies to fund benefits
under variable life insurance policies and variable annuity contracts. FMR is
the Fund's manager.
VIP III BALANCED PORTFOLIO
Investment Objective: Income and growth of capital using a balanced
approach to provide the best possible total return from investments in a
diversified portfolio of equity and fixed-income securities with income,
growth of income and capital appreciation potential. FMR manages the
Portfolio to maintain a balance between stocks and bonds. When FMR's
outlook is neutral, it will invest approximately 60% of the Portfolio's
assets in stocks or other equity securities and the remainder in bonds. The
Portfolio will always invest at least 25% of its total assets in
fixed-income senior securities.
VIP III GROWTH & INCOME PORTFOLIO
Investment Objective: High total return through a combination of current
income and capital appreciation by investing mainly in equity securities.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio under
normal circumstances, 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.
46
<PAGE> 49
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
NO OPTIONAL DEATH BENEFITS ELECTED
(VARIABLE ACCOUNT CHARGES OF 1.40% OF THE DAILY
NET ASSETS OF THE VARIABLE ACCOUNT)
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 13.477888 14.130390 4.84% 1,695,231 1999
Portfolio - Q(1) 12.245396 13.477888 10.06% 1,732,312 1998
10.000000 12.245396 22.45% 1,102,775 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Equity-Income 13.477888 14.130390 4.84% 3,019,886 1999
Portfolio - NQ(1) 12.245396 13.477888 10.06% 2,789,952 1998
10.000000 12.245396 22.45% 1,900,080 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio - 15.969000 21.640361 35.51% 1,601,216 1999
Q(1) 11.610523 15.969000 37.54% 1,138,568 1998
10.000000 11.610523 16.11% 711,162 1997
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 15.969000 21.640361 35.51% 3,499,888 1999
Portfolio - NQ(3) 11.610523 15.969000 37.54% 2,009,283 1998
10.000000 11.610523 16.11% 1,186,843 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 11.187199 11.930180 6.64% 3,512,241 1999
Portfolio - Q(2) 11.859397 11.187199 -5.67% 4,158,432 1998
10.221866 11.859397 16.02% 3,723,025 1997
10.000000 10.221866 2.22% 2,287 1996
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 11.187199 11.930180 6.64% 7,547,236 1999
Portfolio - NQ(2) 11.859397 11.187199 -5.67% 8,642,408 1998
10.221866 11.859397 16.02% 8,132,611 1997
10.000000 10.221866 2.22% 12,210 1996
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.883253 11.285433 3.70% 1,547,965 1999
Portfolio - Q(*), (2) 10.065929 10.883253 8.12% 1,305,540 1998
10.063199 10.065929 0.03% 1,517,808 1997
10.000000 10.063199 0.63% 77,545 1996
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.883253 11.285433 3.70% 3,063,912 1999
Portfolio - NQ(*), (2) 10.465899 10.883253 8.12% 2,759,939 1998
10.063199 10.465899 0.03% 2,372,121 1997
10.000000 10.063199 0.63% 62,978 1996
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 7-day yield on the VIP Money Market Portfolio as of December 31, 1999
was 4.28%.
47
<PAGE> 50
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Overseas Portfolio 12.862332 18.088630 40.63% 1,594,341 1999
- - Q(2) 11.569690 12.862332 11.17% 1,730,887 1998
10.518503 11.569690 9.99% 1,594,615 1997
10.000000 10.518503 5.19% 4,339 1996
- ----------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 12.862332 18.088630 40.63% 3,514,876 1999
- - NQ(2) 11.569690 12.862332 11.17% 3,855,007 1998
11.518503 11.569690 9.99% 3,828,801 1997
10.000000 10.518503 5.19% 17,196 1996
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 13.216823 14.477303 9.54% 405,505 1999
Manager Portfolio - Q(3) 11.650850 13.216823 13.44% 351,207 1998
10.000000 11.650850 16.51% 234,516 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager 13.216823 14.477303 9.54% 824,691 1999
Portfolio - NQ(1) 11.650850 13.216823 13.44% 698,387 1998
10.000000 11.650850 16.51% 585,920 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 13.841884 15.730503 13.64% 279,404 1999
Growth Portfolio - Q(1) 11.940378 13.841884 15.93% 299,850 1998
10.000000 11.940378 19.40% 236,306 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 13.841884 15.730503 13.64% 629,730 1999
Growth Portfolio - NQ(1) 11.940378 13.841884 15.93% 576,240 1998
10.000000 11.940378 19.40% 412,776 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 15.036722 18.422344 22.52% 2,003,071 1999
Portfolio -Q(1) 11.732706 15.036722 28.16% 1,788,055 1998
10.000000 11.732706 17.33% 1,484,705 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 15.036722 18.422344 22.52% 4,068,308 1999
Portfolio - NQ(1) 11.732706 15.036722 28.16% 3,318,944 1998
10.000000 11.732706 17.33% 2,614,941 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade 11.609070 11.326409 -2.43% 1,254,764 1999
Bond Portfolio - Q(2) 10.817010 11.609070 7.32% 1,286,880 1998
10.059105 10.817010 7.53% 881,781 1997
10.000000 10.059105 0.59% 8,008 1996
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Investment Grade 11.609070 11.326409 -2.43% 2,232,584 1999
Bond Portfolio - NQ(2) 10.817010 11.609070 7.32% 2,102,024 1998
10.059105 10.817010 7.53% 1,572,576 1997
10.000000 10.059105 0.59% 1,732 1996
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 15.809112 18.785022 18.82% 1,356,828 1999
Portfolio - Q(1) 12.494291 15.809112 26.53% 1,111,939 1998
10.000000 12.494291 24.94% 687,172 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 15.809112 18.785022 18.82% 2,902,750 1999
Portfolio - NQ(1) 12.494291 15.809112 26.53% 2,367,722 1998
10.000000 12.494291 24.94% 1,471,434 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Balanced 17.022798 17.547850 3.08% 2,352,156 1999
Portfolio - Q 14.675543 17.022798 15.99% 2,652,827 1998
12.181451 14.675543 20.47% 2,672,535 1997
11.234358 12.181451 8.43% 2,291,575 1996
10.000000 11.234358 12.34% 975,789 1995
- ----------------------------------------------------------------------------------------------------------------------
VIP III Balanced 17.022798 17.547850 3.08% 5,436,492 1999
Portfolio - NQ 14.675543 17.022798 15.99% 6,102,782 1998
12.181451 14.675543 20.47% 6,127,776 1997
11.234358 12.181451 8.43% 5,374,512 1996
10.000000 11.234358 12.34% 2,441,208 1995
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 15.781386 16.987037 7.64% 1,145,440 1999
Portfolio - Q(1) 12.350709 15.781386 27.78% 968,478 1998
10.000000 12.350709 23.51% 641,220 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 15.781386 16.987037 7.64% 2,718,399 1999
Portfolio - NQ(1) 12.350709 15.781386 27.78% 2,375,755 1998
10.000000 12.350709 23.51% 1,370,152 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth 23.993138 24.667851 2.81% 7,527,710 1999
Opportunities Portfolio - Q 19.527096 23.993138 22.87% 8,127,546 1998
15.239855 19.527096 28.13% 8,514,753 1997
13.069019 15.239855 16.61% 6,415,213 1996
10.000000 13.069019 30.69% 2,965,497 1995
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Growth 23.993138 24.667851 2.81% 17,920,089 1999
Opportunities Portfolio - NQ 19.527096 23.993138 22.87% 20,287,152 1998
15.239855 19.527096 28.13% 20,154,563 1997
13.069019 15.239855 16.61% 16,114,264 1996
10.000000 13.069019 30.69% 8,130,130 1995
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These underlying mutual funds were added to the variable account on January
20, 1997. Condensed Financial Information for these funds for 1997 reflects
values from January 20, 1997 to December 31, 1997.
(2) These underlying mutual funds were added to the variable account on October
26, 1996. Condensed Financial Information for these funds for 1996 reflects
values from October 26, 1996 to December 31, 1996.
On March 14, 1997, pursuant to an SEC order, the following fund replacements
occurred:
a) the VIP High Income Portfolio replaced the Fidelity Advisor Annuity High
Yield Fund;
b) the VIP Money Market Portfolio replaced the Fidelity Advisor Annuity Money
Market Fund;
c) the VIP Overseas Portfolio replaced the Fidelity Advisor Annuity Overseas
Fund; and
d) the VIP II Investment Grade Bond Portfolio replaced the Fidelity Advisor
Annuity Government Investment Fund.
50
<PAGE> 53
<TABLE>
<CAPTION>
OPTIONAL ONE-YEAR STEP UP DEATH BENEFIT
ELECTED (VARIABLE ACCOUNT CHARGES OF 1.45% OF THE DAILY NET
ASSETS OF THE VARIABLE ACCOUNT)
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 11.368793 11.913142 4.79% 60,593 1999
Portfolio - Q 10.334399 11.368793 10.01% 41,419 1998
10.000000 10.334399 3.34% 1,233 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Equity-Income 11.368793 11.913142 4.79% 146,671 1999
Portfolio - NQ 10.334399 11.368793 10.01% 101,795 1998
10.000000 10.334399 3.34% 9,973 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio - Q 13.781993 18.667172 35.45% 78,768 1999
10.025497 13.781993 37.47% 38,516 1998
10.000000 10.025497 0.25% 1,555 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio - 13.781993 18.667172 35.45% 218,645 1999
NQ 10.025497 13.781993 37.47% 94,771 1998
10.000000 10.025497 0.25% 19,167 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 9.547168 10.176069 6.59% 79,734 1999
Portfolio - Q 10.125956 9.547168 -5.72% 55,178 1998
10.000000 10.125956 1.26% 12,121 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 9.547168 10.176069 6.59% 123,514 1999
Portfolio - NQ 10.125956 9.547168 -5.72% 99,132 1998
10.000000 10.125956 1.26% 6,193 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.462911 10.844055 3.64% 41,696 1999
Portfolio - Q(*) 10.066783 10.462911 3.94% 37,306 1998
10.000000 10.066783 0.67% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.462911 10.844055 3.64% 51,072 1999
Portfolio - NQ(*) 10.066783 10.462911 3.94% 111,460 1998
10.000000 10.066783 0.67% 103,446 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 10.994287 15.453729 40.56% 25,983 1999
- - Q 9.894400 10.994287 11.12% 20,502 1998
10.000000 9.894400 -1.06% 63 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 10.994287 15.453729 40.56% 39,558 1999
- - NQ 9.894400 10.994287 11.12% 27,574 1998
10.000000 9.894400 -1.06% 12,510 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 7-day yield on the Fidelity VIP Money Market Portfolio as of December
31, 1999 was 4.23%.
51
<PAGE> 54
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.575607 12.673141 9.48% 21,912 1999
Portfolio - Q 10.209261 11.575607 13.38% 4,399 1998
10.000000 10.209261 2.09% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager 11.575607 12.673141 9.48% 35,532 1999
Portfolio - NQ 10.209261 11.575607 13.38% 28,093 1998
10.000000 10.209261 2.09% 9,263 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 11.864403 13.476375 13.59% 11,295 1999
Growth Portfolio - Q 10.239737 11.864403 15.87% 9,734 1998
10.000000 10.239737 2.40% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 11.864403 13.476375 13.59% 12,166 1999
Growth Portfolio - NQ 10.239737 11.864403 15.87% 17,710 1998
10.000000 10.239737 2.40% 3,686 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 12.747959 18.422344 44.51% 54,385 1999
Portfolio -Q 9.951886 12.747959 28.10% 35,003 1998
10.000000 9.951886 -0.48% 913 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 12.747959 15.610339 22.45% 128,262 1999
Portfolio - NQ 9.951886 12.747959 28.10% 83,877 1998
10.000000 9.951886 -0.48% 9,371 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade 10.883913 10.613518 -2.48% 13,862 1999
Bond Portfolio - Q 10.146469 10.883913 7.27% 4,667 1998
10.000000 10.146469 1.46% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade 10.883913 10.613518 -2.48% 52,551 1999
Bond Portfolio - NQ 10.146469 10.883913 7.27% 6,209 1998
10.000000 10.146469 1.46% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 13.065126 15.516650 18.76% 46,530 1999
Portfolio - Q 10.330898 13.065126 26.47% 23,101 1998
10.000000 10.330898 3.31% 61 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 13.065126 15.516650 18.76% 127,837 1999
Portfolio - NQ 10.330898 13.065126 26.47% 68,636 1998
10.000000 10.330898 3.31% 3,644 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.909803 12.270926 3.03% 27,944 1999
Portfolio - Q 10.272783 11.909803 15.94% 23,691 1998
10.000000 10.272783 2.73% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Balanced 11.909803 12.270926 3.03% 74,853 1999
Portfolio - NQ 10.272783 11.909803 15.94% 46,788 1998
10.000000 10.272783 2.73% 8,383 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 13.287693 14.295582 7.59% 56,050 1999
Portfolio - Q 10.404380 13.287693 27.71% 36,694 1998
10.000000 10.404380 4.04% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 13.287693 14.295582 7.59% 97,471 1999
Portfolio - NQ 10.404380 13.287693 27.71% 80,881 1998
10.000000 10.404380 4.04% 6,119 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth 12.762442 13.114680 2.76% 151,722 1999
Opportunities Portfolio - Q 10.392122 12.762442 22.81% 114,036 1998
10.000000 10.392122 3.92% 2,407 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth 12.762442 13.114680 2.76% 312,763 1999
Opportunities Portfolio - NQ 10.392122 12.762442 22.81% 227,642 1998
10.000000 10.392122 3.92% 37,507 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These underlying mutual funds were added to the variable account on January
20, 1997. Condensed Financial Information for these funds for 1997 reflects
values from January 20, 1997 to December 31, 1997.
(2) These underlying mutual funds were added to the variable account on October
26, 1996. Condensed Financial Information for these funds for 1996 reflects
values from October 26, 1996 to December 31, 1996.
On March 14, 1997, pursuant to an SEC order, the following fund replacements
occurred:
e) the VIP High Income Portfolio replaced the Fidelity Advisor Annuity
High Yield Fund;
f) the VIP Money Market Portfolio replaced the Fidelity Advisor Annuity
Money Market Fund;
g) the VIP Overseas Portfolio replaced the Fidelity Advisor Annuity
Overseas Fund; and
h) the VIP II Investment Grade Bond Portfolio replaced the Fidelity
Advisor Annuity Government Investment Fund.
53
<PAGE> 56
<TABLE>
<CAPTION>
OPTIONAL 5% ENHANCED DEATH BENEFIT ELECTED
(VARIABLE ACCOUNT CHARGES OF 1.50% OF THE DAILY NET ASSETS
OF THE VARIABLE ACCOUNT)
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 11.362118 11.900112 4.73% 28,206 1999
Portfolio - Q 10.333567 11.362118 9.95% 24,656 1998
10.000000 10.333567 3.34% 2,158 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Equity-Income 11.362118 11.900112 4.73% 31,200 1999
Portfolio - NQ 10.333567 11.362118 9.95% 29,725 1998
10.000000 10.333567 3.34% 2,704 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio - Q 13.773906 18.646776 35.38% 37,563 1999
10.024687 13.773906 37.40% 30,523 1998
10.000000 10.024687 0.25% 1,085 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio - 13.773906 18.646776 35.38% 30,852 1999
NQ 10.024687 13.773906 37.40% 11,669 1998
10.000000 10.024687 0.25% 1,393 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 9.541553 10.164929 6.53% 30,522 1999
Portfolio - Q 10.125138 9.541553 -5.76% 11,405 1998
10.000000 10.125138 1.25% 2,387 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP High Income 9.541553 10.164929 6.53% 36,652 1999
Portfolio - NQ 10.125138 9.541553 -5.76% 34,631 1998
10.000000 10.125138 1.25% 4,150 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.456715 10.832134 3.59% 25,144 1999
Portfolio - Q(*) 10.065929 10.456715 3.88% 61,727 1998
10.000000 10.065929 0.66% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Money Market 10.456715 10.832134 3.59% 23,877 1999
Portfolio - NQ(*) 10.065929 10.456715 3.88% 10,039 1998
10.000000 10.065929 0.66% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 10.987826 15.436822 40.49% 7,933 1999
- - Q 9.893604 10.987826 11.06% 1,537 1998
10.000000 9.893604 -1.06% 400 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP Overseas Portfolio 10.987826 15.436822 40.49% 8,015 1999
- - NQ 9.893604 10.987826 11.06% 7,894 1998
10.000000 9.893604 -1.06% 3,338 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 7-day yield on the Fidelity VIP Money Market Portfolio as of December
31, 1999 was 4.18%.
54
<PAGE> 57
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.568800 12.659254 9.43% 2,118 1999
Portfolio - Q 10.208441 11.568800 13.33% 1,346 1998
10.000000 10.208441 2.09% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager 11.568800 12.659254 9.43% 14,021 1999
Portfolio - NQ 10.208441 11.568800 13.33% 9,296 1998
10.000000 10.208441 2.09% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 11.857417 13.461613 13.53% 3,397 1999
Growth Portfolio - Q 10.238907 11.857417 15.81% 0 1998
10.000000 10.238907 2.39% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Asset Manager: 11.857417 13.461613 13.53% 6,520 1999
Growth Portfolio - NQ 10.238907 11.857417 15.81% 6,520 1998
10.000000 10.238907 2.39% 1,231 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 12.740463 15.593260 22.39% 12,643 1999
Portfolio -Q 9.951081 12.740463 28.03% 2,116 1998
10.000000 9.951081 -0.49% 1,148 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Contrafund(R) 12.740463 15.593260 22.39% 23,346 1999
Portfolio - NQ 9.951081 12.740463 28.03% 19,726 1998
10.000000 9.951081 -0.49% 3,555 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade 10.877515 10.601902 -2.53% 9,626 1999
Bond Portfolio - Q 10.145651 10.877515 7.21% 2,596 1998
10.000000 10.145651 1.46% 1,718 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Investment Grade 10.877515 10.601902 -2.53% 9,188 1999
Bond Portfolio - NQ 10.145651 10.877515 7.21% 4,254 1998
10.000000 10.145651 1.46% 2,680 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 13.057468 15.499687 18.70% 18,437 1999
Portfolio - Q 10.330070 13.057468 26.40% 2,611 1998
10.000000 10.330070 3.30% 386 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP II Index 500 13.057468 15.499687 18.70% 40,607 1999
Portfolio - NQ 10.330070 13.057468 26.40% 24,391 1998
10.000000 10.330070 3.30% 1,382 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.902806 12.257491 2.98% 2,319 1999
Portfolio - Q 10.271954 11.902806 15.88% 1,398 1998
10.000000 10.271954 2.72% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Balanced 11.902806 12.257491 2.98% 20,233 1999
Portfolio - NQ 10.271954 11.902806 15.88% 7,406 1998
10.000000 10.271954 2.72% 1,363 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 13.279886 14.279936 7.53% 11,738 1999
Portfolio - Q 10.403545 13.279886 27.65% 1,884 1998
10.000000 10.403545 4.04% 0 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth & Income 13.279886 14.279936 7.53% 29,850 1999
Portfolio - NQ 10.403545 13.279886 27.65% 7,143 1998
10.000000 10.403545 4.04% 3,430 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth 12.754941 13.100322 2.71% 84,838 1999
Opportunities Portfolio - Q 10.391285 12.754941 22.75% 60,778 1998
10.000000 10.391285 3.91% 1,056 1997
- ----------------------------------------------------------------------------------------------------------------------
VIP III Growth 12.754941 13.100322 2.71% 76,283 1999
Opportunities Portfolio - NQ 10.391285 12.754941 22.75% 57,554 1998
10.000000 10.391285 3.91% 7,724 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These underlying mutual funds were added to the variable account on January
20, 1997. Condensed Financial Information for these funds for 1997 reflects
values from January 20, 1997 to December 31, 1997.
(2) These underlying mutual funds were added to the variable account on October
26, 1996. Condensed Financial Information for these funds for 1996 reflects
values from October 26, 1996 to December 31, 1996.
On March 14, 1997, pursuant to an SEC order, the following fund replacements
occurred:
i) the VIP High Income Portfolio replaced the Fidelity Advisor Annuity
High Yield Fund;
ii) the VIP Money Market Portfolio replaced the Fidelity Advisor Annuity
Money Market Fund;
iii) the VIP Overseas Portfolio replaced the Fidelity Advisor Annuity
Overseas Fund; and
iv) the VIP II Investment Grade Bond Portfolio replaced the Fidelity
Advisor Annuity Government Investment Fund.
56
<PAGE> 59
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
Modified Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Fidelity Advisor Variable Account
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 2000. The
prospectus may be obtained from Nationwide Life Insurance Company by writing
P.O. Box 182610, Columbus, Ohio 43216, or calling 1-800-494-1132, Voice Response
(available 24 hours) 1-800-573-2447, TDD 1-800-238-3035.
TABLE OF CONTENTS
Page
General Information and History.....................................1
Services............................................................1
Purchase of Securities Being Offered................................2
Underwriters........................................................2
Calculation of Performance..........................................2
Annuity Payments....................................................3
Financial Statements................................................4
General Information and History
The Nationwide Fidelity Advisor Variable Account is a separate investment
account of Nationwide Life Insurance Company ("Nationwide"). Nationwide is a
member of the group of companies and all of Nationwide's common stock is owned
by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company, as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of Nationwide group of companies. The Nationwide group of companies is
one of America's largest insurance and financial services family of companies,
with combined assets of over $120 billion as of December 31, 1999.
Services
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each such contract owner and
records with respect to the contract value of each contract.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide has entered into an agreement with the
adviser of the underlying mutual funds. The agreement relates to administrative
services furnished by Nationwide and provides for an annual fee based on the
average aggregate net assets of the variable account (and other separate
accounts of Nationwide or life insurance company subsidiaries of Nationwide)
invested in particular underlying mutual funds. These fees in no way affect the
net asset value of the underlying mutual funds or fees paid by the contract
owner.
1
<PAGE> 60
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934.
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Fidelity
Investments Institutional Services Company, Inc. ("Fidelity"), 82 Devonshire
Street, Boston, Massachusetts 02109. During fiscal year ending December 31,
1999, 1998 and 1997, no underwriting commissions were paid by Nationwide to
Fidelity.
CALCULATION OF PERFORMANCE
Any current yield quotations of the VIP Money Market Portfolio, subject to Rule
482 of the Securities Act of 1933, will consist of a seven calendar day
historical yield, carried at least to the nearest hundredth of a percent. The
yield will be calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. For period ending December
31, 1999, the VIP Money Market Portfolio's seven-day current unit value yield
was 4.13%. The VIP Money Market Portfolio's effective yield is computed
similarly but includes the effect of assumed compounding on an annualized basis
of the current unit value yield quotations of the fund. For the period ending
December 31, 1999, the seven-day effective yield was 4.22%.
The VIP Money Market Portfolio's yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
fund's portfolio, portfolio quality and average maturity, changes in interest
rates and the fund's expenses. Although the VIP Money Market Portfolio
determines its yield on the basis of a seven calendar day period, it may use a
different time period on occasion. The yield quotes may reflect the expense
limitation described "Investment Manager and Other Services" in the VIP Money
Market Portfolio's Statement of Additional Information. There is no assurance
that the yields quoted on any given occasion will remain in effect for any
period of time and there is no guarantee that the net asset values will remain
constant. It should be noted that a contract owner's investment in the VIP Money
Market Portfolio is not guaranteed or insured. Yields of other money market
funds may not be comparable if a different base period or another method of
calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual return is found by taking a
hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of a 1.55% mortality and expense risk and
2
<PAGE> 61
administration charge. The redeemable value also reflects the effect of any
applicable CDSC that may be imposed at the end of the period (see "Contingent
Deferred Sales Charge" located in the prospectus). No deduction is made for
premium taxes which may be assessed by certain states. Nonstandardized total
return may also be advertised, and is calculated in a manner similar to
standardized average annual total return except the nonstandardized total return
is based on a hypothetical initial investment of $25,000 and does not reflect
the deduction of any applicable CDSC. Reflecting the CDSC would decrease the
level of the performance advertised. The CDSC is not reflected because the
contract is designed for long term investment. An assumed initial investment of
$25,000 will be used because that figure more closely approximates the size of a
typical contract than does the $1,000 figure used in calculating the
standardized average annual total return quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available in the variable account if
the underlying mutual fund has not been available for one of the prescribed
periods. The nonstandardized annual total return will be based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the underlying mutual fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance is not a
guarantee of future performance. Factors affecting a sub-account's performance
include general market conditions, operating expenses and investment management.
A contract owner's account when redeemed may be more or less than the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 62
<PAGE> 1
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide Fidelity Advisor Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Fidelity Advisor Variable Account
(comprised of the sub-accounts listed in note 1(b)) (collectively, "the
Account") as of December 31, 1999, and the related statements of operations and
changes in contract owners' equity for each of the years in the two year period
then ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for each of the years in the two year period then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
2,902,368 shares (cost $69,467,151) .............................................................. $ 74,619,890
Fidelity VIP - Growth Portfolio (FidVIPGr)
2,312,478 shares (cost $96,013,107) .............................................................. 127,024,410
Fidelity VIP - High Income Portfolio (FidVIPHI)
12,706,546 shares (cost $150,987,101) ............................................................ 143,711,038
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
78,687,079 shares (cost $78,687,079) ............................................................. 78,687,079
Fidelity VIP - Overseas Portfolio (FidVIPOv)
3,754,242 shares (cost $71,830,878) .............................................................. 103,016,398
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
1,061,031 shares (cost $18,298,133) .............................................................. 19,809,453
Fidelity VIP-II - Asset Manager: Growth Portfolio (FidVIPAMGr)
856,851 shares (cost $13,594,052) ................................................................ 15,748,921
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
4,296,593 shares (cost $89,038,937) .............................................................. 125,245,687
Fidelity VIP-II - Index 500 Portfolio (FidVIPI500)
1,015,071 shares (cost $136,133,517) ............................................................. 169,933,008
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
5,438,385 shares (cost $66,793,448) .............................................................. 66,130,759
Fidelity VIP-III - Balanced Portfolio (FidVIPBal)
9,583,535 shares (cost $117,309,481) ............................................................. 153,336,553
Fidelity VIP-III - Growth and Income Portfolio (FidVIPGrIn)
4,236,017 shares (cost $58,229,067) .............................................................. 73,283,087
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
30,567,233 shares (cost $477,068,635) ............................................................ 707,631,441
Fidelity VIP-III - Mid Cap Portfolio (FidVIPMCap)
17,682 shares (cost $232,419) .................................................................... 269,656
Fidelity VIP - Equity-Income Portfolio: Service Class (FidVIPEIS)
1,573,819 shares (cost $39,558,028) .............................................................. 40,384,186
Fidelity VIP - Growth Portfolio: Service Class (FidVIPGrS)
1,682,874 shares (cost $73,995,915) .............................................................. 92,221,471
Fidelity VIP - High Income Portfolio: Service Class (FidVIPHIS)
3,559,048 shares (cost $41,014,450) .............................................................. 40,146,057
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Fidelity VIP - Overseas Portfolio: Service Class (FidVIPOvS)
749,598 shares (cost $15,869,957) ................................................................ 20,523,983
Fidelity VIP-II - Asset Manager Portfolio: Service Class (FidVIPAMS)
607,331 shares (cost $10,496,262) ................................................................ 11,290,278
Fidelity VIP-II - Asset Manager: Growth Portfolio: Service Class (FidVIPAMGrS)
439,736 shares (cost $7,186,090) ................................................................. 8,038,382
Fidelity VIP-II - Contrafund Portfolio: Service Class (FidVIPConS)
1,933,703 shares (cost $46,848,303) .............................................................. 56,270,761
Fidelity VIP-III - Balanced Portfolio: Service Class (FidVIPBalS)
1,669,806 shares (cost $25,880,147) .............................................................. 26,616,704
Fidelity VIP-III - Growth and Income Portfolio: Service Class (FidVIPGrInS)
3,425,013 shares (cost $54,057,029) .............................................................. 59,047,225
Fidelity VIP-III - Growth Opportunities Portfolio: Service Class (FidVIPGrOpS)
4,507,579 shares (cost $97,287,198) .............................................................. 104,215,235
Fidelity VIP-III - Mid Cap Portfolio: Service Class (FidVIPMCapS)
281,363 shares (cost $3,662,819) ................................................................. 4,287,971
---------------
Total investments ............................................................................. 2,321,489,633
Accounts receivable..................................................................................... 1,738
---------------
Total assets................................................................................... 2,321,491,371
ACCOUNTS PAYABLE........................................................................................... 2,338
---------------
CONTRACT OWNERS' EQUITY (NOTE 4)........................................................................... $ 2,321,489,033
===============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 4
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
- --------------------------
STATEMENTS OF OPERATIONS
- --------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
TOTAL EQUITY-INCOME PORTFOLIO
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 39,919,462 28,746,293 993,026 600,150
Mortality, expense and administration
charges (note 2)..................... (27,195,016) (20,894,395) (1,026,362) (822,437)
------------- ------------- ------------- -------------
Net investment activity.............. 12,724,446 7,851,898 (33,336) (222,287)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 355,318,443 221,265,915 6,778,520 3,724,216
Cost of mutual fund shares sold........ (288,004,397) (192,745,675) (5,148,569) (3,440,172)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 67,314,046 28,520,240 1,629,951 284,044
Change in unrealized gain (loss)
on investments....................... 69,194,861 152,688,719 (708,537) 2,285,323
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 136,508,907 181,208,959 921,414 2,569,367
------------- ------------- ------------- -------------
Reinvested capital gains............... 42,261,919 51,573,229 2,195,110 2,135,830
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 191,495,272 240,634,086 3,083,188 4,482,910
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 504,325,224 439,055,602 9,900,333 24,438,255
Transfers between funds................ - - (618,361) 3,516,796
Redemptions............................ (190,416,697) (95,841,935) (4,720,663) (4,045,164)
Annuity benefits....................... (85,693) (45,976) (1,431) (1,314)
Annual contract maintenance charge
(note 2)............................. (158,183) (135,080) (5,876) (3,209)
Contingent deferred sales charges
(note 2)............................. (3,988,925) (1,866,659) (100,888) (128,773)
Adjustments to maintain reserves....... 5,308 4,599 722 (823)
------------- ------------- ------------- -------------
Net equity transactions............ 309,681,034 341,170,551 4,453,836 23,775,768
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 501,176,306 581,804,637 7,537,024 28,258,678
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 1,820,312,727 1,238,508,090 67,083,656 38,824,978
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $2,321,489,033 1,820,312,727 74,620,680 67,083,656
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
- --------------------------
STATEMENTS OF OPERATIONS
- --------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
GROWTH PORTFOLIO HIGH INCOME PORTFOLIO
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 103,367 133,285 14,171,585 10,862,359
Mortality, expense and administration
charges (note 2)..................... (1,152,699) (533,598) (2,116,727) (2,222,960)
------------- -------------- -------------- -------------
Net investment activity.............. (1,049,332) (400,313) 12,054,858 8,639,399
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold.. 6,939,156 2,870,100 52,776,329 34,158,097
Cost of mutual fund shares sold........ (4,828,896) (2,481,565) (55,942,989) (34,536,377)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 2,110,260 388,535 (3,166,660) (378,280)
Change in unrealized gain (loss)
on investments....................... 20,166,961 9,302,636 767,153 (24,528,745)
------------- -------------- -------------- -------------
Net gain (loss) on investments....... 22,277,221 9,691,171 (2,399,507) (24,907,025)
------------- -------------- -------------- -------------
Reinvested capital gains............... 6,499,195 3,486,467 529,779 6,902,124
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 27,727,084 12,777,325 10,185,130 (9,365,502)
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 16,137,604 16,985,566 9,395,187 28,906,593
Transfers between funds................ 33,381,036 4,184,630 (15,621,078) (3,894,607)
Redemptions............................ (6,117,319) (1,597,186) (14,372,343) (10,314,646)
Annuity benefits....................... - - (4,954) (1,828)
Annual contract maintenance charge
(note 2)............................. (6,152) (2,420) (9,612) (9,856)
Contingent deferred sales charges
(note 2)............................. (161,209) (33,687) (279,317) (221,320)
Adjustments to maintain reserves....... 1,147 433 1,314 (509)
------------- -------------- -------------- -------------
Net equity transactions............ 43,235,107 19,537,336 (20,890,803) 14,463,827
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 70,962,191 32,314,661 (10,705,673) 5,098,325
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 56,063,413 23,748,752 154,419,836 149,321,511
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 127,025,604 56,063,413 143,714,163 154,419,836
============= ============== ============== =============
</TABLE>
<PAGE> 5
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ---------------------------------------
STATEMENTS OF OPERATIONS, continued
- ---------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO OVERSEAS PORTFOLIO
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 3,667,236 2,729,931 1,213,755 1,390,058
Mortality, expense and administration
charges (note 2)..................... (952,178) (697,090) (1,151,010) (1,101,471)
------------- ------------- ------------- -------------
Net investment activity.............. 2,715,058 2,032,841 62,745 288,587
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold. 90,941,316 86,064,942 16,874,287 9,164,560
Cost of mutual fund shares sold........ (90,941,316) (86,064,942) (14,193,657) (8,380,638)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. - - 2,680,630 783,922
Change in unrealized gain (loss)
on investments....................... - - 25,185,085 2,431,247
------------- ------------- ------------- -------------
Net gain (loss) on investments....... - - 27,865,715 3,215,169
------------- ------------- ------------- -------------
Reinvested capital gains............... - - 1,957,670 4,097,014
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 2,715,058 2,032,841 29,886,130 7,600,770
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 26,511,672 36,787,840 3,262,244 8,735,152
Transfers between funds................ 9,240,481 (10,592,420) (2,781,022) (1,473,900)
Redemptions............................ (22,510,342) (8,446,229) (6,667,363) (4,144,730)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. (3,937) (2,787) (7,815) (7,644)
Contingent deferred sales charges
(note 2)............................. (532,748) (175,051) (122,323) (92,445)
Adjustments to maintain reserves....... 1,229 184 3,278 542
------------- ------------- ------------- -------------
Net equity transactions............ 12,706,355 17,571,537 (6,313,001) 3,016,975
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 15,421,413 19,604,378 23,573,129 10,617,745
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 63,266,840 43,662,462 79,447,569 68,829,824
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 78,688,253 63,266,840 103,020,698 79,447,569
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ---------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ---------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSET MANAGER:
ASSET MANAGER PORTFOLIO GROWTH PORTFOLIO
---------------------------- ------------------------------
1999 1998 1999 1998
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 515,103 350,865 330,314 182,827
Mortality, expense and administration
charges (note 2)..................... (246,299) (181,029) (205,584) (152,576)
------------- -------------- -------------- -------------
Net investment activity.............. 268,804 169,836 124,730 30,251
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold. 2,724,342 2,121,060 2,272,692 905,852
Cost of mutual fund shares sold........ (2,487,275) (1,920,469) (1,823,515) (823,932)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 237,067 200,591 449,177 81,920
Change in unrealized gain (loss)
on investments....................... 530,833 209,940 769,030 583,636
------------- -------------- -------------- -------------
Net gain (loss) on investments....... 767,900 410,531 1,218,207 665,556
------------- -------------- -------------- -------------
Reinvested capital gains............... 652,464 1,052,595 547,838 854,987
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 1,689,168 1,632,962 1,890,775 1,550,794
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 2,953,233 4,059,284 1,761,923 3,545,378
Transfers between funds................ 1,397,881 109,848 266,037 202,313
Redemptions............................ (1,361,279) (658,699) (1,359,200) (345,606)
Annuity benefits....................... (20,740) (16,169) - -
Annual contract maintenance charge
(note 2)............................. (1,232) (606) (1,216) (673)
Contingent deferred sales charges
(note 2)............................. (16,832) (5,683) (33,461) (4,350)
Adjustments to maintain reserves....... (227) (2,123) (402) 66
------------- -------------- -------------- -------------
Net equity transactions............ 2,950,804 3,485,852 633,681 3,397,128
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 4,639,972 5,118,814 2,524,456 4,947,922
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 15,168,982 10,050,168 13,224,069 8,276,147
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 19,808,954 15,168,982 15,748,525 13,224,069
============= ============== ============== =============
(Continued)
</TABLE>
<PAGE> 6
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
CONTRAFUND PORTFOLIO INDEX 500 PORTFOLIO
----------------------------- -----------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 428,489 374,985 795,231 369,216
Mortality, expense and administration
charges (note 2)..................... (1,440,777) (932,430) (1,520,745) (673,776)
------------- ------------- ------------- -------------
Net investment activity.............. (1,012,288) (557,445) (725,514) (304,560)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 7,844,113 4,899,088 5,985,851 2,653,129
Cost of mutual fund shares sold........ (5,051,434) (4,114,192) (3,713,122) (2,072,374)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 2,792,679 784,896 2,272,729 580,755
Change in unrealized gain (loss)
on investments....................... 16,939,484 14,022,891 20,210,817 10,718,449
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 19,732,163 14,807,787 22,483,546 11,299,204
------------- ------------- ------------- -------------
Reinvested capital gains............... 3,142,250 2,758,815 539,621 855,170
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 21,862,125 17,009,157 22,297,653 11,849,814
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 15,425,435 17,410,532 68,490,724 29,555,745
Transfers between funds................ 12,598,577 1,764,382 11,972,027 7,332,209
Redemptions............................ (9,111,482) (2,918,682) (7,784,885) (2,251,651)
Annuity benefits....................... (5,188) (1,385) (4,205) -
Annual contract maintenance charge
(note 2)............................. (9,550) (6,037) (7,966) (3,966)
Contingent deferred sales charges
(note 2)............................. (241,426) (55,124) (192,353) (35,351)
Adjustments to maintain reserves....... 1,500 441 10,932 87
------------- ------------- ------------- -------------
Net equity transactions............ 18,657,866 16,194,127 72,484,274 34,597,073
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 40,519,991 33,203,284 94,781,927 46,446,887
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 84,727,181 51,523,897 75,161,985 28,715,098
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 125,247,172 84,727,181 169,943,912 75,161,985
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
INVESTMENT GRADE
BOND PORTFOLIO BALANCED PORTFOLIO
------------------------------ ------------------------------
1999 1998 1999 1998
------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 2,225,217 1,397,192 3,795,276 3,537,100
Mortality, expense and administration
charges (note 2)..................... (797,506) (533,396) (2,269,625) (2,176,307)
------------- -------------- -------------- -------------
Net investment activity.............. 1,427,711 863,796 1,525,651 1,360,793
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold.. 13,760,323 5,690,626 22,627,268 8,612,916
Cost of mutual fund shares sold........ (13,257,389) (5,213,813) (15,722,285) (6,109,489)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 502,934 476,813 6,904,983 2,503,427
Change in unrealized gain (loss)
on investments....................... (4,009,453) 1,274,245 (7,941,415) 13,665,547
------------- -------------- -------------- -------------
Net gain (loss) on investments....... (3,506,519) 1,751,058 (1,036,432) 16,168,974
------------- -------------- -------------- -------------
Reinvested capital gains............... 698,107 165,769 4,410,726 5,403,903
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... (1,380,701) 2,780,623 4,899,945 22,933,670
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 22,958,668 17,009,962 8,215,363 12,361,983
Transfers between funds................ (3,773,589) 8,470,608 (9,589,452) (1,896,771)
Redemptions............................ (5,679,223) (2,606,263) (15,577,451) (9,908,416)
Annuity benefits....................... (18,508) (15,041) (11,164) (1,259)
Annual contract maintenance charge
(note 2)............................. (2,389) (2,087) (14,592) (15,153)
Contingent deferred sales charges
(note 2)............................. (97,638) (50,558) (268,374) (187,285)
Adjustments to maintain reserves....... 668 (1,468) (7,121) 1,390
------------- -------------- -------------- -------------
Net equity transactions............ 13,387,989 22,805,153 (17,252,791) 354,489
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 12,007,288 25,585,776 (12,352,846) 23,288,159
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 54,123,958 28,538,182 165,682,211 142,394,052
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 66,131,246 54,123,958 153,329,365 165,682,211
============= ============== ============== =============
</TABLE>
<PAGE> 7
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
GROWTH AND INCOME GROWTH OPPORTUNITIES
PORTFOLIO PORTFOLIO
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 372,758 - 7,748,077 6,818,325
Mortality, expense and administration
charges (note 2)..................... (948,551) (581,739) (10,462,359) (9,645,696)
------------- ------------- ------------- -------------
Net investment activity.............. (575,793) (581,739) (2,714,282) (2,827,371)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 5,802,414 1,675,936 105,656,801 53,776,742
Cost of mutual fund shares sold........ (3,554,954) (1,294,541) (57,792,437) (31,095,663)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 2,247,460 381,395 47,864,364 22,681,079
Change in unrealized gain (loss)
on investments....................... 2,419,029 10,320,823 (39,675,231) 99,720,539
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 4,666,489 10,702,218 8,189,133 122,401,618
------------- ------------- ------------- -------------
Reinvested capital gains............... 745,516 158,758 14,485,535 23,701,797
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 4,836,212 10,279,237 19,960,386 143,276,044
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 12,202,803 15,826,845 35,348,699 77,524,904
Transfers between funds................ 5,105,328 7,690,493 (49,733,277) (19,480,824)
Redemptions............................ (6,070,004) (2,487,061) (71,916,086) (43,447,338)
Annuity benefits....................... (2,553) - (16,950) (8,980)
Annual contract maintenance charge
(note 2)............................. (4,794) (2,083) (82,987) (78,559)
Contingent deferred sales charges
(note 2)............................. (138,826) (28,510) (1,433,194) (833,269)
Adjustments to maintain reserves....... (95) 570 (11,788) 5,680
------------- ------------- ------------- -------------
Net equity transactions............ 11,091,859 21,000,254 (87,845,583) 13,681,614
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 15,928,071 31,279,491 (67,885,197) 156,957,658
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 57,354,937 26,075,446 775,505,231 618,547,573
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 73,283,008 57,354,937 707,620,034 775,505,231
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EQUITY-INCOME PORTFOLIO:
MID CAP PORTFOLIO SERVICE CLASS
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. - - 298,320 -
Mortality, expense and administration
charges (note 2)..................... (672) - (290,562) (84,773)
------------- -------------- -------------- -------------
Net investment activity.............. (672) - 7,758 (84,773)
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold.. 932 - 1,839,482 655,853
Cost of mutual fund shares sold........ (799) - (1,818,247) (673,141)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 133 - 21,235 (17,288)
Change in unrealized gain (loss)
on investments....................... 37,237 - 140,395 685,763
------------- -------------- -------------- -------------
Net gain (loss) on investments....... 37,370 - 161,630 668,475
------------- -------------- -------------- -------------
Reinvested capital gains............... 1,264 - 659,443 -
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 37,962 - 828,831 583,702
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 40,902 - 23,779,450 18,948,835
Transfers between funds................ 182,565 - (1,788,457) 91,604
Redemptions............................ (377) - (1,642,855) (375,768)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. (65) - - -
Contingent deferred sales charges
(note 2)............................. (8) - (39,300) (1,837)
Adjustments to maintain reserves....... 8,682 - (384) (21)
------------- -------------- -------------- -------------
Net equity transactions............ 231,699 - 20,308,454 18,662,813
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 269,661 - 21,137,285 19,246,515
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD - - 19,246,515 -
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 269,661 - 40,383,800 19,246,515
============= ============== ============== =============
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
GROWTH PORTFOLIO: HIGH INCOME PORTFOLIO:
SERVICE CLASS SERVICE CLASS
----------------------------- --------------------------
1999 1998 1999 1998
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 40,526 - 1,960,183 -
Mortality, expense and administration
charges (note 2)..................... (468,624) (70,401) (295,991) (98,519)
------------- ------------- ------------- -------------
Net investment activity.............. (428,098) (70,401) 1,664,192 (98,519)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 1,602,670 390,810 1,945,198 1,922,952
Cost of mutual fund shares sold........ (1,268,901) (352,615) (2,206,986) (2,195,994)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 333,769 38,195 (261,788) (273,042)
Change in unrealized gain (loss)
on investments....................... 15,360,977 2,864,579 228,456 (1,096,849)
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 15,694,746 2,902,774 (33,332) (1,369,891)
------------- ------------- ------------- -------------
Reinvested capital gains............... 2,548,095 - 73,278 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 17,814,743 2,832,373 1,704,138 (1,468,410)
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 52,001,832 15,833,951 22,326,324 22,844,703
Transfers between funds................ 5,978,794 979,486 (1,792,562) (1,225,535)
Redemptions............................ (2,836,596) (312,595) (1,696,493) (500,261)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. - - - -
Contingent deferred sales charges
(note 2)............................. (67,454) (3,166) (42,576) (3,207)
Adjustments to maintain reserves....... 20 117 (173) (68)
------------- ------------- ------------- -------------
Net equity transactions............ 55,076,596 16,497,793 18,794,520 21,115,632
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 72,891,339 19,330,166 20,498,658 19,647,222
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 19,330,166 - 19,647,222 -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 92,221,505 19,330,166 40,145,880 19,647,222
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- --------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- --------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OVERSEAS PORTFOLIO: ASSET MANAGER PORTFOLIO:
SERVICE CLASS SERVICE CLASS
-------------------------- ------------------------------
1999 1998 1999 1998
------------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 100,837 - 134,952 -
Mortality, expense and administration
charges (note 2)..................... (102,725) (24,548) (72,947) (11,681)
------------- -------------- -------------- -------------
Net investment activity.............. (1,888) (24,548) 62,005 (11,681)
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold.. 1,766,815 282,331 1,744,637 71,477
Cost of mutual fund shares sold........ (1,713,117) (301,072) (1,708,284) (73,296)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 53,698 (18,741) 36,353 (1,819)
Change in unrealized gain (loss)
on investments....................... 4,550,431 103,595 567,272 226,745
------------- -------------- -------------- -------------
Net gain (loss) on investments....... 4,604,129 84,854 603,625 224,926
------------- -------------- -------------- -------------
Reinvested capital gains............... 162,640 - 170,940 -
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 4,764,881 60,306 836,570 213,245
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 8,034,832 5,217,109 6,690,715 3,392,283
Transfers between funds................ 2,565,902 653,623 249,737 135,795
Redemptions............................ (684,205) (66,607) (204,064) (22,375)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. - - - -
Contingent deferred sales charges
(note 2)............................. (21,432) (416) (1,268) (354)
Adjustments to maintain reserves....... 149 (10) (65) (5)
------------- -------------- -------------- -------------
Net equity transactions............ 9,895,246 5,803,699 6,735,055 3,505,344
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 14,660,127 5,864,005 7,571,625 3,718,589
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 5,864,005 - 3,718,589 -
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 20,524,132 5,864,005 11,290,214 3,718,589
============= ============== ============== =============
</TABLE>
<PAGE> 9
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSET MANAGER: CONTRAFUND PORTFOLIO:
GROWTH PORTFOLIO: SERVICE CLASS SERVICE CLASS
------------------------------ -----------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 68,429 - 80,508 -
Mortality, expense and administration
charges (note 2)..................... (51,315) (9,642) (313,528) (53,824)
------------- ------------- ------------- -------------
Net investment activity.............. 17,114 (9,642) (233,020) (53,824)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 802,884 219,864 1,106,117 194,844
Cost of mutual fund shares sold........ (762,726) (231,538) (901,194) (190,062)
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 40,158 (11,674) 204,923 4,782
Change in unrealized gain (loss)
on investments....................... 648,775 203,517 7,493,236 1,929,222
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 688,933 191,843 7,698,159 1,934,004
------------- ------------- ------------- -------------
Reinvested capital gains............... 113,492 - 590,393 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 819,539 182,201 8,055,532 1,880,180
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 5,004,654 2,398,093 32,606,438 11,884,096
Transfers between funds................ (34,469) (35,776) 2,642,289 1,287,064
Redemptions............................ (248,840) (46,097) (1,829,360) (222,049)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. - - - -
Contingent deferred sales charges
(note 2)............................. (857) (60) (33,171) (326)
Adjustments to maintain reserves....... (58) (14) (232) 84
------------- ------------- ------------- -------------
Net equity transactions............ 4,720,430 2,316,146 33,385,964 12,948,869
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 5,539,969 2,498,347 41,441,496 14,829,049
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 2,498,347 - 14,829,049 -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 8,038,316 2,498,347 56,270,545 14,829,049
============= ============= ============= =============
</TABLE>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
BALANCED PORTFOLIO: GROWTH AND INCOME PORTFOLIO:
SERVICE CLASS SERVICE CLASS
------------------------------ -------------------------------
1999 1998 1999 1998
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 260,297 - 131,543 -
Mortality, expense and administration
charges (note 2)..................... (180,232) (32,398) (376,339) (64,178)
------------- -------------- -------------- -------------
Net investment activity.............. 80,065 (32,398) (244,796) (64,178)
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold.. 616,455 235,493 868,921 801,099
Cost of mutual fund shares sold........ (595,209) (233,390) (747,360) (781,432)
------------- -------------- -------------- -------------
Realized gain (loss) on investments.. 21,246 2,103 121,561 19,667
Change in unrealized gain (loss)
on investments....................... 186,954 549,603 2,931,577 2,058,619
------------- -------------- -------------- -------------
Net gain (loss) on investments....... 208,200 551,706 3,053,138 2,078,286
------------- -------------- -------------- -------------
Reinvested capital gains............... 302,507 - 263,087 -
------------- -------------- -------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 590,772 519,308 3,071,429 2,014,108
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 18,024,696 8,771,958 38,417,327 15,905,391
Transfers between funds................ (317,408) 389,137 1,847,772 692,100
Redemptions............................ (1,210,011) (130,919) (2,606,487) (251,704)
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. - - - -
Contingent deferred sales charges
(note 2)............................. (20,126) (636) (42,609) (160)
Adjustments to maintain reserves....... 14 (59) (819) 48
------------- -------------- -------------- -------------
Net equity transactions............ 16,477,165 9,029,481 37,615,184 16,345,675
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 17,067,937 9,548,789 40,686,613 18,359,783
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 9,548,789 - 18,359,783 -
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... 26,616,726 9,548,789 59,046,396 18,359,783
============= ============== ============== =============
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ---------------------------------------
STATEMENTS OF OPERATIONS, Continued
- ---------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
GROWTH OPPORTUNITIES MID CAP PORTFOLIO:
PORTFOLIO: SERVICE CLASS SERVICE CLASS
----------------------------- -----------------------------
1999 1998 1999 1998
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 484,433 - - -
Mortality, expense and administration
charges (note 2)..................... (743,471) (189,926) (8,188) -
------------- ------------- ------------- -------------
Net investment activity.............. (259,038) (189,926) (8,188) -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold.. 1,315,160 173,928 725,760 -
Cost of mutual fund shares sold........ (1,142,684) (164,968) (681,052) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments.. 172,476 8,960 44,708 -
Change in unrealized gain (loss)
on investments....................... 1,770,643 5,157,394 625,152 -
------------- ------------- ------------- -------------
Net gain (loss) on investments....... 1,943,119 5,166,354 669,860 -
------------- ------------- ------------- -------------
Reinvested capital gains............... 946,847 - 26,122 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract
owners equity resulting from
operations....................... 2,630,928 4,976,428 687,794 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 62,971,895 40,711,144 1,862,271 -
Transfers between funds................ (3,133,553) 1,099,745 1,754,802 -
Redemptions............................ (4,193,116) (741,889) (16,653) -
Annuity benefits....................... - - - -
Annual contract maintenance charge
(note 2)............................. - - - -
Contingent deferred sales charges
(note 2)............................. (101,294) (5,091) (241) -
Adjustments to maintain reserves....... (2,952) 57 (31) -
------------- ------------- ------------- -------------
Net equity transactions............ 55,540,980 41,063,966 3,600,148 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 58,171,908 46,040,394 4,287,942 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 46,040,394 - - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 104,212,302 46,040,394 4,287,942 -
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 11
- --------------------------------------------------------------------------------
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide Fidelity Advisor Variable Account (the Account) was
established pursuant to a resolution of the Board of Directors of
Nationwide Life Insurance Company (the Company) on July 22, 1994. The
Account has been registered as a unit investment trust under the
Investment Company Act of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts, and Individual Modified Single
Premium Deferred Variable Annuity Contracts through the Account. The
primary distribution for the contracts is through Fidelity
Investments(R).
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in any of the following:
Funds available in the Fidelity Advisor Classic and Select
Products:
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
(also available in the Fidelity Advisor Generations product)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund
II(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Asset Manager: Growth Portfolio
(FidVIPAMGr)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
Fidelity VIP-II - Index 500 Portfolio (FidVIPI500)
(also available in the Fidelity Advisor Generations product)
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
(also available in the Fidelity Advisor Generations Annuity
product)
Portfolios of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Balanced Portfolio (FidVIPBal)
Fidelity VIP-III - Growth and Income Portfolio (FidVIPGrIn)
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
Fidelity VIP-III - Mid Cap Portfolio (FidVIPMCap)
Funds available in the Fidelity Advisor Generations product:
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio: Service Class
(FidVIPEIS)
Fidelity VIP - Growth Portfolio: Service Class (FidVIPGrS)
Fidelity VIP - High Income Portfolio: Service Class (FidVIPHIS)
Fidelity VIP - Overseas Portfolio: Service Class (FidVIPOvS)
Portfolios of the Fidelity Variable Insurance Products Fund
II (Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio: Service Class
(FidVIPAMS)
Fidelity VIP-II - Asset Manager: Growth Portfolio: Service
Class (FidVIPAMGrS)
Fidelity VIP-II - Contrafund Portfolio: Service Class
(FidVIPConS)
(Continued)
<PAGE> 12
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Portfolios of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Balanced Portfolio: Service Class
(FidVIPBalS)
Fidelity VIP-III - Growth and Income Portfolio: Service Class
(FidVIPGrInS)
Fidelity VIP-III - Growth Opportunities Portfolio: Service
Class (FidVIPGrOpS)
Fidelity VIP-III - Mid Cap Portfolio: Service Class
(FidVIPMCapS)
At December 31, 1999, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are 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.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1999. The cost of investments
sold is determined on a specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
<PAGE> 13
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge, not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The following contract charges are deducted by the Company:
For Fidelity Advisor Generations Annuity contracts a mortality and expense
risk charge assessed through the daily unit value calculation that ranges
from an annual rate of .95% to a maximum of 2.20% if all permissible rider
options are utilized. For this contract, the rider options include: (a)
reduced purchase payment; (b) five year CDSC; (c) CDSC waiver; (d) death
benefit and (e) guaranteed minimum income benefit.
For Fidelity Advisor Annuity Select contracts a mortality risk, expense
risk and administration charge assessed through the daily unit value
calculation that ranges from an annual rate of 1.40% to a maximum of 1.55%
if the death benefit option is utilized.
For Fidelity Advisor Annuity Classic contracts a mortality risk, expense
risk and administration charge assessed through the daily unit value
calculation equal to an annual rate of 1.30%. Additionally, a contract
maintenance charge of up to $30, dependent upon contract type and issue
date, is satisfied by surrendering units.
The following table provides mortality, expense and administration charges
by asset fee rate for the year ended December 31, 1999:
<TABLE>
<CAPTION>
TOTAL FidVIPEI FidVIPGr FidVIPHI FidVIPMMkt
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0.95%........... $ 1,712,052 - - - 81,633
1.00%........... 1,549,618 - - - 49,462
1.05%........... 408,890 - - - 26,980
1.10%........... 2,810 - - - 109
1.15%........... 5,974 - - - 12
1.20%........... 845 - - - 114
1.25%........... 773 - - - 24
1.30%........... 1,874,456 58,541 73,477 125,304 51,843
1.40%........... 21,197,887 926,141 1,018,226 1,956,367 714,208
1.45%........... 339,449 33,374 48,422 26,775 16,137
1.50%........... 102,135 8,306 12,574 8,281 11,656
1.60%........... 96 - - - -
1.65%........... 3 - - - -
1.85%........... 28 - - - -
------------ ------------ ------------ ------------ ------------
Total....... $ 27,195,016 1,026,362 1,152,699 2,116,727 952,178
============ ============ ============ ============ ============
FidVIPov FidVIPAM FidVIPAMGr FidVIPCon FidVIPI500
------------ ------------ ------------ ------------ ------------
0.95%........... $ - - - - 251,973
1.00%........... - - - - 160,189
1.05%........... - - - - 35,886
1.10%........... - - - - 442
1.15%........... - - - - 64
1.20%........... - - - - 140
1.25%........... - - - - 54
1.30%........... 95,693 11,508 10,887 102,254 79,082
1.40%........... 1,043,235 223,408 188,280 1,301,653 953,425
1.45%........... 9,978 8,592 4,787 30,854 28,682
1.50%........... 2,104 2,791 1,630 6,016 10,755
1.60%........... - - - - 38
1.65%........... - - - - 1
1.85%........... - - - - 14
------------ ------------ ------------ ------------ ------------
Total....... $ 1,151,010 246,299 205,584 1,440,777 1,520,745
============ ============ ============ ============ ============
(Continued)
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FidVIPIGBd FidVIPBal FidVIPGrIn FidVIPGrOp FidVIPMCap
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0.95%............ $ 74,866 - - - -
1.00%............ 69,106 - - - -
1.05%............ 27,038 - - - -
1.10%............ 353 - - - -
1.15%............ 173 - - - -
1.20%............ 10 - - - -
1.25%............ 79 - - - -
1.30%............ 18,429 204,127 52,050 991,099 39
1.40%............ 598,108 2,046,014 863,448 9,363,550 633
1.45%............ 6,923 16,739 27,492 80,542 -
1.50%............ 2,421 2,745 5,561 27,168 -
1.60%............ - - - - -
1.65%............ - - - - -
1.85%............ - - - - -
------------ ------------ ------------ ------------ ------------
Total........ $ 797,506 2,269,625 948,551 10,462,359 672
============ ============ ============ ============ ============
FidVIPEIS FidVIPGrS FidVIPHIS FidVIPOvS FidVIPAMS
------------ ------------ ------------ ------------ ------------
0.95%............ $ 137,198 210,831 152,061 47,882 32,880
1.00%............ 119,471 205,720 109,171 41,451 31,665
1.05%............ 33,476 49,692 34,459 13,199 8,159
1.10%............ 169 239 190 46 -
1.15%............ 71 1,665 15 6 185
1.20%............ 61 87 31 33 -
1.25%............ 47 64 49 1 58
1.30%............ 6 49 - - -
1.40%............ 33 181 2 78 -
1.45%............ 30 29 - 14 -
1.50%............ - 38 13 15 -
1.60%............ - 29 - - -
1.65%............ - - - - -
1.85%............ - - - - -
------------ ------------ ------------ ------------ ------------
Total........ $ 290,562 468,624 295,991 102,725 72,947
============ ============ ============ ============ ============
FidVIPAMGrS FidVIPConS FidVIPBalS FidVIPGrInS FidVIPGrOpS
------------ ------------ ------------ ------------ ------------
0.95%............ $ 18,036 139,721 84,037 145,393 332,183
1.00%............ 23,936 138,654 76,312 187,179 333,219
1.05%............ 9,125 32,903 19,185 42,140 75,934
1.10%............ 134 263 287 249 328
1.15%............ - 1,668 256 927 932
1.20%............ 8 75 4 147 119
1.25%............ 30 141 39 91 95
1.30%............ 30 19 - 4 15
1.40%............ 16 7 110 178 586
1.45%............ - 29 2 5 28
1.50%............ - 3 - 26 32
1.60%............ - 29 - - -
1.65%............ - 2 - - -
1.85%............ - 14 - - -
------------ ------------ ------------ ------------ ------------
Total........ $ 51,315 313,528 180,232 376,339 743,471
============ ============ ============ ============ ============
</TABLE>
<PAGE> 15
FidVIPMCapS
------------
0.95% 3,358
1.00% 4,083
1.05% 714
1.10% 1
1.15% -
1.20% 16
1.25% 1
1.30% -
1.40% -
1.45% 15
1.50% -
1.60% -
1.65% -
1.85% -
------------
Total $ 8,188
============
The following table provides mortality, expense and administration charges
for the year ended December 31, 1998:
<TABLE>
<CAPTION>
TOTAL FidVIPEI FidVIPGr FidVIPHI FidVIPMMkt
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0.95%............ $ 346,655 - - - 27,469
1.00%............ 346,637 - - - 21,405
1.05%............ 99,916 - - - 13,826
1.30%............ 1,542,846 39,219 29,588 126,145 40,564
1.40%............ 18,369,018 760,982 484,627 2,077,769 578,067
1.45%............ 142,890 15,961 14,910 13,240 11,394
1.50%............ 46,433 6,275 4,473 5,806 4,365
------------ ------------ ------------ ------------ ------------
Total........ $ 20,894,395 822,437 533,598 2,222,960 697,090
============ ============ ============ ============ ============
FidVIPOv FidVIPAM FidVIPAMGr FidVIPCon FidVIPI500
------------ ------------ ------------ ------------ ------------
0.95%............ $ - - - - 20,294
1.00%............ - - - - 23,497
1.05%............ - - - - 4,757
1.30%............ 88,594 7,562 8,047 59,657 37,450
1.40%............ 1,006,416 168,847 141,334 858,526 575,683
1.45%............ 5,313 3,292 2,786 11,902 9,839
1.50%............ 1,148 1,328 409 2,345 2,256
------------ ------------ ------------ ------------ ------------
Total........ $ 1,101,471 181,029 152,576 932,430 673,776
============ ============ ============ ============ ============
FidVIPIGBd FidVIPBal FidVIPGrin FidVIPGrOp FidVIPEIS
------------ ------------ ------------ ------------ ------------
0.95%............ $ 13,470 - - - 35,645
1.00%............ 22,154 - - - 39,080
1.05%............ 6,446 - - - 10,048
1.30%............ 31,786 190,140 25,704 858,390 -
1.40%............ 457,474 1,978,328 543,629 8,737,336 -
1.45%............ 1,121 6,802 11,701 34,629 -
1.50%............ 945 1,037 705 15,341 -
------------ ------------ ------------ ------------ ------------
Total........ $ 533,396 2,176,307 581,739 9,645,696 84,773
============ ============ ============ ============ ============
(Continued)
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FidVIPGrS FidVIPHIS FidVIPOvS FidVIPAMS FidVIPAMGrS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0.95%............ $ 33,383 49,642 11,313 6,565 3,692
1.00%............ 27,492 37,699 10,118 4,118 4,062
1.05%............ 9,526 11,178 3,117 998 1,888
1.30%............ - - - - -
1.40%............ - - - - -
1.45%............ - - - - -
1.50%............ - - - - -
------------ ------------ ------------ ------------ ------------
Total........ $ 70,401 98,519 24,548 11,681 9,642
============ ============ ============ ============ ============
FidVIPConS FidVIPBalS FidVIPGRinS FidVIPGrOpS
------------ ------------ ------------ ------------
0.95%............ $ 23,438 15,680 24,821 81,243
1.00%............ 24,226 11,424 31,994 89,368
1.05%............ 6,160 5,294 7,363 19,315
1.30%............ - - - -
1.40%............ - - - -
1.45%............ - - - -
1.50%............ - - - -
------------ ------------ ------------ ------------
Total........ $ 53,824 32,398 64,178 189,926
============ ============ ============ ============
</TABLE>
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 17
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999,
for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSET FEE @ .95 RATE:
Fidelity VIP - Money Market Portfolio:
Tax qualified............................ 350,462 10.841227 $ 3,799,438 4%
Non-tax qualified........................ 661,559 10.841227 7,172,111 4%
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 1,930,305 14.567662 28,120,031 19%
Non-tax qualified........................ 1,206,553 14.567662 17,576,656 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 381,199 10.478118 3,994,248 (2)%
Non-tax qualified........................ 699,366 10.478118 7,328,039 (2)%
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified............................ 695,545 11.322947 7,875,619 5%
Non-tax qualified........................ 1,069,193 11.322947 12,106,416 5%
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 872,562 18.039523 15,740,602 36%
Non-tax qualified........................ 1,429,991 18.039523 25,796,356 36%
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified............................ 881,536 9.868246 8,699,214 7%
Non-tax qualified........................ 1,334,025 9.868246 13,164,487 7%
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................ 264,838 14.938906 3,956,390 41%
Non-tax qualified........................ 391,883 14.938906 5,854,303 41%
Fidelity VIP-II -
Asset Manager Portfolio: Service Class:
Tax qualified............................ 113,345 12.204056 1,383,269 10%
Non-tax qualified........................ 308,073 12.204056 3,759,740 10%
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................ 91,493 12.862419 1,176,821 14%
Non-tax qualified........................ 135,720 12.862419 1,745,688 14%
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................ 628,642 15.419403 9,693,284 23%
Non-tax qualified........................ 992,736 15.419403 15,307,396 23%
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified............................ 439,780 11.730743 5,158,946 3%
Non-tax qualified........................ 650,044 11.730743 7,625,499 3%
Fidelity VIP-III -
Growth and Income Portfolio: Service Class:
Tax qualified............................ 631,639 13.387303 8,455,943 8%
Non-tax qualified........................ 1,084,359 13.387303 14,516,642 8%
</TABLE>
(Continued)
<PAGE> 18
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................ 1,580,810 12.317183 19,471,126 3%
Non-tax qualified........................ 2,388,172 12.317183 29,415,552 3%
Fidelity Vip-III -
Mid Cap Portfolio: Service Class:
Tax qualified............................ 48,890 14.643713 715,931 46%(b)
Non-tax qualified........................ 61,089 14.643713 894,570 46%(b)
ASSET FEE @ 1.00 RATE:
Fidelity VIP - Money Market Portfolio:
Tax qualified............................ 204,043 10.830732 2,209,935 4%
Non-tax qualified........................ 351,108 10.830732 3,802,757 4%
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 753,992 14.553757 10,973,416 19%
Non-tax qualified........................ 1,077,454 14.553757 15,681,004 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 342,030 10.468109 3,580,407 (2)%
Non-tax qualified........................ 368,204 10.468109 3,854,400 (2)%
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified............................ 700,294 11.312151 7,921,831 5%
Non-tax qualified........................ 723,120 11.312151 8,180,043 5%
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 910,888 18.022329 16,416,323 36%
Non-tax qualified........................ 1,383,685 18.022329 24,937,226 36%
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified............................ 685,851 9.858827 6,761,686 7%
Non-tax qualified........................ 773,796 9.858827 7,628,721 7%
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................ 228,910 14.924674 3,416,407 41%
Non-tax qualified........................ 368,270 14.924674 5,496,310 41%
Fidelity VIP-II -
Asset Manager Portfolio: Service Class:
Tax qualified............................ 173,975 12.192406 2,121,174 10%
Non-tax qualified........................ 214,274 12.192406 2,612,516 10%
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................ 123,075 12.850172 1,581,535 14%
Non-tax qualified........................ 173,485 12.850172 2,229,312 14%
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................ 687,704 15.404707 10,593,879 23%
Non-tax qualified........................ 960,351 15.404707 14,793,926 23%
</TABLE>
<PAGE> 19
================================================================================
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified................................ 401,736 11.719556 4,708,168 3%
Non-tax qualified............................ 552,217 11.719556 6,471,738 3%
Fidelity VIP-III -
Growth and Income Portfolio: Service Class:
Tax qualified................................ 922,659 13.374521 12,340,122 8%
Non-tax qualified............................ 1,278,902 13.374521 17,104,702 8%
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified................................ 1,554,894 12.305429 19,133,638 3%
Non-tax qualified............................ 2,150,035 12.305429 26,457,103 3%
Fidelity Vip-III -
Mid Cap Portfolio: Service Class:
Tax qualified................................ 84,669 14.636558 1,239,263 46%(b)
Non-tax qualified............................ 63,767 14.636558 933,329 46%(b)
ASSET FEE @ 1.05 RATE:
Fidelity VIP - Money Market Portfolio:
Tax qualified................................ 85,348 10.820248 923,487 4%
Non-tax qualified............................ 200,667 10.820248 2,171,267 4%
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified................................ 118,845 14.53988 1,727,992 19%
Non-tax qualified............................ 250,685 14.53988 3,644,930 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified................................ 142,145 10.45812 1,486,569 (2)%
Non-tax qualified............................ 203,464 10.45812 2,127,851 (2)%
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified................................ 125,193 11.301374 1,414,853 5%
Non-tax qualified............................ 237,960 11.301374 2,689,275 5%
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified................................ 139,137 18.005139 2,505,181 36%
Non-tax qualified............................ 324,870 18.005139 5,849,330 36%
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified................................ 146,880 9.849428 1,446,684 7%
Non-tax qualified............................ 233,348 9.849428 2,298,344 7%
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified................................ 47,782 14.910446 712,451 41%
Non-tax qualified............................ 66,203 14.910446 987,116 41%
Fidelity VIP-II -
Asset Manager Portfolio: Service Class:
Tax qualified................................ 42,988 12.18077 523,627 10%
Non-tax qualified............................ 66,396 12.18077 808,754 10%
</TABLE>
(Continued)
<PAGE> 20
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................. 35,123 12.837906 450,906 14%
Non-tax qualified......................... 60,669 12.837906 778,863 14%
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................. 112,426 15.390001 1,730,236 23%
Non-tax qualified......................... 213,961 15.390001 3,292,860 23%
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified............................. 71,054 11.708369 831,926 3%
Non-tax qualified......................... 133,286 11.708369 1,560,562 3%
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................. 152,587 13.36177 2,038,832 8%
Non-tax qualified......................... 295,741 13.36177 3,951,623 8%
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................. 290,728 12.293685 3,574,118 3%
Non-tax qualified......................... 433,732 12.293685 5,332,165 3%
Fidelity Vip-III -
Mid Cap Portfolio: Service Class:
Tax qualified............................ 21,916 14.62939 320,618 46%(b)
Non-tax qualified........................ 10,769 14.62939 157,544 46%(b)
ASSET FEE @ 1.10 RATE:
Fidelity VIP - Money Market Portfolio:
Tax qualified............................ 2,487 10.273279 25,550 3%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 12,510 10.838507 135,590 8%(a)
Non-tax qualified........................ 6,221 10.838507 67,426 8%(a)
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 11,323 9.813933 111,123 (2)%(a)
Non-tax qualified........................ 6,219 9.813933 61,033 (2)%(a)
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified............................ 7,287 9.347646 68,116 (7)%(a)
Non-tax qualified........................ 1,926 9.347646 18,004 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 12,175 12.372047 150,630 24%(a)
Non-tax qualified........................ 1,987 12.372047 24,583 24%(a)
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified............................ 4,712 9.711691 45,761 (3)%(a)
Non-tax qualified........................ 4,502 9.711691 43,722 (3)%(a)
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................ 2,518 13.111592 33,015 31%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................ 3,541 10.846645 38,408 8%(a)
Non-tax qualified........................ 976 10.846645 10,586 8%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................ 8,180 11.323961 92,630 13%(a)
Non-tax qualified........................ 2,518 11.323961 28,514 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified............................ 10,428 9.77361 101,919 (2)%(a)
Non-tax qualified........................ 2,856 9.77361 27,913 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................ 13,370 10.061118 134,517 1%(a)
Non-tax qualified........................ 1,659 10.061118 16,691 1%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................ 15,297 9.909749 151,589 (1)%(a)
Non-tax qualified........................ 4,111 9.909749 40,739 (1)%(a)
Fidelity VIP-III -
Mid Cap Portfolio: Service Class:
Tax qualified............................ 77 13.502242 1,040 35%(a)
ASSET FEE @ 1.15 RATE:
Fidelity Vip - Money Market Portfolio:
Tax qualified............................ 12,006 10.26979 123,299 3%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 2,318 10.834863 25,115 8%(a)
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 4,162 9.810644 40,832 (2)%(a)
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified............................ 3,388 9.344503 31,659 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 8,021 12.3679 99,203 24%(a)
Non-tax qualified........................ 39,902 12.3679 493,504 24%(a)
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified............................ 1,531 9.708435 14,864 (3)%(a)
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................ 244 13.10719 3,198 31%(a)
</TABLE>
(Continued)
<PAGE> 22
<TABLE>
<CAPTION>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II -
Asset Manager Portfolio: Service Class:
Tax qualified.............................. 4,567 10.596211 48,393 6%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified.............................. 2,663 11.320167 30,146 13%(a)
Non-tax qualified.......................... 49,325 11.320167 558,367 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified.............................. 8,159 9.770329 79,716 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified.............................. 3,405 10.057746 34,247 1%(a)
Non-tax qualified.......................... 29,185 10.057746 293,535 1%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified.............................. 9,376 9.906423 92,883 (1)%(a)
Non-tax qualified.......................... 21,582 9.906423 213,800 (1)%(a)
ASSET FEE @ 1.20 RATE:
Fidelity VIP - Money Market Portfolio:
Tax qualified.............................. 257 10.266304 2,638 3%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified.............................. 1,951 10.83123 21,132 8%(a)
Non-tax qualified.......................... 4,626 10.83123 50,105 8%(a)
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified.............................. 504 9.807349 4,943 (2)%(a)
Non-tax qualified.......................... 122 9.807349 1,196 (2)%(a)
Fidelity Vip -
Equity-income Portfolio: Service Class:
Tax qualified.............................. 1,430 9.341371 13,358 (7)%(a)
Non-tax qualified.......................... 991 9.341371 9,257 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified.............................. 1,660 12.363757 20,524 24%(a)
Non-tax qualified.......................... 2,283 12.363757 28,226 24%(a)
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified.............................. 1,211 9.70517 11,753 (3)%(a)
Non-tax qualified.......................... 535 9.70517 5,192 (3)%(a)
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified.............................. 284 13.102821 3,721 31%(a)
Non-tax qualified.......................... 881 13.102821 11,544 31%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Non-tax qualified.......................... 420 10.839384 4,553 8%(a)
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(C)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................. 685 11.316365 7,752 13%(a)
Non-tax qualified......................... 2,726 11.316365 30,848 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified............................. 151 9.767051 1,475 (2)%(a)
Non-tax qualified......................... 106 9.767051 1,035 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................. 577 10.054379 5,801 1%(a)
Non-tax qualified......................... 4,593 10.054379 46,180 1%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................. 3,926 9.903104 38,880 (1)%(a)
Non-tax qualified......................... 2,978 9.903104 29,491 (1)%(a)
Fidelity VIP-III -
Mid Cap Portfolio: Service Class:
Tax qualified............................. 31 13.493199 418 35%(a)
Non-tax qualified......................... 499 13.493199 6,733 35%(a)
ASSET FEE @ 1.25 RATE:
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................. 803 10.827599 8,695 8%(a)
Non-tax qualified......................... 573 10.827599 6,204 8%(a)
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Non-tax qualified......................... 5,985 9.804059 58,677 (2)%(a)
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified............................. 257 9.338236 2,400 (7)%(a)
Non-tax qualified......................... 980 9.338236 9,151 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................. 673 12.35961 8,318 24%(a)
Non-tax qualified......................... 1,395 12.35961 17,242 24%(a)
Fidelity Vip -
High Income Portfolio: Service Class:
Tax qualified............................. 326 9.701921 3,163 (3)%(a)
Non-tax qualified......................... 1,924 9.701921 18,666 (3)%(a)
Fidelity VIP -
Overseas Portfolio: Service Class:
Non-tax qualified......................... 32 13.098422 419 31%(a)
Fidelity VIP-II -
Asset Manager Portfolio: Service Class:
Non-tax qualified......................... 3,092 10.589098 32,741 6%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................. 263 10.835743 2,850 8%(a)
Non-tax qualified......................... 246 10.835743 2,666 8%(a)
</TABLE>
(Continued)
<PAGE> 24
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................ 1,562 11.312579 17,670 13%(a)
Non-tax qualified........................ 2,319 11.312579 26,234 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Tax qualified............................ 127 9.763773 1,240 (2)%(a)
Non-tax qualified........................ 1,506 9.763773 14,704 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................ 1,485 10.051 14,926 1%(a)
Non-tax qualified........................ 2,033 10.051 20,434 1%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................ 995 9.89977 9,850 (1)%(a)
Non-tax qualified........................ 1,977 9.89977 19,572 (1)%(a)
Fidelity VIP-III -
Mid Cap Portfolio: Service Class:
Non-tax qualified........................ 42 13.488675 567 35%(a)
ASSET FEE @ 1.30 RATE:
Fidelity VIP - Equity-Income Portfolio:
Tax qualified............................ 183,447 14.172629 2,599,926 5%
Non-tax qualified........................ 156,154 14.172629 2,213,113 5%
Fidelity VIP - Growth Portfolio:
Tax qualified............................ 219,941 21.704997 4,773,819 36%
Non-tax qualified........................ 231,950 21.704997 5,034,474 36%
Fidelity VIP - High Income Portfolio:
Tax qualified............................ 417,032 11.968494 4,991,245 7%
Non-tax qualified........................ 335,122 11.968494 4,010,906 7%
Fidelity VIP - Money Market Portfolio:
Tax qualified............................ 292,257 11.321684 3,308,841 4%
Non-tax qualified........................ 138,223 11.321684 1,564,917 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................ 299,712 18.146675 5,438,776 41%
Non-tax qualified........................ 215,144 18.146675 3,904,148 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified............................... 31,342 14.520553 455,103 10%
Non-tax qualified........................ 36,449 14.520553 529,260 10%
Fidelity VIP-II -
Asset Manager Growth Portfolio:
Tax qualified............................ 31,321 15.777489 494,167 14%
Non-tax qualified........................ 31,916 15.777489 503,554 14%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified............................ 314,209 18.477393 5,805,763 23%
Non-tax qualified........................ 225,052 18.477393 4,158,374 23%
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 269,118 18.841144 5,070,491 19%
Non-tax qualified........................ 164,955 18.841144 3,107,941 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 173,026 11.362789 1,966,058 (2)%
Non-tax qualified........................ 91,053 11.362789 1,034,616 (2)%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified............................ 481,305 17.636796 8,488,678 3%
Non-tax qualified........................ 367,940 17.636796 6,489,283 3%
Fidelity VIP-III -
Growth and Income Portfolio:
Tax qualified............................ 158,200 17.037809 2,695,381 8%
Non-tax qualified........................ 126,435 17.037809 2,154,175 8%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified............................ 1,413,840 24.792904 35,053,199 3%
Non-tax qualified........................ 1,475,385 24.792904 36,579,079 3%
Fidelity VIP-III - Mid Cap Portfolio:
Tax qualified............................ 9,645 14.603095 140,847 46%(b)
Non-tax qualified........................ 8,821 14.603095 128,814 46%(b)
Fidelity VIP - Equity-Income Portfolio:
Service Class:
Tax qualified............................ 341 9.335095 3,183 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 673 12.355467 8,315 24%(a)
Non-tax qualified........................ 754 12.355467 9,316 24%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Tax qualified............................ 1,035 10.83211 11,211 8%(a)
Non-tax qualified........................ 235 10.83211 2,546 8%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................ 530 11.308771 5,994 13%(a)
Non-tax qualified........................ 434 11.308771 4,908 13%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................ 173 10.047615 1,738 0%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................... 531 9.896444 5,255 (1)%(a)
ASSET FEE @ 1.40 RATE:
Fidelity VIP - Equity-Income Portfolio:
Tax qualified............................ 1,695,231 14.13039 23,954,275 5%
Non-tax qualified........................ 3,019,886 14.13039 42,672,167 5%
Fidelity VIP - Growth Portfolio:
Tax qualified............................ 1,601,216 21.640361 34,650,892 36%
Non-tax qualified........................ 3,499,888 21.640361 75,738,840 36%
</TABLE>
(Continued)
<PAGE> 26
<TABLE>
<CAPTION>
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP - High Income Portfolio:
Tax qualified............................ 3,512,241 11.93018 41,901,667 7%
Non-tax qualified........................ 7,547,236 11.93018 90,039,884 7%
Fidelity VIP - Money Market Portfolio:
Tax qualified............................ 1,547,965 11.285433 17,469,455 4%
Non-tax qualified........................ 3,063,912 11.285433 34,577,574 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................ 1,594,341 18.08863 28,839,444 41%
Non-tax qualified........................ 3,514,876 18.08863 63,579,291 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified............................ 405,505 14.477303 5,870,619 10%
Non-tax qualified........................ 824,691 14.477303 11,939,301 10%
Fidelity VIP-II -
Asset Manager Growth Portfolio:
Tax qualified............................ 279,404 15.730503 4,395,165 14%
Non-tax qualified........................ 629,730 15.730503 9,905,970 14%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified............................ 2,003,071 18.422344 36,901,263 23%
Non-tax qualified........................ 4,068,308 18.422344 74,947,769 23%
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 1,356,953 18.785022 25,490,392 19%
Non-tax qualified........................ 2,905,306 18.785022 54,576,237 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 1,254,764 11.326409 14,211,970 (2)%
Non-tax qualified........................ 2,233,065 11.326409. 25,292,608 (2)%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified........................... 2,352,156 17.54785. 41,275,281 3%
Non-tax qualified....................... 5,436,492 17.54785 95,398,746 3%
Fidelity VIP-III -
Growth and Income Portfolio:
Tax qualified........................... 1,145,440 16.987037 19,457,632 8%
Non-tax qualified....................... 2,718,399 16.987037 46,177,544 8%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified........................... 7,527,710 24.667851 185,692,429 3%
Non-tax qualified....................... 17,920,089 24.667851 442,050,085 3%
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Non-tax qualified.......................... 887 9.328815 8,275 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified........................... 4,046 12.347169 49,957 23%(a)
Non-tax qualified....................... 1,119 12.347169 13,816 23%(a)
Fidelity VIP -
High Income Portfolio: Service Class:
Non-tax qualified....................... 107 9.692137 1,037 (3)%(a)
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................. 2,046 13.085254 26,772 31%(a)
Non-tax qualified......................... 202 13.085254 2,643 31%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio: Service Class:
Non-tax qualified......................... 219 10.824826 2,371 8%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................. 210 11.301172 2,373 13%(a)
Non-tax qualified......................... 101 11.301172 1,141 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Non-tax qualified......................... 3,154 9.753925 30,764 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................. 1,435 10.040866 14,409 0%(a)
Non-tax qualified......................... 4,769 10.040866 47,885 0%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................. 11,626 9.889792 114,979 (1)%(a)
Non-tax qualified......................... 7,514 9.889792 74,312 (1)%(a)
ASSET FEE @ 1.45 RATE:
Fidelity VIP - Equity-Income Portfolio:
Tax qualified............................. 60,593 11.913142 721,853 5%
Non-tax qualified......................... 146,671 11.913142 1,747,312 5%
Fidelity VIP - Growth Portfolio:
Tax qualified............................. 78,768 18.667172 1,470,376 35%
Non-tax qualified......................... 218,645 18.667172 4,081,484 35%
Fidelity VIP - High Income Portfolio:
Tax qualified............................. 79,734 10.176069 811,379 7%
Non-tax qualified......................... 123,514 10.176069 1,256,887 7%
Fidelity VIP - Money Market Portfolio:
Tax qualified............................. 41,696 10.844055 452,154 4%
Non-tax qualified......................... 51,072 10.844055 553,828 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................. 25,983 15.453729 401,534 41%
Non-tax qualified......................... 39,558 15.453729 611,319 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified............................. 21,912 12.673141 277,694 9%
Non-tax qualified......................... 35,532 12.673141 450,302 9%
Fidelity VIP-II -
Asset Manager Growth Portfolio:
Tax qualified............................. 11,295 13.476375 152,216 14%
Non-tax qualified......................... 12,166 13.476375 163,954 14%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified............................. 54,385 15.610339 848,968 22%
Non-tax qualified......................... 128,262 15.610339 2,002,213 22%
</TABLE>
(Continued)
<PAGE> 28
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified.............................. 46,530 15.51665 721,990 19%
Non-tax qualified.......................... 128,027 15.51665 1,986,550 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified.............................. 13,862 10.613518 147,125 (2)%
Non-tax qualified.......................... 52,808 10.613518 560,479 (2)%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified.............................. 27,944 12.270926 342,899 3%
Non-tax qualified.......................... 74,853 12.270926 918,516 3%
Fidelity VIP-III -
Growth and Income Portfolio:
Tax qualified.............................. 56,050 14.295582 801,267 8%
Non-tax qualified.......................... 97,471 14.295582 1,393,405 8%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified.............................. 151,722 13.11468 1,989,785 3%
Non-tax qualified.......................... 312,763 13.11468 4,101,787 3%
Fidelity VIP -
Equity-Income Portfolio: Service Class:
Tax qualified.............................. 3,290 9.32567 330,681 (7)%(a)
Non-tax qualified.......................... 180 9.325673 1,679 (7)%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified.............................. 2,607 12.34302 32,178 23%(a)
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified.............................. 1,262 13.080864 16,508 31%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified.............................. 2,852 11.297372 32,220 13%(a)
Fidelity VIP-III -
Balanced Portfolio: Service Class:
Non-tax qualified.......................... 115 9.750647 1,121 (2)%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Non-tax qualified.......................... 284 10.037482 2,851 0%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified.............................. 3,120 9.886469 30,846 (1)%(a)
Fidelity VIP-III -
Mid Cap Portfolio: Service Class:
Tax qualified.............................. 1,246 13.47058 16,784 35%(a)
ASSET FEE @ 1.50 RATE:
Fidelity VIP - Equity-income Portfolio:
Tax qualified.............................. 28,206 11.900112 335,655 5%
Non-tax qualified.......................... 31,200 11.900112 371,283 5%
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP - Growth Portfolio:
Tax qualified............................. 37,563 18.646776 700,429 35%
Non-tax qualified......................... 30,852 18.646776 575,290 35%
Fidelity VIP - High Income Portfolio:
Tax qualified............................. 30,522 10.164929 310,254 7%
Non-tax qualified......................... 36,652 10.164929 372,565 7%
Fidelity VIP - Money Market Portfolio:
Tax qualified............................. 25,144 10.832134 272,363 4%
Non-tax qualified......................... 23,877 10.832134 258,639 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................. 7,933 15.436822 122,460 40%
Non-tax qualified......................... 8,015 15.436822 123,726 40%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified............................. 2,118 12.659254 26,812 9%
Non-tax qualified......................... 14,021 12.659254 177,495 9%
Fidelity VIP-II -
Asset Manager Growth Portfolio:
Tax qualified............................. 3,397 13.461613 45,729 14%
Non-tax qualified......................... 6,520 13.461613 87,770 14%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified 12,643 15.59326 197,146 22%
Non-tax qualified........................ 23,346 15.59326 364,040 22%
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................ 18,621 15.499687 288,620 19%
Non-tax qualified........................ 40,822 15.499687 632,728 19%
Fidelity VIP-II -
Investment Grade Bond Portfolio:
Tax qualified............................ 9,870 10.601902 104,641 (3)%
Non-tax qualified........................ 9,188 10.601902 97,410 (3)%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified............................ 2,319 12.257491 28,425 3%
Non-tax qualified........................ 20,233 12.257491 248,006 3%
Fidelity VIP-III -
Growth and Income Portfolio:
Tax qualified............................ 11,738 14.279936 167,618 8%
Non-tax qualified........................ 29,850 14.279936 426,256 8%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified............................ 84,838 13.100322 1,111,405 3%
Non-tax qualified........................ 76,283 13.100322 999,332 3%
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................ 866 12.338879 10,685 23%(a)
Non-tax qualified........................ 271 12.338879 3,344 23%(a)
Fidelity VIP -
High Income Portfolio: Service Class:
Tax qualified............................... 267 9.685624 2,586 (3)%(a)
Fidelity VIP -
Overseas Portfolio: Service Class:
Tax qualified............................ 255 13.076471 3,335 31%(a)
</TABLE>
(Continued)
<PAGE> 30
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(c)
---------- ------------ ----------
<S> <C> <C> <C> <C>
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................... 265 11.29358 2,993 13%(a)
Non-tax qualified........................... 300 11.29358 3,388 13%(a)
Fidelity VIP-III - Growth and Income
Portfolio: Service Class:
Tax qualified............................... 530 10.034112 5,318 0%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio: Service Class:
Tax qualified............................... 648 9.883134 6,404 (1)%(a)
Fidelity VIP-III -
Mid Cap Portfolio: Service Class:
Non-tax qualified........................... 85 13.466052 1,145 35%(a)
ASSET FEE @ 1.60 RATE:
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................... 765 10.802136 8,264 8%(a)
Fidelity VIP -
Growth Portfolio: Service Class:
Tax qualified............................... 539 12.330569 6,646 23%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................... 572 11.285979 6,456 13%(a)
ASSET FEE @ 1.65 RATE:
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified............................... 271 10.798506 2,926 8%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Tax qualified............................... 397 11.282174 4,479 13%(a)
ASSET FEE @ 1.85 RATE:
Fidelity VIP-II - Index 500 Portfolio:
Non-tax qualified........................... 253 10.783929 2,728 8%(a)
Fidelity VIP-II -
Contrafund Portfolio: Service Class:
Non-tax qualified........................... 253 11.266962 2,851 13%(a)
Reserves for annuity contracts in payout phase:
Tax qualified............................... 35,491
Non-tax qualified........................... 368,949
---------------
$ 2,321,489,033
===============
</TABLE>
(a) Non-annualized. The return was computed for the period 5/03/1999 (effective
date) through 12/31/1999.
(b) Non-annualized. The return was computed for the period 1/11/1999 (effective
date) through 12/31/1999.
(c) The annual return does not include contract charges satisfied by
surrendering units.
- --------------------------------------------------------------------------------
<PAGE> 63
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 3.8 $ 527.9 $1,432.6 $173.6 $2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
--------
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ -------- -------- ------ --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ -------- -------- ------ --------
December 31, 1998 3.8 914.7 1,579.0 275.6 2,773.1
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(b) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of accumulated other comprehensive income in
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of
deferred policy acquisition costs that would have been required as
a charge or credit to operations had such unrealized amounts been
realized. The Company has no fixed maturity securities classified
as held-to-maturity or trading as of December 31, 1999 or 1998.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
Participating business represents approximately 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------- ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------- ---------
$13,831.7 $563.2 $ (22.6) $14,372.3
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
equity that bypass net income. Currently, the Company's only component
of Other Comprehensive Income is unrealized gains (losses) on
securities available-for-sale. The related before and after federal tax
amounts are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans and derivative financial instruments. These
instruments involve, to varying degrees, elements of credit risk in
excess of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $143.6 million and $187.9 million as of December 31,
1999 and 1998, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(9) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance and employees of WSC ended
participation in the plan. A curtailment gain of $67.1 million resulted
(consisting of a $107.2 million reduction in the projected benefit
obligation, net of the write-off of the $40.1 million remaining
unamortized transition obligation related to WSC). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, invested
assets are retained by the ceding company and investment earnings are
paid to the reinsurer. Under the terms of the Company's agreements, the
investment risk associated with changes in interest rates is borne by
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
The ceding of risk does not discharge the original insurer from its
primary obligation to the policyholder. The Company believes that the
terms of the modified coinsurance agreements are consistent in all
material respects with what the Company could have obtained with
unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 million,
respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1999 and
1998 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company paid a dividend to NFS, and NFS paid an equivalent dividend
to Nationwide Corp., consisting of securities having an aggregate fair
value of $850.0 million. The Company recognized a gain of $14.4 million
on the transfer of securities.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to a $600.0 million revolving credit
facility which provides for a $600.0 million loan over a five year term
on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company 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, the Company 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 the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate fixed for a
prescribed period, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment includes the fixed
option under variable annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
- ----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 64
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) All financial statements are included in Parts A and B of the
Registration Statement.
(1) Financial statements included
in Prospectus
(Part A):
Condensed Financial Information.
(2) Financial statements included in Part B:
Those financial statements N/A
required by Item 23 to be included in Part B have been
incorporated therein by reference to the Prospectus (Part
A).
Nationwide Fidelity Advisor Variable Account:
Independent Auditors' Report.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1999.
Statements of Operations for years ended December 31, 1999
and 1998.
Statement of Changes in Contract Owners' Equity for Years
ended December 31, 1999 and 1998.
Notes to Financial Statements.
Nationwide Life Insurance Company and Subsidiaries:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1999 and 1998.
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
(b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant. *
(2) Not Applicable
<PAGE> 65
(3) Underwriting or Distribution contracts
between the Registrant and Principal
Underwriter. *
(4) The form of the variable annuity contract *
(5) Variable Annuity Application *
(6) Articles of Incorporation of Depositor *
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel *
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule. *
*Filed previously in connection with this registration statement
(SEC File No. 33-82174) and hereby incorporated by reference.
<PAGE> 66
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
301 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
<PAGE> 67
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
<PAGE> 68
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
David K. Hollingsworth Senior Vice President -
One Nationwide Plaza Business Development and
Columbus, OH 43215 Sponsor Relations
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE DEPOSITOR OR REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 69
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
The 401(k) Companies, Inc. Texas Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
The 401(k) Company Texas Third-party administrator for 401(k)
plans
---------------------------------------- ------------------------- ------------------ ---------------------------------------
401(k) Investment Advisors, Inc. Texas Investment advisor registered with the
SEC
---------------------------------------- ------------------------- ------------------ ---------------------------------------
401(k) Investments Services, Inc. Texas NASD registered broker-dealer
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Affiliate Agency, Inc. Delaware Insurance agency marketing life
insurance & annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Affiliate Agency of Ohio, Inc. Ohio Insurance agency marketing life
insurance & annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
AID Finance Services, Inc. Iowa Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED General Agency Company Iowa Managing general agent and surplus
lines broker for property & casualty
insurance products
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group, Inc. Iowa Property & casualty holding company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group Insurance Marketing Iowa Direct marketer for property and
Company casualty insurance products
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Property and Casualty Insurance Iowa Underwrites general property &
Company casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
AMCO Insurance Company Iowa Underwrites general property &
casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
American Marine Underwriters, Inc. Florida Underwriting manager for ocean cargo
and bulk insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Auto Direkt Insurance Company Germany Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Cal-Ag Insurance services, Inc. California Captive insurance brokerage firm
---------------------------------------- ------------------------- ------------------ ---------------------------------------
CalFarm Insurance Agency California Former marketing company for
traditional agent producers of CalFarm
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
CalFarm Insurance Company California Multi-line insurance company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Caliber Funding Delaware A limited purpose corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Colonial County Mutual Insurance Texas Insurance Company
Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Columbus Insurance Brokerage and Germany General service insurance broker
Service GmbH
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance agency that sells and
services commercial insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Depositors Insurance Company Iowa Underwrites property & casualty
insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
eNationwide, LLC Ohio A limited liability company to provide
administrative services to
Nationwide's direct operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
F&B, Inc. Iowa Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Alabama Insurance agency marketing life
of Alabama, Inc. insurance and annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Ohio Insurance marketing life insurance and
of Ohio, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Oklahoma Insurance marketing life insurance and
of Oklahoma, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Texas Insurance marketing life insurance and
of Texas, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
---------------------------------------- ------------------------- ------------------ ---------------------------------------
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Leben Direkt Insurance Company Germany Life insurance through direct mail
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas General agent to market non-standard
automobile and motorcycle insurance
for Colonial Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
MedProSolutions, Inc. Massachusetts Provides third-party administration
services for workers compensation,
automobile injury and disability claims
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Midwest Printing Services, Ltd. Iowa General printing services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Morley & Associates, Inc. Oregon Insurance brokerage
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Morley Capital Management, Inc. Oregon Investment adviser and stable value
money management
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Morley Financial Services, Inc. Oregon Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Morley Research Associates, Ltd. Delaware Credit research consulting
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**MRM Investments, Inc. Ohio Owns and operates a recreational ski
facility
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**National Casualty Company Wisconsin Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
National Casualty Company of America, England Insurance Company
Ltd.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**National Premium and Benefit Delaware Provides third-party administration
Administration Company services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Advisory Services, Inc. Ohio Registered broker-dealer providing
investment management and
administrative services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Agribusiness Insurance Iowa Provides property & casualty insurance
Company primarily to agricultural business
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Arena, LLC Ohio A limited liability company related to
arena development
*Nationwide Asset Allocation Trust Ohio Diversified open-end investment company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Corporation Ohio Holding company for entities
affiliated with Nationwide Mutual
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Exclusive Distribution Ohio A limited liability company providing
Company, LLC agency support services to Nationwide
exclusive agents
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Assignment Company Ohio An assignment company to administer
structured settlement business
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution New Mexico Insurance Agency
Distributors Agency, Inc. of New Mexico
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution Massachusetts Insurance Agency
Distributors Agency, Inc. of
Massachusetts
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Bermuda Long-term insurer which issued
(Bermuda) Ltd. variable annuity and variable life
products to persons outside the U.S. &
Bermuda
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust securities & uses proceeds to acquire
debentures
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust II securities & uses proceeds to acquire
debentures
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services, Inc. Delaware Holding Company for entities
associated with Nationwide Mutual
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Foundation Ohio Not-for profit corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide General Insurance Company Ohio Primarily provides automobile and fire
insurance to select customers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Finance, LLC Ohio Act as a support company for
Nationwide Global Holdings, Inc. & its
international capitalization efforts
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Funds Cayman Islands Exempted company with limited
liability for purpose of issuing
investment shares to segregated asset
accounts of Nationwide Financial
Services (Bermuda) Ltd. and to
non-U.S. resident investors
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for Nationwide
Insurance Enterprise international
operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings, Inc.-NGH Grand Duchy of Analyze European market of life
Luxembourg Branch Luxembourg insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Global Holdings-Hong Kong, Hong Kong Primarily a holding company for
Limited Nationwide Global Holdings, Inc. Asian
operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings-NGH Brasil Brazil Holding company
Participacoes LTDA
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Health Plans, Inc. Ohio Health insuring organization
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Home Mortgage Company Iowa Mortgage lendor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Indemnity Company Ohio Reinsurance company assuming business
from Nationwide Mutual Insurance
Company and other insurers within the
Nationwide Insurance Enterprise
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Company of America Wisconsin Independent agency personal lines
underwriter of property & casualty
insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Company of Florida Ohio Transacts general insurance business
except life insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Golf Charities, Ohio Not-for-profit corporation
Inc.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide International Underwriters California Special risks, excess & surplus lines
underwriting manager
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment under management
of trustees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Investing Foundation II Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investment Services Oklahoma Registered broker-dealer
Corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Life Insurance Company Ohio Life Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Lloyds Texas Commercial property insurance in Texas
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Management Systems, Inc. Ohio Preferred provider organization,
products and related services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Mutual Funds Ohio Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Alabama Market and administer deferred
of Alabama compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of Arkansas compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity contracts to
of Ohio members of the National Education
Association in the state of Ohio
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity contracts to
of Oklahoma members of the National Education
Association in the state of Oklahoma
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity contracts to
of Wyoming members of the National Education
Association in the state of Wyoming
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Seguradora S.A. Brazil Engage in elementary, health & life
insurance; private open pension and
wealth concession plans
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Separate Account Trust Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Services Company, LLC. Ohio Single member limited liability
company performing shared services
functions for the Nationwide Insurance
Enterprise
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Trust Company, FSB United States Federal savings bank chartered by the
Office of Thrift Supervision in U.S.
Department of Treasury to exercise
custody & fiduciary powers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Insurance Company Germany Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Life Insurance Company Germany Life and health insurance company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services to Nevada employers in the
construction industry
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services to Nevada employers in health
& nonprofit industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services to Nevada employers in the
hospitality & entertainment industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing, Transportation and services to Nevada employers in the
Distribution manufacturing, transportation and
distribution industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NFS Distributors, Inc. Delaware Holding company for Nationwide
Financial Services, Inc. distribution
companies
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NGH Luxembourg, S.A Luxembourg Acts primarily as holding company for
Nationwide Global Holdings, Inc.
European operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NGH Netherlands, B.V. The Netherlands Holding company for other overseas
companies
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
NGH UK, Ltd. United Kingdom Assist Nationwide Global Holdings,
Inc. with European operations and
marketing
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Northpointe Capital LLC Delaware Limited liability company for
investments
---------------------------------------- ------------------------- ------------------ ---------------------------------------
PanEuroLife Luxembourg Life Insurance company providing
individual life insurance primarily in
the UK, Belgium and France
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration and record
keeping services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Portland Investment Services, Inc. Oregon NASD registered broker-dealer
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Riverview Agency, Inc. Texas Has a pending application to become a
licensed insurance agency with the
Texas Department of Insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Surplus Lines Insurance Arizona Provides excess and surplus lines
Company insurance coverage on a non-admitted
basis
---------------------------------------- ------------------------- ------------------ ---------------------------------------
SVM Sales GmbH, Neckura Insurance Group Germany Recruits and supervises external sales
partners who obtain new business for
the Neckura Group as well as to offer
financial services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Union Bond & Trust Company Oregon Oregon state bank with trust powers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova Capital, Inc. Delaware Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova Mutual Fund Capital Trust Delaware Trust designed to act as a registered
investment advisor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova SA Capital Trust Delaware Trust designed to act as a registered
investment advisor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Western Heritage Insurance Company Arizona Underwrites excess and surplus lines
of property and casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account -D Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
- --------------------------- --------------------------- ----------------------------
| ALLIED GROUP | | ALLIED | | |
| MERCHANT BANKING | | GROUP, INC. | | |
| CORPORATION | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 10,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $150,055 | | |100% $243,344,521 | | | |
- --------------------------- | --------------------------- | ----------------------------
| |
- --------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
- --------------------------- --------------------------- | ----------------------------
| |
- --------------------------- --------------------------- | ----------------------------
| ALLIED | | MIDWEST | | | NATIONWIDE |
| GROUP INSURANCE | | PRINTING SERVICES, | | | HOME MORTGAGE |
| MARKETING COMPANY | | LTD. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
- -------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
- --| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | ----| ------------- | |--|------------ |
| | | | | | | |
| | Cost | | Cost | | | Cost |
| | ---- | | ---- | | | ---- |
| |SIC-100% $6,000,000 | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | |
| -------------------------------- -------------------------------- | --------------------------------
| | |
| -------------------------------- -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | |
| |Common Stock: 10,000 | | | | |Common Stock: 1500 Shares |
|---|------------ Shares | | | |--|------------ |
| | | | | | | |
| | Cost | | | | | Cost |
| | ---- | | | | | ---- |
| |SIC-100% $10,000 | |NC-100% | | |Neckura-100% DM 1,643,149 |
| -------------------------------- -------------------------------- | --------------------------------
| |
| -------------------------------- -------------------------------- | --------------------------------
| | WESTERN . | | SUN DIRECT | | | SVM SALES |
| | HERITAGE INSURANCE | | VERSICHERUNGS - | | | GmbH |
| | COMPANY | | AKTIENGESCLISCHAFT | | | |
| |Common Stock: 4,776,076 | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|---|------------ Shares | |------------ |------------| |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|SIC-100% $57,000,000 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- ---------------------------------------------------------------------------------------------------------------------|
|
- --------------------------------------------------------------------------------------------------------------- |
| | | |
| | | |
-------------------------------- -------------------------------- | -------------------------------------
| SCOTTSDALE | | NATIONWIDE | | | NATIONWIDE |
| INDEMNITY COMPANY | | COMMUNITY URBAN | | | CORPORATION |
| | | REDEVELOPMENT | | | |
| | | CORPORATION | | |Common Stock: Control: |
|Common Stock: 50,000 | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $1,008,497,908 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 36,862,514 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE CASH | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 100 Shares | |-----| ---- |
| |------------ Shares | | |------------ | | |Casualty-18.6% $90,630 |
| | | | | Cost | | |Fire-18.6% $90,722 |
| | Cost | | | ---- | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-100% $11,226 | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE INSURANCE | | | CALFARM INSURANCE |
| | GENERAL AGENCY, INC. | | | COMPANY OF FLORIDA | | | COMPANY |
| | | | | | | |Common Stock: 49,800 Shares |
------|Common Stock: 1,000 | |----|Common Stock: 10,000 Shares| |-----|------------- |
| |------------ Shares | | |------------ | | |
| | | | | Cost | | |
| | Cost | | | ---- | | |
| | ---- | | |Casualty-100% $300,000,000 | |Casualty-100% |
| |Casualty-100% $5,000,000 | | | | | |
| -------------------------------- | -------------------------------- -------------------------------------
| || | |
| -------------------------------- | -------------------------------- -------------------------------------
| | COLONIAL COUNTY | | | NATIONWIDE INTERNATIONAL | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | UNDERWRITERS | | AGENCY |
| | COMPANY | | |Common Stock: 1,000 Shares | | |
| | | |----|------------ | | |
| | | | | | | |
| | | | | Cost | |Common Stock: 1,000 shares |
| |Surplus Debentures: | | | ---- | |------------- |
| |------------------- | | |Casualty-100% $10,000 | | |
| | Cost | | -------------------------------- | |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- |CalFarm Insurance |
| |Lone Star 150,000 | | | NATIONWIDE | |Company - 100% |
| -------------------------------- | | ARENA LLC | -------------------------------------
| | | | |
| -------------------------------- | | | -------------------------------------
| | NATIONWIDE SERVICES | | | | | CAL-AG INSURANCE |
| | COMPANY, LLC | | | | | SERVICES |
| | | | | | | |
| |Single Member Limited | |....| | |Common Stock: 1,000 Shares |
|.....|Liability Company | | | | |------------ |
| | | | | | | |
| | | | |Casualty-90% | |CalFarm Insurance |
| |Casualty-100% | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| | | NATIONWIDE |
| -------------------------------- | | EXCLUSIVE DISTRIBUTION |
| | AMERICAN MARINE | | | COMPANY, LLC (NEDCO) |
| | UNDERWRITERS, INC. | | | |
| | | | | Single Member Limited |
| |Common Stock: 20 Shares | |....| Liability Compnany |
|-----|------------ | | | |
| | Cost | | | |
| | ---- | | |Casualty-100% |
| |Casualty-100% $5,020 | | | |
| | | | --------------------------------
| -------------------------------- | |
| | --------------------------------
| --------------------------------- | | INSURANCE |
| | eNATIONWIDE, LLC | | | INTERMEDIARIES, INC |
| | | | | |
| | Single Member Limited | | |Common Stock 1,615 Shares |
| | Liability Company | |----|------------ |
| | | | Cost |
|.....| | | ---- |
| | |Casualty-100% $1,615,000 |
| | | |
|Casualty-100% | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1999
</TABLE>
Page 1
<PAGE> 82
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| ||--------------------------
- ----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
- ----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR |
| | | | | || | | | || | |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ------------------------------| || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC. |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | GLOBAL FUND | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | CAYMAN ISLANDS | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |--| | EXEMPTED LLC |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | | | || | OF OKLAHOMA, INC |
| | | | | || | Cost | | || | |
| NW Life-90% | | | | || | ---- | | || | |
| NW Mutual-10% | | | | || | NFIDAI-100% $153,000 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | ASSET ALLOCATION TRUST | || | | | || | |
| | | | | || | | | || | |
| Units: |--| | | || | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | OHIO BUSINESS TRUST |==== | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | || | OF TEXAS, INC |
| | | | | Cost | | || | |
| NW Life-97.6% | | | | ---- | | || | |
| NW Mutual-2.4% | | | | NFIDAI-100% $100 | | || | |
- ----------------------------- ----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INS. AGENCY, INC. | | || | |
| OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INS. AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $1,008,497,908 |
|Fire 649,510 36,862,514 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------|-------------------------|--------------------------|-----------------------------|----------------------|--------------
| | | | |
- -----------|------------ ------------|-------------- -----------|------------- ---------------|--------- ------------|--------------
|NFS DISTRIBUTORS, INC.| | IRVIN L. SCHWARTZ | | NATIONWIDE FINANCIAL | |VILLANOVA CAPITAL, INC.| | NATIONWIDE FINANCIAL |
| (NFSDI) | | AND ASSOCIATES, INC. | |SERVICES (BERMUDA) INC.| |Common Stock: 958,750 | | SERVICES CAPITAL |
| | |Common Stock: Control: | |Common Stock: 250,000 | |------------- Shares | | TRUST II |
| | |------------- -------- | |------------- Shares | |NFS-96% | | |
| | |Class A Other-100%| | Cost | |Preferred Stock:500,000| | |
|NFS-100% | |Class B NFS -100%| | ---- | |--------------- Shares | | |
| | | | |NFS-100% $3,500,000 | |NFS-100% | | NFS-100% |
- -----------|------------ --------------------------- ------------------------- ---------------|--------- -------------------------
| | |
- -----------|---------------------------- -----------------------------|-----------------------|
- -----------|------------ --------------|----------- ------------|------------ --------------|---------- ------------|-------------
| NATIONAL DEFERRED | | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL | | VILLANOVA MUTUAL FUND |
| COMPENSATION, INC. | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)| | CAPITAL TRUST (VMF) |
| | |Common Stock: 236,494 | | | |Common Stock: 82,343 | | |
| | |------------- Shares | | | |------------ Shares | | |
| | | | | | | | | |
|NFSDI-100% | | | | | |VILLANOVA CAPITAL, INC.| | |
| | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% | |DELAWARE BUSINESS TRUST|
- ----------||------------ -------------------|------ ---------------------|--- ---------------------|--- -------------------------
|| | | |
|| | | -----
|| ---------------------------- | ------------------------- | ------------------------- | ------------------------
|| | NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | | | MORLEY & |
|| |SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | |INVESTORS SERVICES, INC.| | | ASSOCIATES, INC. |
|| | | | | NEW MEXICO | | | | | | |
|| |Common Stock: 10,000 | | | Common Stock: 1,000 | | | Common Stock: 5 Shares | | | Common Stock: 3,500 |
|| |------------- Shares |--|--| ------------- Shares | |--|------------- | |--| ------------- Shares |
============ | Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | | |Morley-100% $1,000|
---------------------------- | -------------------------- | -------------------------- | ------------------------
| | |
---------------------------- | -------------------------- | -------------------------- | -----------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA VALUE | | | EXCALIBER FUNDING |
|SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | INVESTOR, LLC | | | CORPORATION |
| | | | SO. DAKOTA | | | | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | | | | |Common Stock: 1,000 |
|------------- Shares |--|--|------------- Shares | ...| | |--|------------- Shares |
| Cost | | | Cost | | | | | Cost |
| ---- | | | ---- | | | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | VSA-100% | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | -----------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | MORLEY CAPITAL | | | CALIBER FUNDING |
| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | MANAGEMENT | | | CORPORATION |
| ARKANSAS | | | OF WYOMING | | | | | |
|Common Stock: 50,000 |-----|Common Stock: 500 Shares| |Common Stock: 500 Shares| | | |
|------------- Shares | | |------------- | |------------- |--|--| |
| Cost | | | Cost | | Cost | | | |
| ---- | | | ---- | | ---- | | | |
|NRS-100% $500 | | |NRS-100% $500 | |Morley-100% $5,000 | | |Morley-100% |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | | | MORLEY RESEARCH |
| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | | | ASSOCIATES, LTD. |
| AGENCY, INC. | | | OF OHIO | | | | | |
|Common Stock: 1,000 | | | | |Common Stock: 2,000 | | | Common Stock: 1,000 |
|------------- Shares |--|==| | |------------- Shares |--|--| ------------- Shares |
| | | | | | | | | |
| Cost | | | | | Cost | | | Cost |
| ---- | | | | | ---- | | | ---- |
|NRS-100% $1,000 | | | | | Morley-100% $50,000 | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
|SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| | | | OKLAHOMA | | | |
|Common Stock: 500 | | | | | Common Stock: 1,000 | |
|------------- Shares |--|==| | | ------------- Shares |--
| Cost | | | | | Cost |
| ---- | | | | | ---- |
|NRS-100% $500 | | | | | Morley-100% $25,000 |
---------------------------- | -------------------------- --------------------------
|
---------------------------- | --------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT|
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. |
| | | | OF TEXAS |
|Common Stock: 1,000 |-- ==| |
|------------- Shares | | |
| Cost | | |
| ---- | | |
|NRS-100% $1,000 | | |
---------------------------- --------------------------
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
------------------------------- | ---------------------------- -----------------------------
| GATES MCDONALD | | | NATIONWIDE | | NATIONWIDE GLOBAL |
| & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) | | HOLDINGS, INC. (NGH) |
| | | | | | |
- ------------------- --|Common Stock: 254 Shares | |--|Common Stock: 100 Shares | |Common Stock: 1 Share |
| | | |------------ | || |------------ | --|------------ |
| ---------------|-------------- | | Cost | || | Cost || | Cost |
| | | | | ---- | || | ---- || | ---- |
| | THE 401(k) COMPANIES, INC. | | |NW Corp.-100% $25,683,532 | || | || | |
| | (401(k)) | | |------------------------------ || |NW Corp.-100% $14,603,732|| |NW Corp.-100% $257,000,000|
| | | | || --------------------------- | -----------------------------
| |Common Stock: Control | | |------------------------------ || ----------------------------| -----------------------------
||--|------------- ------- | | | MEDPROSOLUTIONS, INC. | || | NATIONWIDE MANAGEMENT || | NATIONWIDE GLOBAL |
|| |Class A Other-100% | --| | |--| SYSTEMS, INC. || | HOLDINGS, INC. - |
|| |Class B NFS-100% | | | Cost | || | || | LUXEMBOURG BRANCH |
|| | | | | ---- | || |Common Stock: 100 Shares || | (BRANCH) |
|| ------------------------------ | |Gates-100% $6,700,000 | || |------------- || | |
|| | | | || | Cost ||--| |
|| | | | || | ---- || |Endowment Capital - |
|| ------------------------------ | ------------------------------- || |NHP Inc.-100% $25,149 || | $1,000,000 |
|| | 401(k) INVESTMENT | | || ----------------------------| --------------|--------------
|| | SERVICES, INC. | | |------------------------------ || ----------------------------| --------------|--------------
|| | | | | GATES MCDONALD & | || | NATIONWIDE || | NGH LUXEMBOURG S.A. |
|| |Common Stock: 1,000,000 | | | COMPANY OF NEW YORK, INC. | || | AGENCY, INC. || | (LUX SA) |
|| |------------ Shares | --| | |--| || | |
||--| | | |Common Stock: 3 Shares | | |Common Stock: 100 Shares || |Common Stock: 5894 Shares |
|| | Cost | | |------------ | | |------------ || -|------------ |
|| | ---- | | | Cost | | | Cost || || Cost |
|| |401(k)-100% $7,800 | | | ---- | | | ---- || || ---- |
|| ------------------------------ | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 || ||BRANCH.-99.98% $115,470,723|
|| | ------------------------------- | ----------------------------| |-----------------------------
|| ------------------------------ | | | |
|| | 401(k) INVESTMENT | | ------------------------------- | ----------------------------| |-----------------------------
|| | ADVISORS, INC. | | | GATES MCDONALD & | | |NATIONWIDE GLOBAL HOLDINGS|| || PAN EURO LIFE |
|| | | | | COMPANY OF NEVADA | | | -HONG KONG, LIMITED || || |
|| |Common Stock: 1,000 Shares | --| | | | || ||Common Stock: 1,300,000 |
||--|------------ | | |Common Stock: 40 Shares | | |Common Stock: 2 Shares || ||------------ Shares |
|| | Cost | | |------------ | | |------------ Cost -- -- |
|| | ---- | | | Cost | | | ---- || || Cost |
|| |401(k)-100% $1,000 | | | ---- | | |NGH-50% || || ---- |
|| ------------------------------ | |Gates-100% $93,750 | | |Casualty--50% || ||LUX SA-90% 3,817,832,685|
|| | ------------------------------- | ----------------------------| || LUF |
|| ------------------------------ | | | |-----------------------------
|| | 401(k) COMPANY | | ------------------------------- | ----------------------------| |-----------------------------
|| | | | | GATES MCDONALD | | | NGH || ||NATIONWIDE GLOBAL HOLDINGS |
|| |Common Stock: 855,000 Shares| | | HEALTH PLUS, INC. | | | NETHERLANDS B.V. || ||- NGH BRASIL PARTICIPACOES,|
|| | | --| | | | || || LTDA (NGH BRASIL) |
|| | Cost | | |Common Stock: 200 Shares | | |Common Stock: 40 Shares || || |
||--| ---- | | |------------ | | |------------ -- -- Shares Cost |
|| |401(k)-100% $1,000 | | | Cost | | | Cost || | ------ ---- |
|| ------------------------------ | | ---- | | | ---- || |LUX SA 6,164,899 R6,164,899|
|| | |Gates-100% $2,000,000 | | |NGH-100% NLG 52,500 || |NGH 1 R1 |
|| ------------------------------ | ------------------------------- | ----------------------------| --------------|--------------
|| | | | | | |
|===| | | ------------------------------- | ----------------------------| --------------|--------------
| | RIVERVIEW AGENCY, INC. | | |NEVADA INDEPENDENT COMPANIES-| | | NATIONWIDE || | NATIONWIDE |
| | | | |MANUFACTURING TRANSPORTATION | | | SERVICES SP. Z.O.O. || | SEGURADORA S.A. |
| | | | | AND DISTRIBUTION | | | || | |
| | | --| | | |Common Stock: 80 Shares || | Shares Cost |
| | | | |Common Stock: 1,000 Shares | | |------------ Cost -- | ------ ---- |
| ------------------------------ | |------------ | | | ---- || |NGH |
| | |Gates-100% | | |NGH-100% 4,000 PLN || |BRASIL 9,999,999 R9,999,999|
| ------------------------------ | ------------------------------- | --------------------------- | |LUX SA 1 R1 |
| | | | | | -----------------------------
| | PENSION ASSOCIATES, INC. | | ------------------------------- | ----------------------------| -----------------------------
| | | | | NEVADA INDEPENDENT | | | MRM INVESTMENTS, INC. || | NATIONWIDE GLOBAL |
- ----| Common Stock: 1,000 Shares | | | COMPANIES-HEALTH AND PROFIT | | | || | FINANCE, LLC |
| | --| | ---|Common Stock: 1 Share || | Single Member Limited |
| Cost | | |Common Stock: 1,000 Shares | |------------ || | Liability Company |
| ---- | | |------------ | | Cost |...| |
| NFS-100% $2,839,392 | | | | | ---- | | |
------------------------------ | |Gates-100% | |NW Corp.-100% $7,000,000 | |NGH-100% |
| ------------------------------- ---------------------------- -----------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-CONSTRUCTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| | |
| |Gates-100% |
| -------------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|Gates-100% | December 31, 1999
-------------------------------
Page 2
</TABLE>
<PAGE> 85
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract owners of Qualified and Non-Qualified
Contracts as of January 31, 2000 was 6,302 and 13,249,
respectively.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 86
Item 29. PRINCIPAL UNDERWRITER
(a) The principal underwriter is Fidelity Investments
Institutional Services Company, Inc. which does not act as
principal underwriter, depositor, sponsor, or investment
adviser to any other investment company.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
------------------------------------------- -----------------------------------------------------------
<S> <C>
J. Gary Burkhead Director
------------------------------------------- -----------------------------------------------------------
Kevin J. Kelly Director
------------------------------------------- -----------------------------------------------------------
Robert L. Reynolds Director
------------------------------------------- -----------------------------------------------------------
Kevin J. Kelly President and Chief Executive Officer
------------------------------------------- -----------------------------------------------------------
Eric Roiter General Counsel
------------------------------------------- -----------------------------------------------------------
Stephen E. Tibbetts Treasurer
------------------------------------------- -----------------------------------------------------------
Jay Freedman Clerk
------------------------------------------- -----------------------------------------------------------
Elizabeth L. Baker Compliance Officer
------------------------------------------- -----------------------------------------------------------
Susan Englander Hislop Assistant Clerk
------------------------------------------- -----------------------------------------------------------
</TABLE>
(c) Not applicable
The address for each person named in Item 29 is 82 Devonshire
Street, Boston, Massachusetts 02109.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
<PAGE> 87
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant represents that any of the contracts which are
issued pursuant to Section 403(b) of the Internal Revenue Code are
issued by Nationwide through the Registrant in reliance upon, and
in compliance with a no-action letter issued by the staff of the
Securities and Exchange Commission to the American Council of Life
Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by Nationwide.
<PAGE> 88
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide Fidelity Advisor Variable Account:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
COLUMBUS, OHIO
APRIL 27, 2000
<PAGE> 89
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT, certifies
that it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this Post-Effective Amendment No. 9 and has caused this Post-Effective
Amendment to be signed on its behalf in the City of Columbus, and State of Ohio,
on this 27th day of April, 2000.
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
-------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-------------------------------------------------
(Depositor)
By/s/ STEVEN SAVINI, ESQ.
-------------------------------------------------
Steven Savini, Esq.
As required by the Securities Act of 1933, this Post-Effective Amendment No. 9
has been signed by the following persons in the capacities indicated on the 27th
day of April, 2000.
Signature Title
LEWIS J. ALPHIN Director
- ----------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ----------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ----------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
- ----------------------------------------
Joseph J. Gasper Officer and Director
DIMON R. MCFERSON Chairman and Chief Executive
- ----------------------------------------
Dimon R. McFerson Officer and Director
DAVID O. MILLER Chairman of the Board and
- ----------------------------------------
David O. Miller Director
YVONNE L. MONTGOMERY Director
- ----------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
- ----------------------------------------
Robert A. Oakley Financial Officer
RALPH M. PAIGE Director
- ----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director
- ----------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ----------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------------------
Nancy C. Thomas
By /s/ STEVEN SAVINI, ESQ.
-----------------------------------
Steven Savini, Esq.
Attorney-in-Fact
<PAGE> 1
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this 1st day of May, 2000, between Nationwide Life
Insurance Company ("Nationwide"), and Nationwide Investment Services Corporation
("NISC").
Nationwide proposes to develop, issue and administer, and NISC proposes to
provide the exclusive national distribution services for certain annuity and
life products (the "Products"). The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
1. Appointment of Product Administration
Nationwide is hereby appointed Product Administrator for the
Products.
2. Duties of Nationwide
Nationwide will perform in a proper and timely manner, those
functions enumerated in the column marked "Nationwide" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
3. Duties of NISC
NISC will perform in a proper and timely manner, those
functions enumerated in the column marked "NISC" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
1. Distribution of Products
The Products will be distributed through registered
representatives of NASD broker-dealer firms, appointed by
Nationwide, who shall be duly qualified and licensed as agents
(the "Agents"), in accordance with applicable state insurance
authority.
2. NISC shall be the exclusive National Distributor of the
Products.
<PAGE> 2
3. Appointment and Termination of Agents
Appointment and termination of Agents shall be processed and
executed by Nationwide. NISC reserves the right to require
Nationwide to consult with it regarding licensing decisions.
4. Advertising
NISC shall not print, publish or distribute any advertisement,
circular or document relating to the Products or relating to
Nationwide unless such advertisement, circular or document has
been approved in writing by Nationwide. Such approval shall
not be unreasonably withheld, and shall be given promptly,
normally within five (5) business days. Neither Nationwide nor
any of its affiliates shall print, publish or distribute any
advertisement, circular or document relating to the Products
or relating to NISC unless such advertisement, circular or
document has been approved in writing by NISC. Such approval
shall not be unreasonably withheld, and shall be given
promptly, normally within five (5) business days. However,
nothing herein shall prohibit any person from advertising the
Products on a generic basis.
5. Marketing Conduct
The parties will jointly develop standards, practices and
procedures respecting the marketing of the Products. Such
standards, practices and procedures are intended to help
Nationwide meet its obligations as an issuer under the
securities laws, to assure compliance with state insurance
laws, and to help NISC meet its obligations under the
securities laws as National Distributor. These standards,
practices and procedures are subject to continuing review and
neither Nationwide nor NISC will object unreasonably to
changes to such standards, practices and procedures
recommended by the other to comply with the intent of this
provision.
6. Sales Material and Other Documents
a. Sales Material
1) Nationwide shall develop and prepare all
promotional material to be used in the
distribution of the Products, in
consultation with NISC.
2) Nationwide is responsible for the printing
and the expense of providing such
promotional material.
3) Nationwide is responsible for approval of
such promotional material by state insurance
regulators, where required.
<PAGE> 3
4) NISC and Nationwide agree to abide by the
Advertising and Sales Promotion Material
Guidelines, attached hereto as EXHIBIT B,
and incorporated herein by reference.
b. Prospectuses
1) Nationwide is responsible for the
preparation and regulatory clearance of any
required registration statements and
prospectuses for the Products.
2) Nationwide is responsible for the printing
of Product prospectuses in such quantities
as the parties agree are necessary to assure
sufficient supplies.
3) Nationwide is responsible for supplying
Agents with sufficient quantities of Product
prospectuses.
c. Contracts, Applications and Related Forms
1) Nationwide, in consultation with NISC, is
responsible for the design and printing of
adequate supplies of Product applications,
contracts, related forms, and such service
forms as the parties agree are necessary.
2) Nationwide is responsible for supplying
adequate quantities of all such forms to the
Agents.
7. Appointment of Agents
a. NISC will assist Nationwide in facilitating the
appointment of Agents by Nationwide.
b. Nationwide will forward all appointment forms and
applications to the appropriate states and maintain
all contacts with the states.
c. Nationwide will maintain appointment files on Agents,
and NISC will have access to such files as needed.
8. Licensing and Appointment Guide
Nationwide shall provide to NISC a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities
as NISC may reasonably require.
<PAGE> 4
9. Other
a. Product Training
Nationwide is responsible for any Product training
for the Agents.
b. Field Sales Material
1) Nationwide, in consultation with NISC, is
responsible for the development, printing
and distribution of non-public field sales
material to be used by Agents.
2) NISC shall have the right to review all
field sales materials and to require any
modification mandated by regulatory
requirements.
c. Production Reports
Nationwide will deliver to NISC the items listed in
Production Reports to be Provided, attached hereto as
EXHIBIT C, and incorporated herein by reference.
d. Customer Service
Each party will notify the other of all material
pertinent inquiries and complaints it receives, from
whatever source and to whomever directed, and will
consult with the other in responding to such
inquiries and complaints.
e. Records and Books
All books and records maintained by Nationwide in
connection with the offer and sale of variable
annuity interests funded by a Separate Account are
maintained and preserved in conformity with the
requirements of Rule 17a-3 and 17a-4 under the 1934
Exchange Act, to the extent such requirements are
applicable to the variable annuity operations.
All such books and records are maintained and held by
Nationwide on behalf of and as agent for NISC, whose
property they are and shall remain. Such books and
records are at all times subject to inspection by the
Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<PAGE> 5
C. GENERAL PROVISIONS
1. Waiver
The forbearance or neglect of either party to insist upon
strict compliance by the other with any of the provisions of
this Agreement, whether continuing or not, or to declare a
forfeiture of termination against the other, shall not be
construed as a waiver of any rights or privileges of the
forbearing party in the event of a further default or failure
of performance.
2. Limitations
Neither party shall have authority on behalf of the other to:
make, alter or discharge any contractual terms of the
Products; waive any forfeiture; extend the time of making any
contributions to the products; guarantee dividends; alter the
forms which either may prescribe; nor substitute other forms
in place of those prescribed by the other.
3. Binding Effect
This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors
and assigns, provided that neither party shall assign or
sub-contract this Agreement or any rights or obligations
hereunder without prior written consent of the other.
4. Indemnification
Each party ("Indemnifying Party") hereby agrees to release,
indemnify and hold harmless the other party, its officers,
directors, employers, agents, servants, predecessors or
successors from any claims or liability arising out of the
acts or omissions of the Indemnifying Party not authorized by
this Agreement, including the violation of any federal or
state law or regulation.
5. Notices
All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the
party to whom notice is to be given, or on the date of mailing
if sent postage prepaid by First Class Mail, Registered or
Certified mail, by overnight mail, properly addressed as
follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Michael C. Butler, Vice President-Sales
Three Nationwide Plaza
Columbus, Ohio 43215
<PAGE> 6
TO NISC:
Nationwide Investment Services Corporation.
Barbara Shane, Vice President-Compliance Officer
Two Nationwide Plaza
Columbus, Ohio 43215
6. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio.
7. Arbitration
The parties agree that misunderstandings or disputes arising
from this Agreement shall be decided by arbitration, conducted
upon request of either party before three arbitrators (unless
the parties agree on a single arbitrator) designated by the
American Arbitration Association, and in accordance with the
rules of such Association. The expenses of the arbitration
proceedings conducted hereunder shall be borne equally by both
parties.
8. Confidentiality
Any information, documents and materials, whether printed or
oral, furnished by either party or its agents or employees to
the other shall be held in confidence. No such information
shall be given to any third party, other than to such
sub-contractors of NISC as may be permitted herein, or under
requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by
mutual agreement of the parties in writing. Any decision by either
party to cease issuance or distribution of any specific Product shall
not effect a termination of the Agreement unless such termination is
mutually agreed upon, or unless notice is given pursuant to Section
E.2. hereof.
E. TERMINATION
1. Either party may terminate this Agreement for cause at any
time, upon written notice to the other, if the other knowingly
and willfully: (a) fails to comply with the laws or
regulations of any state or governmental agency or body having
jurisdiction over the sale of insurance or securities; (b)
misappropriates any money or property belonging to the other;
(c) subjects the other to any actual or potential liability
due to misfeasance, malfeasance, or nonfeasance; (d) commits
any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
<PAGE> 7
2. Either party may terminate this Agreement, without regard to
cause, upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
a) The parties irrevocably acknowledge the continuing
right to use any Product trademark that might then be
associated with any Products, but only with respect
to all business in force at the time of termination.
b) In the event this Agreement is terminated the parties
will use their best efforts to preserve in force the
business issued pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By: __________________________
Michael C. Butler
Title: Vice President - Sales
NATIONWIDE INVESTMENT SERVICES
CORPORATION
By: ________________________
Barbara Shane
Title: Vice President - Compliance Officer
<PAGE> 8
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
NATIONWIDE NISC
- - Establishes underwriting criteria for - Consults with regard to new business
application processing and rejections. procedures and processing.
- - Reviews the completed application.
Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of
any error or missing data necessary to
underwrite application and establish
records for owner of Product ("Contract
Owner").
- - Prepares policy data page for
approved business and mails with policy
to Contract Owner.
- - Establishes and maintains all records
required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and
other statements to Contract Owners and
Agents, as required.
- - Prints, provides all forms ancillary
to issue of contract/policy forms for
Products.
- - Maintains supply of approved specimen
policy forms and all ancillary forms,
distributes same to Agents.
<PAGE> 9
B. BILLING AND COLLECTION
NATIONWIDE
- - Receives premium/purchase
payments and reconciles amount
received with remittance media.
- - Updates Contract Owner records to
reflect receipt of premium/purchase
payment and performs accounting/
investment allocation of each
payment received.
- - Deposits all cash received under the
Products in accordance with the
terms of the Products.
C. BANKING
NATIONWIDE
- - Balances, edits, endorses and prepares daily deposit.
- - Places deposits in depository account.
- - Prepares daily cash journal summary reports and
maintains same for review by NISC.
<PAGE> 10
D. PRICING/VALUATION/ACCOUNTING/TRADING
NATIONWIDE NISC
- - Maintains and makes available, as - Cooperates in annual audit of separate
reasonably requested, records used in account financials conducted for purposes
determining "Net Amount Available for of financial statement certification and
Investment." publication.
- - Collects information needed in - Will clear and settle Mutual Fund
determining Variable Account unit trades on behalf of the separate accounts
values from the Funds including using the National Securities Clearing
daily net asset value, capital Corporation FUND/Serv System.
gains or dividend distributions,
and the number of Fund Shares
acquired or sold during the
immediately preceding valuation
period.
- - Performs daily unit valuation
calculation.
<PAGE> 11
E. CONTRACT OWNER SERVICE/
RECORD MAINTENANCE
NATIONWIDE NISC
- - Receives and processes all - Accommodates customer service function
Contract Owner service requests, by providing any supporting information
including but not limited to or documentation which may be in the
informational requests, beneficiary control of NISC.
changes, and transfers of Contract
Value among eligible investment
options.
- - Maintains daily records of all
changes made to Contract Owner
accounts.
- - Researches and responds to all
Contract Owner/Agent inquiries.
- - Keeps all required Contract Owner
records.
- - Maintains adequate number of toll
free lines to service Contract Owner/
Agent inquiries.
F. DISBURSEMENTS (SURRENDERS,
DEATH CLAIMS, LOANS)
NATIONWIDE NISC
- - Receives and processes surrenders,
loans, and death claims in accordance
with established guidelines.
- - Prepares checks for surrenders,
loans, and death claims, and forwards
to Contract Owner or Beneficiary.
Prepares and mails confirmation
statement of disbursement to Contract
Owner/Beneficiary with copy to Agent.
<PAGE> 12
G. COMMISSIONS
NATIONWIDE NISC
- - Ascertains, on receipt of - Receives and performs record keeping
applications, whether writing Agent for investment company payments made
is appropriately licensed. under a 12b-1 Plan.
- - Pays commissions and other fees
in accordance with agreements
relating to same.
H. PROXY PROCESSING
NATIONWIDE NISC
- - Receives record date information
from Funds Receives proxy
solicitation materials from Funds.
- - Prepares Voting Instruction cards
and mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares
in accordance with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
NATIONWIDE NISC
- - Prepares and mails quarterly and
annual Statements of Account to
Contract Owners.
- - Prepares and mails all semi-annual
and annual reports of Variable
Account(s) to Contract Owners.
<PAGE> 13
J. REGULATORY/STATEMENT REPORTS
NATIONWIDE NISC
- - Prepares and files Separate Account - Prepares and files periodic FOCUS
Annual Statements. Reports with the NASDR and SEC, as
applicable.
- - Prepares and mails the appropriate, - Prepares and files annual audited
required IRS reports at the Contract financial statements with required
Owner level. Files same with required regulatory agencies.
regulatory agencies.
- - Prepares and files form N-SAR for
the Separate Account.
K. PREMIUM TAXES
NATIONWIDE NISC
- - Collects, pays and accounts for
premium taxes as appropriate.
- - Prepares and maintains all premium
tax records by state.
- - Maintains liabilities in General
Account ledger for accrual of premium
tax collected.
- - Integrates all company premium taxes
due and performs related accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
NATIONWIDE NISC
- - Provides periodic reports in - Provides periodic reports in accordance
accordance with the Schedule of with the Schedule of Reports to be
Reports to be prepared jointly by prepared jointly by Nationwide and NISC.
Nationwide and NISC. (See EXHIBIT C) (See EXHIBIT C)
<PAGE> 14
M. AGENT LICENSE RECORDKEEPING
NATIONWIDE NISC
- - Receives, establishes, processes, - Maintains securities registrations and
and maintains Agent appointment assumes supervisory responsibility for
records. representatives of affiliated sales and
marketing companies involved in the
wholesale distribution of Nationwide
variable contract products.
- Maintains training, supervisory, and
other required records for and on behalf
of registered representatives of NISC.
<PAGE> 15
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY NATIONWIDE AND NISC
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NISC require that all variable contract promotional
materials be reviewed and approved by both Nationwide and NISC prior to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. Nationwide and NISC shall approve in writing all
promotional material. Such approval shall not be unreasonably withheld,
and shall be given promptly, normally within five (5) days.
2. All promotional material will be submitted in "draft" form to permit
any changes or corrections to be made prior to the printing.
3. Nationwide and NISC will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use
will not constitute approval for any other use. Different standards of
review may apply when the same advertising material is intended for
different uses. The following information will be provided for each
item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be to broker/dealer, entity,
participant, etc.
c. How the material will be used (e.g., brochure, mailing, web
site, etc.)
d. The projected date of initial use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for the
new use must be submitted.
6. Nationwide will assign a form number to each item of advertising and
sales promotional material. This number will appear on each piece of
advertising and sales promotional material. It will be used to aid in
necessary filings, and to maintain appropriate controls.
7. Nationwide and NISC will provide written approval for all material to
be used.
8. Nationwide will be responsible to effect necessary state filings.
9 NISC will coordinate SEC/NASD filings of sales and promotional
material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Office of Product and
Market Compliance, Nationwide Life Insurance Company, One Nationwide
Plaza, Columbus, Ohio 43215
