<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-89560
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES [X]
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 10
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
PATRICIA R. HATLER, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, 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 September 20, 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
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM CAPTION
<S> <C>
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 & 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............................................. 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 Information
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
SUPPLEMENT DATED OCTOBER 2, 2000 TO
PROSPECTUS DATED MAY 1, 2000 FOR
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE FIDELITY ADVISOR VA
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING UNDERLYING
MUTUAL FUND:
THIS PROSPECTUS PROVIDES DISCLOSURE FOR CONTRACTS ISSUED PRIOR TO MAY 1,
2000. FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000, ANOTHER PROSPECTUS -
IDENTICAL TO THIS PROSPECTUS WITH THE EXCEPTION OF AVAILABLE SHARE CLASSES -
WILL BE PROVIDED.
Fidelity VIP III Dynamic Capital Appreciation: Service Class
2. THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES" TABLE ON PAGE 9 OF YOUR
PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING:
THE FOLLOWING UNDERLYING MUTUAL FUNDS AND CORRESPONDING EXPENSES APPLY TO
CONTRACTS ISSUED PRIOR TO MAY 1, 2000:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (AS A PERCENTAGE OF
UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
---------- -------- ---- -----------
<S> <C> <C> <C> <C>
Fidelity VIP III Dynamic Capital 0.58% 0.92% 0.10% 1.60%
Appreciation: Service Class*
</TABLE>
*Based on estimated expenses for the first year.
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.
3. THE "EXAMPLE" CHART ON PAGE 10 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE
FOLLOWING:
EXAMPLE - FOR CONTRACTS ISSUED PRIOR TO MAY 1, 2000
The following chart shows the expenses (in dollars) that would be incurred
under this contract assuming a $1,000 investment, 5% annual return, and no
change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses
may be greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The assumed variable account charge is 2.70% which is the maximum
charge for the maximum number of rider options.
<PAGE> 4
For those contracts that do not elect the maximum number of options, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<TABLE>
<CAPTION>
If you surrender If you do not If you annuitize
your contract surrender your your contract
at the end of the contract at the at the end of the
applicable end of the applicable
time period applicable time time period
period
--------------------- -------------------- ---------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
--- ---- ---- ---- --- --- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP III 108 190 264 461 45 136 228 461 * 136 228 461
Dynamic Capital
Appreciation:
Service Class
</TABLE>
* The contracts sold under this prospectus do not permit annuitization during
the first two contract years.
4. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 54 OF YOUR
PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING:
VIP III BALANCED PORTFOLIO: SERVICE CLASS
Investment Objective: The fund seeks both income and capital growth
consistent with reasonable risk 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 Funds 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.
5. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 54 OF YOUR
PROSPECTUS IS AMENDED TO READ:
FIDELITY VIP III DYNAMIC CAPITAL APPRECIATION PORTFOLIO: SERVICE CLASS
Investment Objective: The fund seeks capital appreciation by normally
investing in common stocks of foreign and domestic issuers. This strategy
includes primarily investing in growth stocks, value stocks, or both. FMR
uses fundamental analysis of each issuer's financial condition and industry
position, and market and economic conditions, to select investments for the
Portfolio. The Portfolio may realize capital gains without considering the
tax consequences to shareholders.
<PAGE> 5
SUPPLEMENT DATED OCTOBER 2, 2000 TO
PROSPECTUS DATED MAY 1, 2000 FOR
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE FIDELITY ADVISOR VA
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING:
THIS PROSPECTUS PROVIDES DISCLOSURE FOR CONTRACTS ISSUED ON OR AFTER MAY 1,
2000. FOR CONTRACTS ISSUED PRIOR TO MAY 1, 2000, ANOTHER PROSPECTUS -
IDENTICAL TO THIS PROSPECTUS WITH THE EXCEPTION OF AVAILABLE SHARE CLASSES -
WILL BE PROVIDED.
Fidelity VIP III Dynamic Capital Appreciation: Service Class 2
2. THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES" TABLE ON PAGE 9 OF YOUR
PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING:
THE FOLLOWING UNDERLYING MUTUAL FUNDS AND CORRESPONDING EXPENSES APPLY TO
CONTRACTS ISSUED ON AND AFTER MAY 1, 2000:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF
UNDERLYING MUTUAL FUND NET ASSETS, WITHOUT EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
---------- -------- ----- -----------
<S> <C> <C> <C> <C>
Fidelity VIP III Dynamic Capital 0.58% 0.92% 0.25% 1.75%
Appreciation: Service Class 2*
</TABLE>
*Based on estimated expenses for the first year.
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.
None of the underlying mutual funds listed above are subject to fee waivers
or expense reimbursements.
3. THE "EXAMPLE" CHART ON PAGE 10 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE
FOLLOWING:
EXAMPLE - FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000
The following chart shows the expenses (in dollars) that would be incurred
under this contract assuming a $1,000 investment, 5% annual return, and no
change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses
may be greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The assumed variable account charge is 2.70% which is the
maximum charge for the maximum number of rider options.
<PAGE> 6
For those contracts that do not elect the maximum number of options, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<TABLE>
<CAPTION>
If you surrender If you do not If you annuitize
your contract surrender your your contract
at the end of the contract at the at the end of the
applicable end of the applicable
time period applicable time time period
period
---------------------- -------------------- ---------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
--- ---- ---- ---- --- --- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP III 110 195 271 474 47 141 235 474 * 141 235 474
Dynamic Capital
Appreciation:
Service Class 2
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during
the first two contract years.
4. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 54 OF YOUR
PROSPECTUS IS AMENDED TO INCLUDE:
VIP III BALANCED PORTFOLIO: SERVICE CLASS 2
Investment Objective: The fund seeks both income and capital growth
consistent with reasonable risk 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 Funds 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.
5. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 54 OF YOUR
PROSPECTUS IS AMENDED TO READ:
FIDELITY VIP III DYNAMIC CAPITAL APPRECIATION PORTFOLIO: SERVICE CLASS 2
Investment Objective: The fund seeks capital appreciation by normally
investing in common stocks of foreign and domestic issuers. This strategy
includes primarily investing in growth stocks, value stocks, or both. FMR
uses fundamental analysis of each issuer's financial condition and industry
position, and market and economic conditions, to select investments for the
Portfolio. The Portfolio may realize capital gains without considering the
tax consequences to shareholders.
<PAGE> 7
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 ("SERVICE CLASS SHARES") ARE AVAILABLE FOR
CONTRACTS ISSUED PRIOR TO MAY 1, 2000:
VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio: Service Class
- VIP Growth Portfolio: Service Class
- VIP High Income Portfolio: Service Class*
- VIP Money Market Portfolio
- VIP Overseas Portfolio: Service Class
VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Asset Manager Portfolio: Service Class
- VIP II Asset Manager: Growth Portfolio: Service Class
- VIP II Contrafund(R) Portfolio: Service Class
- VIP II Investment Grade Bond Portfolio
- VIP II Index 500 Portfolio
VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Balanced Portfolio: Service Class
- VIP III Growth & Income Portfolio: Service Class
- VIP III Growth Opportunities Portfolio: Service Class
- VIP III Mid Cap Portfolio: Service Class
THE FOLLOWING UNDERLYING MUTUAL FUNDS ("SERVICE CLASS 2 SHARES") ARE AVAILABLE
FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000:
VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio: Service Class 2
- VIP Growth Portfolio: Service Class 2
- VIP High Income Portfolio: Service Class 2*
- VIP Money Market Portfolio
- VIP Overseas Portfolio: Service Class 2
VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Asset Manager Portfolio: Service Class 2
- VIP II Asset Manager Growth: Portfolio: Service Class 2
- VIP II Contrafund(R) Portfolio: Service Class 2
- VIP II Investment Grade Bond Portfolio
- VIP II Index 500 Portfolio
VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Balanced Portfolio: Service Class 2
- VIP III Growth & Income Portfolio: Service Class 2
- VIP III Growth Opportunities Portfolio: Service Class 2
- VIP III Mid Cap Portfolio: Service Class 2
1
<PAGE> 8
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Fidelity Advisor Variable Account ("variable account") may be
allocated to the fixed account or the Guaranteed Term Options (Guaranteed Term
Options may not be available in every jurisdiction - refer to your contract for
specific information).
As indicated, Service Class shares of the underlying mutual funds are
exclusively available under contracts purchased prior to May 1, 2000. Service
Class 2 shares of the underlying mutual funds are exclusively available under
contracts issued on or after May 1, 2000. Accordingly, two versions of this
prospectus will be made available - one for contracts issued on or after May 1,
2000, the other for contracts issued before May 1, 2000. The only difference
between these two versions will be with respect to the share classes of the
underlying mutual funds and related provisions; otherwise the two versions are
identical.
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 55.
For general information or to obtain FREE copies of the:
- Statement of Additional Information;
- prospectus, annual report or semi-annual report for any underlying
mutual fund;
- prospectus for the Guaranteed Term Options; or
- required Nationwide forms,
call: 1-800-494-1132
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 43218-2610
The Statement of Additional Information and other material 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 EVERY STATE
GOVERNMENT AGENCY
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> 9
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, and any amount held under Guaranteed Term
Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) of the Internal
Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple IRA, or Tax Sheltered Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) of the Internal Revenue Code.
SIMPLE IRA- An annuity contract which qualifies for favorable tax treatment
under Section 408(p) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account 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> 10
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..............................................
NATIONWIDE INVESTMENT SERVICES CORPORATION.....................................
TYPES OF CONTRACTS.............................................................
Non-Qualified Annuity Contracts
Individual Retirement Annuities (IRAs)
Simplified Employee Pension IRAs (SEP IRAs)
Simple IRAs
Roth IRAs
Tax Sheltered Annuities
Qualified Plans
INVESTING IN THE CONTRACT......................................................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS................................................
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS.............................
Reduced Purchase Payment Option
CDSC Options and Charges
Death Benefit Options
Guaranteed Minimum Income Benefit Option
Extra Value Option
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 Prior to Annuitization
Transfers After Annuitization
Transfer Requests
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 & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Loan Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT.....................................................................
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
4
<PAGE> 11
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Option ("GMIB")
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
REQUIRED DISTRIBUTIONS.........................................................
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities, SEP IRAs and
Simple IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.....................................................
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.........................................................
LEGAL PROCEEDINGS..............................................................
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY................................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS.............................
APPENDIX B: CONDENSED FINANCIAL INFORMATION....................................
5
<PAGE> 12
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:
<TABLE>
<CAPTION>
Number of Completed CDSC
Years from Date of Percentage
Purchase Payment
----------------- -----------
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
</TABLE>
(1) Each contract year, the contract owner may withdraw without a CDSC the
greater of:
(a) 10% of all purchase payments made to the contract; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued as Tax Sheltered Annuities
due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of the daily net assets of the variable account)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges 0.95%
Total Variable Account Charges 0.95%(3)
</TABLE>
(2) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options.
They are charged on a daily basis at the annual rate noted above.
(3) Charges shown include the Five-Year Reset Death Benefit that is standard to
every contract (see "Death Benefit Payment").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states may
not permit Nationwide to assess a loan processing fee (see "Loan Privilege").
6
<PAGE> 13
ADDITIONAL CONTRACT OPTIONS
For an additional charge, the following options are available to contract owners
(upon approval by state insurance authorities). These options must be elected at
the time of application and will replace the corresponding standard contract
benefits.
If the contract owner chooses one or more of the following optional benefits, a
corresponding charge will be deducted. Charges for the optional benefits are IN
ADDITION TO the standard variable account charges. Except as otherwise noted,
optional benefit charges will only apply to allocations made to the variable
account and are charged as a percentage of the average variable account value.
REDUCED PURCHASE PAYMENT OPTION
For an additional charge at an annualized rate of 0.25% of the daily net assets
of the variable account, Nationwide will lower an applicant's minimum initial
purchase payment to $1,000 and subsequent purchase payments to $25. This option
is not available to contracts issued as Investment-only Contracts.
<TABLE>
<S> <C>
Reduced Purchase Payment Option .............. 0.25%
Total Variable Account Charges
(including Reduced Purchase
Payment Option)................................ 1.20%
</TABLE>
CDSC OPTION
For an additional charge at an annualized rate of 0.15% of the daily net assets
of the variable account, an applicant can receive a five year CDSC schedule,
instead of the standard seven year CDSC schedule.
<TABLE>
<S> <C>
Five Year CDSC Option .......................... 0.15%
Total Variable Account Charges
(including Five Year CDSC Option).............. 1.10%
</TABLE>
Range of Five-Year CDSC over time:
<TABLE>
<CAPTION>
Number of Completed CDSC
Years from Date of Percentage
Purchase Payment
-------------------- ----------
<S> <C>
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
</TABLE>
For contracts issued in the State of New York, this option is available only for
contracts issued as Roth IRAs and is not available when the Extra Value Option
is elected.
CDSC WAIVER OPTIONS
ADDITIONAL WITHDRAWAL WITHOUT CHARGE AND DISABILITY WAIVER
For an additional charge at an annualized rate of 0.10% of the daily net
assets of the variable account, an applicant can receive an additional 5%
CDSC-free withdrawal privilege, which also includes a disability waiver. This
5% is in addition to the standard 10% CDSC-free withdrawal privilege that
applies to every contract (see "CDSC Options and Charges").
<TABLE>
<S> <C>
Additional Withdrawal Without
Charge and Disability Waiver ................. 0.10%
Total Variable Account Charges
(including Additional Withdrawal
Without Charge and
Disability Waiver) ........................ 1.05%
</TABLE>
ADDITIONAL CDSC WAIVER OPTIONS FOR TAX SHELTERED ANNUITIES
Tax Sheltered Annuity applicants may also elect two additional CDSC waiver
options (see "CDSC Options and Charges").
<TABLE>
<S> <C>
10 Year and Disability Waiver.................. 0.05%
Total Variable Account Charges
(including 10 Year and Disability
Waiver) ..................................... 1.00%
Hardship Waiver................................ 0.15%
Total Variable Account Charges
(including Hardship Waiver).................. 1.10%
</TABLE>
DEATH BENEFIT OPTIONS
An applicant may choose among the following optional death benefits as a
replacement for the Five-Year Reset Death Benefit that is standard to every
contract. The optional death benefits are:
<TABLE>
<S> <C>
Optional One-Year Step Up
Death Benefit.................................... 0.05%
Total Variable Account Charges
(including One Year Step Up
</TABLE>
7
<PAGE> 14
<TABLE>
<S> <C>
Death Benefit).................................. 1.00%
Optional 5% Enhanced Death
Benefit.......................................... 0.10%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit)........................................ 1.05%
</TABLE>
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, an applicant may elect the Guaranteed Minimum Income
Benefit Option (see "Guaranteed Minimum Income Benefit Option").
<TABLE>
<S> <C>
Guaranteed Minimum Income Benefit
Option............................................ 0.45%
Total Variable Account Charges
(including a Guaranteed Minimum
Income Benefit Option)........................... 1.40%
</TABLE>
EXTRA VALUE OPTION
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, Nationwide will credit 3% of the purchase payment(s)
made to the contract during the first 12 months the contract is in force.
Nationwide will discontinue deducting this charge seven years from the date the
contract was issued (see "Extra Value Option").
<TABLE>
<S> <C>
Extra Value Option............................ 0.45%
Total Variable Account Charges
(including Extra Value Option)............... 1.40%
</TABLE>
The charge for the Extra Value Option will be assessed against the fixed account
and the Guaranteed Term Option allocations during the first seven contract years
in the form of crediting rates that may be up to 0.45% less than the crediting
rates available when the Extra Value Option is not elected (see "Fixed Account"
and "Guaranteed Term Options").
8
<PAGE> 15
THE FOLLOWING UNDERLYING MUTUAL FUNDS AND CORRESPONDING EXPENSES APPLY TO
CONTRACTS ISSUED PRIOR TO MAY 1, 2000:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (AS A PERCENTAGE OF
UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
---------- -------- ----- ------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio: Service Class 0.48% 0.08% 0.10% 0.66%
VIP Growth Portfolio: Service Class 0.58% 0.07% 0.10% 0.75%
VIP High Income Portfolio: Service Class 0.58% 0.11% 0.10% 0.79%
VIP Money Market Portfolio 0.18% 0.09% 0.00% 0.27%
VIP Overseas Portfolio: Service Class 0.73% 0.15% 0.10% 0.98%
VIP II Asset Manager Portfolio: Service Class 0.53% 0.10% 0.10% 0.73%
VIP II Asset Manager: Growth Portfolio: Service Class 0.58% 0.13% 0.10% 0.81%
VIP II Contrafund(R) Portfolio: Service Class 0.58% 0.07% 0.10% 0.75%
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: Service Class 0.43% 0.13% 0.10% 0.66%
VIP III Growth & Income Portfolio: Service Class 0.48% 0.11% 0.10% 0.69%
VIP III Growth Opportunities Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
VIP III Mid Cap Portfolio: Service Class 0.57% 0.40% 0.10% 1.07%
</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
Fees Expenses Fees Underlying
Mutual Fund
Expenses
---------- -------- ----- ------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio: Service Class 0.48% 0.09% 0.10% 0.67%
VIP Growth Portfolio: Service Class 0.58% 0.09% 0.10% 0.77%
VIP Overseas Portfolio: Service Class 0.73% 0.18% 0.10% 1.01%
VIP II Asset Manager Portfolio: Service Class 0.53% 0.11% 0.10% 0.74%
VIP II Asset Manager Growth Portfolio: Service Class 0.58% 0.14% 0.10% 0.82%
VIP II Contrafund(R) Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
VIP II Index 500 Portfolio 0.24% 0.10% 0.00% 0.34%
VIP III Balanced Portfolio: Service Class 0.43% 0.14% 0.10% 0.67%
VIP III Growth & Income Portfolio: Service Class 0.48% 0.12% 0.10% 0.70%
VIP III Growth Opportunities Portfolio: Service Class 0.58% 0.11% 0.10% 0.79%
VIP III Mid Cap Portfolio: Service Class 0.57% 2.74% 0.10% 3.41%
</TABLE>
9
<PAGE> 16
THE FOLLOWING UNDERLYING MUTUAL FUNDS AND CORRESPONDING EXPENSES APPLY TO
CONTRACTS ISSUED ON AND AFTER MAY 1, 2000:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, WITHOUT EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total
Fees Expenses Fees Underlying
Mutual Fund
Expenses
---------- -------- ----- ------------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio: Service Class 2 0.48% 0.10% 0.25% 0.83%
VIP Growth Portfolio: Service Class 2 0.58% 0.10% 0.25% 0.93%
VIP High Income Portfolio: Service Class 2 0.58% 0.11% 0.25% 0.94%
VIP Money Market Portfolio 0.18% 0.09% 0.00% 0.27%
VIP Overseas Portfolio: Service Class 2 0.73% 0.18% 0.25% 1.16%
VIP II Asset Manager Portfolio: Service Class 2 0.53% 0.11% 0.25% 0.89%
VIP II Asset Manager: Growth 0.58% 0.15% 0.25% 0.98%
Portfolio: Service Class 2
VIP II Contrafund(R) Portfolio: Service Class 2 0.58% 0.12% 0.25% 0.95%
VIP II Investment Grade Bond Portfolio 0.43% 0.11% 0.00% 0.54%
VIP II Index 500 Portfolio 0.24% 0.10% 0.00% 0.34%
VIP III Balanced Portfolio: Service Class 2 0.43% 0.16% 0.25% 0.84%
VIP III Growth & Income Portfolio: Service Class 2 0.48% 0.13% 0.25% 0.86%
VIP III Growth Opportunities Portfolio: Service Class 2 0.58% 0.13% 0.25% 0.96%
VIP III Mid Cap Portfolio: Service Class 2 0.57% 0.43% 0.25% 1.25%
</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. None of
the underlying mutual funds listed above are subject to fee waivers or expense
reimbursements.
10
<PAGE> 17
EXAMPLE - FOR CONTRACTS ISSUED PRIOR TO MAY 1, 2000
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below. The example reflects expenses of both
the variable account and the underlying mutual funds. The assumed variable
account charge is 2.70% which is the maximum charge for the maximum number of
rider options.
For those contracts that do not elect the maximum number of options, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<TABLE>
<CAPTION>
If you surrender If you do not If you annuitize
your contract surrender your your contract
at the end of the contract at the at the end of the
applicable end of the applicable
time period applicable time time period
period
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
--- ---- ---- ---- -- --- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP Equity-Income 98 161 218 377 35 107 182 377 * 107 182 377
Portfolio: Service
Class
VIP Growth 99 164 222 386 36 110 186 386 * 110 186 386
Portfolio: Service
Class
VIP High Income 100 165 224 389 37 111 188 389 * 111 188 389
Portfolio: Service
Class
VIP Money Market 94 149 198 340 31 95 162 340 * 95 162 340
Portfolio
VIP Overseas 102 171 234 407 39 117 198 407 * 117 198 407
Portfolio: Service
Class
VIP II Asset Manager 99 164 221 384 36 110 185 384 * 110 185 384
Portfolio: Service
Class
VIP II Asset 100 166 225 391 37 112 189 391 * 112 189 391
Manager: Growth
Portfolio: Service
Class
VIP II Contrafund(R) 99 164 222 386 36 110 186 386 * 110 186 386
Portfolio: Service
Class
VIP II Investment 97 158 212 366 34 104 176 366 * 104 176 366
Grade Bond Portfolio
VIP II Index 500 94 150 198 341 31 96 162 341 * 96 162 341
Portfolio
VIP III Balanced 98 161 218 377 35 107 182 377 * 107 182 377
Portfolio: Service
Class
VIP III Growth & 99 162 219 380 36 108 183 380 * 108 183 380
Income Portfolio:
Service Class
VIP III Growth 100 165 224 388 37 111 188 388 * 111 188 388
Opportunities
Portfolio: Service
Class
VIP III Mid Cap 103 174 238 475 40 120 202 415 * 120 202 415
Portfolio: Service
Class
</TABLE>
* The contracts sold under this prospectus do not permit annuitization during
the first two contract years.
11
<PAGE> 18
EXAMPLE - FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below. The example reflects expenses of both
the variable account and the underlying mutual funds. The assumed variable
account charge is 2.70% which is the maximum charge for the maximum number of
rider options.
For those contracts that do not elect the maximum number of options, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<TABLE>
<CAPTION>
If you surrender If you do not If you annuitize
your contract surrender your your contract
at the end of the contract at the at the end of the
applicable end of the applicable
time period applicable time time period
period
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
--- ---- ---- ---- -- --- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP Equity-Income 100 167 226 393 37 113 190 393 * 113 190 393
Portfolio: Service
Class 2
VIP Growth 101 170 231 402 38 116 195 402 * 116 195 402
Portfolio: Service
Class 2
VIP High Income 101 170 232 403 38 116 196 403 * 116 196 403
Portfolio: Service
Class 2
VIP Money Market 97 157 211 364 34 103 175 364 * 103 175 364
Portfolio
VIP Overseas 104 177 243 423 41 123 207 423 * 123 207 423
Portfolio: Service
Class 2
VIP II Asset Manager 101 168 229 399 38 114 193 399 * 114 193 399
Portfolio: Service
Class
VIP II Asset 102 171 234 407 39 117 198 407 * 117 198 407
Manager: Growth
Portfolio: Service
Class 2
VIP II Contrafund(R) 101 170 232 404 38 116 196 404 * 116 196 404
Portfolio: Service
Class 2
VIP II Investment 97 158 212 366 34 104 176 366 * 104 176 366
Grade Bond Portfolio
VIP II Index 500 95 152 201 346 32 98 165 346 * 98 165 346
Portfolio
VIP III Balanced 100 167 227 394 37 113 191 394 * 113 191 394
Portfolio: Service
Class 2
VIP III Growth & 100 168 228 396 37 114 192 396 * 114 192 396
Income Portfolio:
Service Class 2
VIP III Growth 101 171 233 405 38 117 197 405 * 117 197 405
Opportunities
Portfolio: Service
Class 2
VIP III Mid Cap 104 179 247 431 41 125 211 431 * 125 211 431
Portfolio: Service
Class 2
</TABLE>
* The contracts sold under this prospectus do not permit annuitization during
the first two contract years.
12
<PAGE> 19
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)" and
"contract owner" will mean "participant."
The contracts can be categorized as:
- Investment-only;
- Non-Qualified;
- Individual Retirement Annuities with contributions rolled over or
transferred from certain tax-qualified plans*;
- Roth IRAs;
- Tax Sheltered Annuities with contributions rolled over or transferred from
other Tax Sheltered Annuity plans*;
- SEP IRAs; and
- Simple IRAs.
* Contributions are not required to be rolled over or transferred if the
contract owner elects the Reduced Purchase Payment Option.
For more detailed information with regard to the differences in contract types,
please see "Types of Contracts" later in this prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
MINIMUM MINIMUM
CONTRACT INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENTS
PAYMENT
-------- -------- ----------
<S> <C> <C>
Investment-only $15,000 $1,000
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax $15,000 $1,000
Sheltered
Annuity
Charitable $15,000 $1,000
Remainder
Trust
SEP IRA $15,000 $1,000
Simple IRA $15,000 $1,000
</TABLE>
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
If the contract owner elects the Extra Value Option, amounts credited to the
contract in excess of total purchase payments may not be used to meet the
minimum initial and subsequent purchase payment requirements.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 0.95% of the daily net assets of the variable account. Nationwide assesses
this charge in return for bearing certain mortality and expense risks, as well
as for administrative expenses.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
There are several CDSC options that are available to contract owners, each with
different characteristics and costs. The charge associated with each option is
charged as a percentage of the daily net assets of the variable account. They
are as follows:
<TABLE>
<CAPTION>
OPTION CONTRACT CHARGE
TYPE
------ -------- ------
<S> <C> <C>
Five Year CDSC All* 0.15%
Option
Additional All 0.10%
Withdrawal
Without Charge
and Disability
Waiver
10 Year and Tax 0.05%
Disability Waiver Sheltered
Annuities
Hardship Waiver Tax 0.15%
Sheltered
Annuities
</TABLE>
* For contracts issued in the State of New York, this option is available
only for contracts issued as Roth IRAs and is not available when the Extra
Value Option is elected.
13
<PAGE> 20
If the contract owner elects the Reduced Purchase Payment Option, Nationwide
will reduce the minimum purchase payment to $1,000 and subsequent purchase
payments to $25. In return for the reduction, Nationwide will deduct an
additional charge of 0.25% of the daily net assets of the variable account. This
option is not available for contracts issued as Investment-only contracts.
Two optional death benefits are available under the contract. 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.
A Guaranteed Minimum Income Benefit option is available under the contract. If
the contract owner elects the Guaranteed Minimum Income Benefit option,
Nationwide will deduct an additional charge of 0.45% of the daily net assets of
the variable account (see "Guaranteed Minimum Income Benefit").
An Extra Value Option is available under the contract. The Extra Value Option is
only available at the time of application. If the contract owner elects the
Extra Value Option on the application, Nationwide will apply a credit of 3% of
the purchase payment(s) made during the first 12 months the contract is in
force. In exchange, Nationwide will deduct an additional charge at an annualized
rate of 0.45% of the daily net assets of the variable account. Nationwide will
discontinue deducting this charge seven years from the date the contract was
issued. Once the Extra Value Option is elected, it may not be revoked (see
"Extra Value Option").
Upon annuitization of the contract, any amounts assessed for any rider options
will be waived and only those charges applicable to the base contract will be
assessed.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How a contract is taxed depends on the type of contract issued and the purpose
for which the contract is purchased. Nationwide will charge against the contract
any premium taxes levied by 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 2 of this prospectus.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of a variable
account charge which may vary from contract to contract (for more information on
the calculation of accumulation unit values, see "Determining Variable Account
Value - Valuing an Accumulation Unit"). Please refer to Appendix B for
information regarding each class of accumulation units.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
14
<PAGE> 21
GENERAL DISTRIBUTOR
The contracts are distributed by the general distributor, Fidelity Investments
Institutional Services Company, Inc., located at 82 Devonshire Street, Boston,
MA 02109.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
NON-QUALIFIED ANNUITY CONTRACTS
A Non-Qualified Annuity Contract is a contract that does not qualify for certain
tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth
IRA, a SEP IRA, a Simple 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.
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
SIMPLIFIED EMPLOYEE PENSION IRAS (SEP IRAS)
A SEP IRA is a written plan established by an employer for the benefit of
employees which permits the employer to make contributions to an IRA established
for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA in the same way, and
with the same restrictions and limitations, as for an IRA. In addition, the
employer may make contributions to the SEP IRA, subject to dollar and percentage
limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan established an employer must satisfy certain requirements:
- minimum participation rules;
15
<PAGE> 22
- top-heavy contribution rules;
- nondiscriminatory allocation rules; and
- requirements regarding a written allocation formula.
In addition, the plan cannot restrict withdrawals of non-elective contributions,
and must restrict withdrawals of elective contributions before March 15th of the
following year.
SIMPLE IRAS
A Simple IRA is an individual retirement annuity which is funded exclusively by
a qualified salary reduction arrangement and satisfies the following:
- vesting requirements,
- participation requirements; and
- administrative requirements.
The funds contributed to a Simple IRA cannot be commingled with funds in IRAs or
SEP IRAs.
A Simple IRA cannot receive rollover distributions except from another Simple
IRA.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- the contract is not transferable by the owner;
- the premiums are not fixed;
- the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- the entire interest of the owner in the contract is nonforfeitable; and
- after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract
within the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
TAX SHELTERED ANNUITIES
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70-1/2, and
after the death of the owner. Additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
statutory period of time.
QUALIFIED PLANS
Contracts that are owned by Qualified Plans are not intended to confer tax
benefits on the beneficiaries of the plan; they are used as investment vehicles
for the plan. The income tax consequences to the beneficiary of a Qualified Plan
are controlled by the operation of the plan, not by operation of the assets in
which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of
the plan to obtain and review the plan, trust, summary plan description and
other documents for the tax and
16
<PAGE> 23
other consequences of being a participant in a qualified plan.
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
Investment-only Contracts, Individual Retirement Annuities, SEP IRAs, Simple
IRAs, Roth IRAs, and Tax Sheltered Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon 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.
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<PAGE> 24
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
(1) shares of a current underlying mutual fund are no longer available
for investment; or
(2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus should be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the Guaranteed Term Options are not subject to variable account
charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate.
For contract owners that elect the Extra Value Option, allocations made to the
Guaranteed Term Options, for the first seven contract years, will be credited a
guaranteed interest rate of 0.45% less than the guaranteed interest rate that
applies to the Guaranteed Term Options if the Extra Value Option is not elected.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, Dollar
Cost Averaging, or systematic withdrawals.
Guaranteed Term Options may not be available in every state.
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<PAGE> 25
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by the assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to accuracy
and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- New Money Rate - The rate credited on the fixed account allocation when
the contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than
the rate when the contract was issued, since the New Money Rate is subject
to change based on market conditions.
- Variable Account to Fixed Rate - Allocations transferred from any of the
underlying investment options in the variable account to the fixed account
may receive a different rate. The rate may be lower than the New Money
Rate. There may be limits on the amount and frequency of movements from
the variable account to the fixed account.
- Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements
when any of the money in the contract owner's fixed account matures. At
that time, the contract owner will have an opportunity to leave the money
in the fixed account and receive the Renewal Rate or the contract owner
can move the money to any of the other underlying mutual fund options.
- Dollar Cost Averaging Rate - From time to time, Nationwide may offer a
more favorable rate for an initial purchase payment into a new contract
when used in conjunction with a Dollar Cost Averaging program.
For Contract owners that elect the Extra Value Option, payments or transfers
made to the fixed account, for the first seven contract years, will be credited
a guaranteed interest rate of 0.45% less than the crediting rate that applies to
the fixed account if the Extra Value Option is not elected. Nationwide
guarantees, however, that the rate will not be less than 3.0% for any given
year.
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
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<PAGE> 26
of the purchase payments allocated to the fixed account, plus interest credited
as described above, less surrenders and any applicable charges including CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis and is equal to an annual rate
of 0.95% of the daily net assets of the variable account.
The Mortality Risk Charge compensates Nationwide for guaranteeing the annuity
purchase rates of the contracts. This guarantee ensures that the annuity
purchase rates will not change regardless of the death rates of annuity payees
or the general population. The 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 compensates Nationwide for guaranteeing that charges
will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will 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 purchase payments. (For tax
purposes, a surrender is usually treated as a withdrawal of earnings first.)
The CDSC applies as follows:
<TABLE>
<CAPTION>
Number of Years CDSC
from Date of Percentage
Purchase Payment
---------------- ----------
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
</TABLE>
The CDSC is used to cover sales expenses, including commissions (maximum of 6%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59-1/2 may be subject to a 10%
penalty tax.
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
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<PAGE> 27
(3) from any values which have been held under a contract for at least 7
years.
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options, the fixed account, or the variable account.
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
REDUCED PURCHASE PAYMENT OPTION
If the contract owner chooses the Reduced Purchase Payment Option, Nationwide
will deduct an additional charge equal to an annualized rate of 0.25% of the
daily net assets of the variable account. In return, the minimum initial
purchase payment for that contract will be $1,000 and minimum subsequent
purchase payment will be $25. This option is not available for Investment-only
Contracts.
The contract owner may elect to terminate this option if, throughout a period of
at least two years and continuing until such election, the total of all purchase
payments, less surrenders and withdrawals, is maintained at $25,000 or more.
This election must be submitted in writing on a form provided by Nationwide.
Termination of the rider will occur as of the date on the election form, and the
charge for this rider will no longer be assessed. Subsequent purchase payments,
if any, will be subject to the terms of the contract and must be at least
$1,000.
CDSC OPTIONS AND CHARGES
Five Year CDSC Option
For an additional charge of 0.15% of the daily net assets of the variable
account, the contract owner may choose the Five Year CDSC Option.
Under this option, CDSC will not exceed 7% of purchase payments surrendered.
The Five Year CDSC Option applies as follows:
<TABLE>
<CAPTION>
Number of Years from CDSC
Date of Purchase Percentage
Payment
-------------------- ----------
<S> <C>
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
</TABLE>
For contracts issued in the State of New York, this option is available only for
contracts issued as Roth IRAs and is not available when the Extra Value Option
is elected.
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<PAGE> 28
Additional Withdrawal Without Charge and Disability Waiver
Each contract has a standard 10% CDSC-free withdrawal privilege each year. For
an additional charge of 0.10% of the daily net assets of the variable account,
the contract owner can withdraw an additional 5% of total purchase payments each
year without incurring a CDSC. This would allow the contract owner to withdraw a
total of 15% of the total of all purchase payments each year free of CDSC. Like
the standard 10% CDSC-free privilege, this additional withdrawal benefit is
non-cumulative.
This option also contains a disability waiver. Nationwide will waive CDSC if a
contract owner (or annuitant if the contract is owned by a non-natural owner) is
disabled after the contract is issued but before reaching age 65. If this waiver
becomes effective due to disability, no additional purchase payments may be made
to the contract.
Additional CDSC Waiver Options for Tax Sheltered Annuities
10 Year and Disability Waiver
For an additional charge of 0.05% of the daily net assets of the variable
account, the contract owner of a Tax Sheltered Annuity can purchase the 10
Year and Disability Waiver. Under this option, Nationwide will waive CDSC if
two conditions are met:
(1) the contract owner has been the owner of the contract for 10 years;
and
(2) the contract owner has made regular payroll deferrals during the
entire contract year for at least 5 of those 10 years.
This option also contains a disability waiver. Nationwide will waive CDSC if
the contract owner is disabled after the contract is issued but before
reaching age 65. If this waiver becomes effective due to disability, no
additional purchase payments may be made to the contract.
Hardship Waiver
For an additional charge of 0.15% of the daily net assets of the variable
account, the contract owner of a Tax Sheltered Annuity can purchase the
Hardship Waiver. Under this option, Nationwide will waive CDSC if the
contract owner experiences a hardship (as defined for purposes of Internal
Revenue Code Section 401(k)). The contract owner may be required to provide
proof of hardship.
If this waiver becomes effective, no additional purchase payments may be made
to the contract.
DEATH BENEFIT OPTIONS
If the contract owner chooses an optional death benefit, Nationwide will deduct
a charge equal to an annual rate of either 0.05% (for the One-Year Step Up Death
Benefit) or 0.10% (for the 5% Enhanced Death Benefit) of the daily net assets of
the variable account, depending upon which option was chosen. Nationwide may
lower either of these charges at any time without notifying contract owners.
Further information about these benefits can be found in the "Death Benefit
Payment" provision. 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).
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<PAGE> 29
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase payment or
surrender to the most recent contract anniversary prior to the annuitant's
86th birthday, less an adjustment for amounts subsequently surrendered,
plus purchase payments received since that contract anniversary.
Long Term Care Facility Provisions
If the contract owner chooses an optional death benefit, no CDSC will be
charged if:
- The third contract anniversary has passed; and
- The contract owner has been confined to a long-term care facility or
hospital for a continuous 90-day period that began after the contract
issue date.
Additionally, if the contract owner chooses an optional death benefit, no
CDSC will be charged if:
- The contract owner has been diagnosed by a physician to have a terminal
illness; and
- Nationwide receives and records a letter from that physician indicating
such diagnosis.
Written notice and proof of terminal illness or confinement for 90 days in a
hospital or long term care facility must be received in a form satisfactory to
Nationwide and recorded at Nationwide's home offer prior to waiver of the CDSC.
For those contracts that have a non-natural person as contract owner as an agent
for a natural person, the annuitant may exercise the rights of the contract
owner for the purposes described in this provision. If the non-natural contract
owner does not own the contract as an agent for a natural person (e.g., the
contract owner is a corporation or a trust for the benefit of an entity), the
annuitant may NOT exercise the rights described in this provision.
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge of 0.45% of the daily net assets of the variable
account, the contract owner can purchase a Guaranteed Minimum Income Benefit
option at the time of application. The Guaranteed Minimum Income Benefit option
provides for a minimum guaranteed value that may replace the contract value as
the amount to be annuitized under certain circumstances. A Guaranteed Minimum
Income Benefit may afford protection against unfavorable investment performance.
EXTRA VALUE OPTION
The Extra Value Option may not be available in all states. Applicants should
be aware of the following prior to electing the Extra Value Option:
1. Electing the Extra Value Option will be beneficial for contract owners
only if the investment performance of the underlying mutual funds and the
rate of return in the fixed account and Guaranteed Term Options, is great
enough to compensate for the reduction in contract value due to the 0.45%
charge;
2. Nationwide may make a profit from the charge assessed by the Extra Value
Option;
3. Because the 0.45% charge associated with the Extra Value Option will be
assessed against the entire variable account value for the first seven (7)
contract years, contract owners who anticipate making additional purchase
payments after the first contract year should carefully examine the Extra
Value Option and consult their financial adviser regarding its
desirability;
4. Once the Extra Value Option is elected, it may not be revoked; and
5. Nationwide may recapture all or part of the amount credited in the event
of early surrenders, including revocation of the contract during the
contractual Free-look period.
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, the contract owner can purchase an Extra Value Option
at the time of application. Nationwide may reduce this charge.
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<PAGE> 30
In exchange, Nationwide will apply a credit of 3% of the purchase payment(s)
made during the first 12 months the contract is in force. This credit is funded
from Nationwide's general account. The amount credited will be allocated among
the sub-accounts, the fixed account, and/or the Guaranteed Term Options in the
same proportion that the purchase payment is allocated to the contract.
The option of electing the Extra Value Option allows prospective contract owners
to choose between two different variable account charge structures for the first
seven years of the contract. If the credit is elected and no additional contract
options are elected, the total variable account charges under the contract will
be an annualized rate of 1.40% of the daily net assets of the variable account
for the first seven years of the contract. If the Extra Value Option is not
elected, total variable account charges will be an annualized rate of 0.95%
(assuming no other contract options are elected) of the daily net assets of the
variable account for the first seven years of the contract and thereafter.
Under these circumstances, the decision to elect or decline the Extra Value
Option will depend primarily on whether the prospective contract owner believes
it is more advantageous to have:
(a) a 1.40% variable account charge for the first seven years of the contract,
plus the Extra Value Option credit; or
(b) a 0.95% variable account charge for the first seven years of the contract,
without the Extra Value Option credit.
The following table demonstrates hypothetical rates of return for contracts with
the Extra Value Option and no other optional benefits (total variable account
asset charges of 1.40%) and contracts with no additional contract options (total
variable account asset charges of 0.95%).
The figures are based upon:
(a) a $100,000 initial purchase payment with no additional purchase
payments;
(b) the deduction of variable account charges of an annualized rate of
0.95% (base contract) and 1.40% (contract with only the Extra Value
Option) of the daily net asset value; and
(c) an assumed annual rate of return before charges of 7.75% for all years
for a period of 10 years.
7.75% RATE OF RETURN
<TABLE>
<CAPTION>
Base Contract Contract With Extra
Contract (0.95% total Value Option (1.40%
Year asset charges) total asset charges)
-------- -------------- --------------------
<S> <C> <C>
1 $106,800 $109,541
2 $114,062 $116,496
3 $121,819 $123,894
4 $130,102 $131,761
5 $138,949 $140,128
6 $148,398 $149,026
7 $158,489 $158,489
8 $169,266 $169,266
9 $180,776 $180,776
10 $193,069 $193,069
</TABLE>
Generally, the higher the rate of return, the more advantageous the Extra Value
Option becomes and vice versa. The table above assumes no additional purchase
payments are made to the contract after the first contract anniversary. If
subsequent purchase payments are made to the contract after the first contract
anniversary, (assuming a rate of return of 7.75%), the number of contract years
needed to "break-even" increases in direct correlation with the amount of
subsequent purchase payments made to the contract after the first contract
anniversary.
Amounts credited to the contract in connection with the Extra Value Option may
be recaptured if:
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<PAGE> 31
(a) the contract owner elects to surrender the contract pursuant to the
contractual free-look provisions; or
(b) withdrawals that are subject to a CDSC are taken before the end of the
seventh contract year.
If the contract is surrendered pursuant to the contractual free-look, Nationwide
may recapture the full credited amount if the contract value, at the time of the
request to surrender, is equal to or greater than the purchase payments made to
the contract. In such a situation, the contract owner is entitled to keep any
earnings. If, however, the contract value is less than the purchase payments
made to the contract, Nationwide will bear the loss.
After the free look period and before the seventh contract anniversary, any
amounts withdrawn from the contract that are subject to a CDSC subjects a part
of the amount credited to recapture. For example, if a contract owner withdraws
13% of purchase payments made within the first contract year, 3% of the amount
credited will be recaptured by Nationwide, since the contract owner may withdraw
only 10% of purchase payments without a CDSC. This means that the percentage of
the amount credited to be recaptured will be determined by the percentage of
total purchase payments reflected in the amount surrendered that is subject to
CDSC. The amount recaptured will be taken from the sub-accounts, the fixed
account and/or the Guaranteed Term Options in the same proportion as allocated
by the contract owner at the time of the withdrawal.
For contract issued in the State of New York, after the free look period and
before the seventh contract anniversary, amounts credited under the contract may
be recaptured whenever withdrawals are made that are subject to a CDSC in
accordance with the following:
<TABLE>
<CAPTION>
(Extra Value Amount)
Percentage of First year
Contract Years Purchase Payments
-------------- ------------------------
<S> <C>
1 and 2 3%
3,4 and 5 2%
6 and 7 1%
After Year 7 0%
</TABLE>
The percentage of the amount credited to be recaptured will be determined by the
percentage of total purchase payments reflected in the amount surrendered that
is subject to CDSC. The amount recaptured will be taken from the sub-accounts
and the fixed account in the same proportion as allocated by the contract owner
at the time of the withdrawal.
NO AMOUNT CREDITED WILL BE SUBJECT TO RECAPTURE IF THE WITHDRAWAL IS NOT SUBJECT
TO A CDSC OR IF A DISTRIBUTION IS TAKEN AS A RESULT OF DEATH, ANNUITIZATION, OR
TO MEET MINIMUM DISTRIBUTION REQUIREMENTS UNDER THE INTERNAL REVENUE CODE. IN
ADDITION, NO RECAPTURE WILL TAKE PLACE AFTER THE SEVENTH CONTRACT YEAR.
After the end of the first seven contract years, the 0.45% charge for the Extra
Value Option will no longer be assessed and the amount credited will be fully
vested. Nationwide intends to administer the removal of the 0.45% rider option
charge by decreasing the number of units and increasing the unit value of the
sub-accounts in which the contract owner was invested at the end of the seventh
contract year. The elimination of the 0.45% charge and the adjustment in the
number of units and unit values will not affect contract owners' contract
values.
Upon annuitization of the contract, any amounts assessed for any rider options
will be waived and only those charges applicable to the base contract will be
assessed.
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.
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<PAGE> 32
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;
- an election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner; and
- Nationwide will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either joint owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract if a
contract owner who is NOT the annuitant dies before the annuitization date, and
there is no surviving joint owner.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, (age 83
or younger if electing a Guaranteed Minimum Income Benefit option) unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be changed before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person 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
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<PAGE> 33
beneficiary. Multiple beneficiaries will share the death benefit equally, unless
otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
-------- ---------------- -----------
<S> <C> <C>
Investment-only $15,000 $1,000
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Charitable $15,000 $1,000
Remainder Trust
SEP IRA $15,000 $1,000
Simple IRA $15,000 $1,000
</TABLE>
Subsequent purchase payments are not permitted for contracts issued in the State
of Oregon, and may not be permitted in other states under certain circumstances.
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
If the contract owner elects the Extra Value Option, amounts credited to the
contract may not be used to meet the minimum initial and subsequent purchase
payment requirements.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts issued by Nationwide on the life of any
one annuitant cannot exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- New Year's Day
- Martin Luther King, Jr. Day
- Presidents' Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving
- Christmas
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
27
<PAGE> 34
value may be affected since the contract owner will not have access to their
account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account,
and/or Guaranteed Term Options as instructed by the contract owner. Shares of
the underlying mutual funds allocated to the sub-accounts are purchased at net
asset value, then converted into accumulation units. Contract owners can change
allocations or make exchanges among the sub-accounts, fixed account or
Guaranteed Term Options. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account.
Certain transactions may be subject to conditions imposed by the underlying
mutual funds, as well as those set forth in the contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
(1) the value of amounts allocated to the sub-accounts of the variable account;
(2) amounts allocated to the fixed account; and
(3) amounts allocated to a Guaranteed Term Option.
If part or all of the contract value is surrendered, or charges are assessed
against the whole contract value, Nationwide will deduct a proportionate amount
from each sub-account, the fixed account and any Guaranteed Term Option based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(1) the net asset value of the underlying mutual fund as of the end of
the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-dividend date occurs
during the current valuation period); and
(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 0.95% to 2.70% 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.
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<PAGE> 35
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
(1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
(2) adding any interest earned on the amounts allocated.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
(1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment); and
(2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option.
TRANSFERS PRIOR TO ANNUITIZATION
Transfers from the Fixed Account to the Variable Account or to a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account or to a
Guaranteed Term Option only upon reaching the end of an interest rate guarantee
period. Normally, Nationwide will permit 100% of such fixed account allocations
to be transferred to the variable account or to a Guaranteed Term Option;
however Nationwide may, under certain economic conditions and at its discretion,
limit the maximum transferable amount. Under no circumstances will the maximum
transferable amount be less than 10% of the fixed account allocation reaching
the end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account 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 from a Guaranteed Term Option
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation period.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
TRANSFER REQUESTS
Nationwide will accept transfer requests in writing or, in those states that
allow, over the telephone. Nationwide will use reasonable procedures to confirm
that telephone instructions are genuine and will not be liable for following
telephone instructions that it reasonably determined to be genuine. Nationwide
may withdraw the telephone exchange privilege upon 30 days written notice to
contract owners.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
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<PAGE> 36
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account or to the Guaranteed Term Options. Nationwide will
determine the amount that may be transferred and will declare this amount at the
end of the guarantee period. This amount will not be less than 10% of the amount
in the fixed account that is maturing.
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or a Guaranteed Term Option, this period
begins on the date of deposit or transfer and ends on the one year anniversary
of the deposit or transfer. The guaranteed interest rate period may last for up
to 3 months beyond the 1 year anniversary because guaranteed terms end on the
last day of a calendar quarter.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
- submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one contract
owner at the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. The refunded contract value will reflect the deduction of any contract
charges, unless otherwise required by law. All Individual Retirement Annuity,
SEP IRA, Simple IRA and Roth IRA refunds will be a return of purchase payments.
State and/or federal law may provide additional free look privileges.
Contract owners who have elected the Extra Value Option and subsequently
terminate the contract under the free look provision will forfeit any amounts
credited to the contract. For those jurisdictions that allow a return of
contract value, the contract owner will retain any earnings attributable to the
amount credited; all
30
<PAGE> 37
losses attributable to the amount credited will be incurred by Nationwide.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
If the Extra Value Option is elected, and the amount withdrawn is subject to a
CDSC, then for the first seven contract years only, a portion of the amount
credited under the Extra Value Option may be recaptured. No recapture will take
place after the seventh contract year. The amount credited will not, however, be
subject to recapture if a withdrawal not subject to the CDSC is being made (see
"Extra Value Option").
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. The amount withdrawn from
each investment option will be in proportion to the value in each option at the
time of the surrender request.
A CDSC may apply. The contract owner may take the CDSC from either:
(a) the amount requested; or
(b) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
The CDSC deducted is a percentage of the amount requested by the contract owner.
Amounts deducted for CDSC are not subject to subsequent CDSC.
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
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<PAGE> 38
be paid as lifetime income; lump sum cash payments are not permitted, except for
death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless one of
the applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(as 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 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.
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<PAGE> 39
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1,000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
------ ---------------
<S> <C> <C>
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*)
</TABLE>
* The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a loan processing fee at the time each new loan is
processed. If assessed, this fee compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
The fee is taken from the sub-accounts, fixed account, and Guaranteed Term
Options in proportion to the contract value at the time the loan is processed.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. Any
remaining required collateral will be transferred from the Guaranteed Term
Options. Transfers from the Guaranteed Term Options may be subject to a market
value adjustment. No CDSC will be deducted on transfers related to loan
processing.
LOAN INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. The interest rate is guaranteed
never to fall below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the Fidelity Money
Market Fund unless the contract owner directs otherwise.
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<PAGE> 40
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to
annuitization; or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD & LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed distribution may also be subject to an early withdrawal
tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Investment-only Contracts, Individual Retirement Annuities, Roth IRAs, SEP IRAs,
Simple IRAs, and Tax Sheltered Annuities may not be assigned, pledged or
otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
Requests for asset rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York
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<PAGE> 41
Stock Exchange is closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Tax Sheltered Annuity plan. Contract owners should consult
a financial adviser to discuss the use of asset rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. Nationwide does not guarantee that this program will result in
profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account, the VIP High Income Portfolio and the VIP Money Market
Portfolio to any other underlying mutual fund. Dollar Cost Averaging transfers
may not be directed to Guaranteed Term Options.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A Dollar Cost
Averaging program which transfers amounts from the fixed account to the variable
account is not the same as an Enhanced Rate Dollar Cost Averaging program.
Contract owners that wish to utilize Dollar Cost Averaging from the fixed
account should first inquire whether any Enhanced Rate Dollar Cost Averaging
programs are available.
Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs. Contract owners may participate in this program if their contract
value is $10,000 or more. Dollar Cost Averaging transfers for this program may
only be made from the fixed account. Such Enhanced Rate Dollar Cost Averaging
programs allow the contract owner to earn a higher rate of interest on assets in
the fixed account than would normally be credited when not participating in the
program. Each enhanced interest rate is guaranteed for as long as the
corresponding program is in effect. Nationwide will process transfers until
either amounts in the enhanced rate fixed account are exhausted, or the contract
owner instructs 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. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable
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<PAGE> 42
election of distributions of substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
(1) 10% of all purchase payments made to the contract as of the withdrawal
date;
(2) an amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code; or
(3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
<TABLE>
<CAPTION>
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
---------------- --------------
<S> <C>
Under age 59 1/2 5%
Age 59 1/2 through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
</TABLE>
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceeds the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of CDSC for that contract year will be
determined in accordance with that provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a Tax
Sheltered Annuity, annuitization may occur during the first 2 years subject to
Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
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The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
(1) deducting applicable premium taxes from the total contract value; then
(2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
A VARIABLE PAYMENT ANNUITY MAY NOT BE
ELECTED WHEN EXERCISING THE GUARANTEED
MINIMUM INCOME BENEFIT OPTION.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
(1) deducting applicable premium taxes from the total contract value; then
(2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate is the percentage rate of return required to maintain
level variable annuity payments. Subsequent variable annuity payments may be
more or less than the first payment based on whether actual investment
performance of the underlying mutual funds is higher or lower than the assumed
investment rate of 3.5%.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
Exchanges among Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges 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
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- an annuity payment would be less than $50, in which case Nationwide can
change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
GUARANTEED MINIMUM INCOME BENEFIT OPTION ("GMIB")
What is a GMIB?
A GMIB is a benefit which ensures the availability of a minimum amount when the
contract owner wishes to annuitize the contract. This minimum amount, referred
to as the Guaranteed Annuitization Value, may be used at specified times to
provide a guaranteed level of determinable lifetime annuity payments. The GMIB
may provide protection in the event of lower contract values that may result
from the investment performance of the contract.
How is the Guaranteed Annuitization Value Determined?
The Guaranteed Annuitization Value is equal to (a) - (b), but will never be
greater than 200% of all purchase payments, where:
(a) is the sum of all purchase payments, plus interest accumulated at a
compounded annual rate of 5% starting at the date of issue and ending on
the contract anniversary occurring immediately prior to the annuitant's
86th birthday; and
(b) is the reduction to (a) due to surrenders made from the contract. All such
reductions will be proportionately the same as the reductions to the
contract value caused by surrenders. For example, a surrender which reduces
the contract value by 25% will also reduce the Guaranteed Annuitization
Value by 25%.
Special Restrictions for a GMIB
After the first contract year, if the value of the contract owner's fixed
account allocation becomes greater than 30% of the contract value in any
contract year due to:
(1) the application of additional purchase payments;
(2) surrenders; or
(3) transfers from the variable account,
then 0% interest will accrue in that contract year for purposes of calculating
the Guaranteed Annuitization Value.
If the contract owner's fixed account allocation becomes greater than 30% of the
contract value solely as a result of fluctuations in the value of the variable
account, then interest will continue to accrue for the purposes of the
Guaranteed Annuitization Value at 5% annually, subject to the other terms and
conditions outlined herein.
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GMIB Illustrations
The following charts illustrate the amount of income that will be provided to an
annuitant if the contract owner annuitizes the contract at the 7th, 10th or 15th
contract anniversary date, using the GMIB.
The illustrations assume the following:
- An initial purchase payment of $100,000 is made to the contract and
allocated to the variable account;
- There are no surrenders from the contract or transfers to the fixed account
(raising the fixed account value to greater than 30% of the contract
value);
- The contract is issued to a MALE at age 55, 65 or 70; and
- A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option is
elected.
<TABLE>
<CAPTION>
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
-------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
----------------- ------------------------- ------------------- ------------
<S> <C> <C> <C>
55 62 $4.72 $664.15
65 72 $5.96 $838.63
70 77 $5.79 $955.42
</TABLE>
<TABLE>
<CAPTION>
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
-------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
----------------- ------------------------- ------------------- ------------
<S> <C> <C> <C>
55 65 $5.03 $ 819.33
65 75 $6.44 $1,049.01
70 80 $7.32 $1,192.35
</TABLE>
<TABLE>
<CAPTION>
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
-------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
----------------- ------------------------- ------------------- ------------
<S> <C> <C> <C>
55 70 $5.66 $1,132.00
65 80 $7.32 $1,464.00
70 85 $8.18 $1,636.00
</TABLE>
* Guaranteed Monthly Benefit per $1,000 applied.
The illustrations should be used as a tool to assist an investor in determining
whether purchasing and exercising a GMIB option is right for them. The
guaranteed purchase rates assumed in the illustrations may not apply in some
states, or for contracts issued under an employer sponsored plan. Different
guaranteed purchase rates will also apply for females, for males who annuitize
at ages other than the ages shown above, or for annuitizations under other
annuity payment options. Where different guaranteed purchase rates apply, GMIB
amounts shown above will be different. In all cases, the guaranteed purchase
rates used to calculate the GMIB will be the same as the purchase rates
guaranteed in the contract for fixed annuitizations without the GMIB.
The purchase rates available in connection with annuitization options under a
GMIB are minimum guaranteed purchase rates. Alternative purchase rates, which
may be more favorable, may apply to annuitizations which occur without a GMIB
option.
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When May the Guaranteed Annuitization Value be Used?
The contract owner may use the Guaranteed Annuitization Value by annuitizing the
contract during the thirty day period following any contract anniversary:
(1) after the contract has been in effect for seven years; and
(2) the annuitant has attained age 60.
What Annuity Payment Options May Be Used With the Guaranteed Annuitization
Value?
The contract owner may elect any life contingent FIXED ANNUITY PAYMENT OPTION
calculated using the guaranteed annuity purchase rates set forth in the
contract. Such Fixed Annuity Payment Options include:
- Life Annuity;
- Joint and Last Survivor Annuity; and
- Life Annuity with 120 or 240 Monthly Payments Guaranteed.
Other GMIB Terms and Conditions
**PLEASE READ CAREFULLY**
- The GMIB must be elected at the time of application.
- The annuitant must be age 82 or younger at the time the contract is
issued.
- The GMIB is irrevocable and will remain for as long as the contract
remains in force.
IMPORTANT CONSIDERATIONS TO KEEP IN MIND
REGARDING THE GMIB OPTION
While a GMIB does provide a Guaranteed Annuitization Value, A GMIB MAY NOT BE
APPROPRIATE FOR ALL INVESTORS and should be understood completely and analyzed
thoroughly before being elected.
- A GMIB DOES NOT in any way guarantee the performance of any underlying
mutual fund, or any other investment option available under the
contract.
- Once elected, the GMIB is irrevocable, meaning that even if the
investment performance of underlying mutual funds or other available
investment options surpasses the minimum guarantees associated with the
GMIB, the GMIB charges will still be assessed.
- The GMIB in no way restricts or limits the rights of contract owners to
annuitize the contract at other times permitted under the contract nor
will it in any way restrict the right to annuitize the contract using
contract values that may be higher than the Guaranteed Annuitization
Value.
- Please take advantage of the guidance of a qualified financial adviser
in evaluating the GMIB options, and all other aspects of the contract.
- GMIB may not be approved in all state jurisdictions.
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ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. Individual Retirement Annuities and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, contract, and the Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the contingent owner becomes the contract owner. If no contingent owner is
named, the last surviving contract owner's estate becomes the contract owner.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not a contract owner dies before the annuitization date,
a death benefit is payable to the beneficiary unless a contingent annuitant is
named. If a contingent annuitant is named, the contingent annuitant becomes the
annuitant and no death benefit is payable.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If no beneficiary survives the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the
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death benefit equally, unless otherwise specified.
If no beneficiary(ies) or contingent beneficiary(ies) survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
A joint owner will receive a death benefit if a contract owner/annuitant dies
before the annuitization date.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
DEATH BENEFIT PAYMENT
Contract owners may select one of three death benefits available under the
contract at the time of application (not all death benefit options may be
available in all states). If no selection is made at the time of application,
the death benefit will be the Five-Year Reset Death Benefit.
The death benefit value is determined as of the date Nationwide receives:
(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required form(s).
Five-Year Reset Death Benefit (Standard Contractual Death Benefit)
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the contract value as of the most recent five year contract anniversary
before the annuitant's 86th birthday, less an adjustment for amounts
surrendered, plus purchase payments received after that five year
contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase
payment or surrender to the most recent contract anniversary prior to
the
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<PAGE> 49
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received since that contract
anniversary.
The total accumulated amount will not exceed 200% of the net of purchase
payments and amounts surrendered. The adjustment for amounts subsequently
surrendered after the most recent contract anniversary will reduce the 5%
interest anniversary value in the same proportion that the contract value was
reduced on the date(s) of the partial surrender(s).
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
(1) If any contract owner dies on or after the annuitization date and
before the entire interest in the contract has been distributed, then
the remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
(2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death benefit
or the contract value reduced by charges set forth elsewhere in the
contract) will be distributed within 5 years of the contract owner's
death, provided however:
(a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary. Payments must begin within one year of the contract
owner's death unless otherwise permitted by federal income tax
regulations; or
(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
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<PAGE> 50
withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
a) or b), the payments will begin on the required beginning date. The required
beginning date is the later of:
(a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70-1/2; or
(b) the annuitant's retirement date.
Provision (b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70-1/2.
Distributions commencing on the required distribution date must satisfy minimum
distribution and incidental benefit provisions set forth in the Internal Revenue
Code. Those provisions require that distributions cannot be less than the amount
determined by dividing the annuitant's interest in the Tax Sheltered Annuity
determined by the end of the previous calendar year by:
(a) the annuitant's life expectancy; or if applicable,
(b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Tax
Sheltered Annuity must be distributed by December 31 of the calendar year in
which the fifth anniversary of the annuitant's death occurs unless:
(a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70-1/2; or
(b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES, SEP IRAS OR SIMPLE
IRAS
Distributions from an Individual Retirement Annuity, SEP IRA or Simple IRA must
begin no later than April 1 of the calendar year following the calendar year in
which the contract owner reaches age 70-1/2. Distributions may be paid in a lump
sum or in substantially equal payments over:
(a) the contract owner's life or the lives of the contract owner and his or
her spouse or designated beneficiary; or
(b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity, SEP IRA or Simple IRA must be distributed by
December 31 of the calendar year in which the fifth anniversary of the contract
owner's death occurs, unless:
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<PAGE> 51
(a) the contract owner names his or her surviving spouse as the beneficiary
and such spouse chooses to:
(1) treat the contract as an Individual Retirement Annuity, SEP IRA or
Simple IRA established for his or her benefit; or
(2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year in which the contract owner would have reached age
70-1/2; or
(b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract owner's
death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA, Simple
IRA 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, SEP IRA or Simple IRA must annually report the amount of non-deductible
purchase payments, the amount of any distribution, the amount by which
non-deductible purchase payments for all years exceed non-taxable distributions
for all years, and the total balance of all Individual Retirement Annuities, SEP
IRAs or Simple IRAs.
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
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her life (or a period not longer than his or her life expectancy)
beginning no later than December 31 of the year following the year in
which the contract owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- 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;
- SEP IRAs;
- Simple IRAs;
- Roth IRAs;
- Tax Sheltered Annuities; and
- "Non-Qualified Annuities."
Individual Retirement Annuities, SEP IRAs and Simple IRAs
Distributions from Individual Retirement Annuities, SEP IRAs and Simple IRAs 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%. (For Simple IRAs, the 10%
penalty is increased to 25% if the distribution is made during the 2 year period
beginning on the date that the individual first participated in the Simple IRA.)
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);
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<PAGE> 53
- 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 distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
- it is made on or after the date on which the contract owner attains age
59-1/2;
- it is made to a beneficiary (or the contract owner's estate) on or after
the death of the contract owner;
- it is attributable to the contract owner's disability; or
- it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified distribution is not includible in gross income to the extent
that the distribution, when added to all previous distributions, does not exceed
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior
to January 1, 1999 if the owner elected the special 4-year income averaging
provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59-1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%.
The penalty tax can be avoided if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- for qualified higher education expenses; or
- used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior
to the date that the
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<PAGE> 54
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;
- 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.
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<PAGE> 55
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
Therefore, income earned under a Non-Qualified Contract that is owned by a
non-natural person is taxed as ordinary income during the taxable year that it
is earned. Taxation is not deferred, even if the income is not distributed out
of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, allowing tax deferral. However,
this exception does not apply when the non-natural person is an employer that
holds the contract under a non-qualified deferred compensation arrangement for
one or more employees.
The non-natural persons rules also do not apply to contracts that are:
- 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 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.
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<PAGE> 56
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 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
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<PAGE> 57
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;
- 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
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by Nationwide and the other named Nationwide affiliates which were used to fund
certain tax-deferred retirement plans. The amended complaint seeks unspecified
compensatory and punitive damages. No class has been certified. On June 11,
1999, Nationwide and the other named defendants filed a motion to dismiss the
amended complaint. On March 8, 2000, the court denied the motion to dismiss the
amended complaint filed by Nationwide and other named defendants. Nationwide
intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, 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 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 VIP Money
Market Portfolio's units. Yield is an annualized figure, which means that it is
assumed that the 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;
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- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise the sub-account's standardized average annual total return
("standardized return") calculated in a manner prescribed by the SEC, and
non-standardized total return ("non-standardized return").
Standardized return shows the percentage rate of return of a hypothetical
initial investment of $1,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been available
in the variable account if it has not been available for one of the prescribed
periods). This calculation reflects the standard 7 year CDSC schedule and the
charges that could be assessed to a contract if the maximum rider options for a
contract issued as a Tax Sheltered Annuity are chosen as of December 31, 1999
(2.70%). Standardized return does not reflect the deduction of state premium
taxes, which may be imposed by certain states.
Non-standardized average annual total return is calculated similarly to
standardized average annual total return except non-standardized average annual
total return assumes an initial investment of $25,000, with contract variable
account charges of 0.95%. An assumed initial investment of $25,000 is used
because that amount more accurately reflects the average contract size.
Both methods of calculation reflect total return for the most recent one, five
and ten year periods (or for a period covering the time the underlying mutual
fund has been in existence). For those underlying mutual funds which have not
been available for one of the prescribed periods, the nonstandardized total
return illustrations will show the investment performance the underlying mutual
funds would have achieved had they been available in the variable account for
one of the periods. If the underlying mutual fund has been available in the
variable account for less than one year (or if the underlying mutual fund has
been effective for less than one year), standardized and non-standardized
performance is not annualized.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1999.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
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SUB-ACCOUNT PERFORMANCE SUMMARY
FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN*
<TABLE>
<CAPTION>
10 Years or
Date Fund Date Fund
Available in Available
the Variable in the
1 Year 5 Years Account 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: Service Class -2.90% N/A 9.41% 01/20/97
VIP Growth Portfolio: Service Class 27.38% N/A 27.11% 01/20/97
VIP High Income Portfolio: Service Class -1.13% N/A 2.96% 11/01/96
VIP Money Market Portfolio -3.97% N/A 1.16% 11/01/96
VIP Overseas Portfolio: Service Class 32.43% N/A 18.00% 11/01/96
VIP II Asset Manager Portfolio: Service Class 1.74% N/A 10.28% 01/20/97
VIP II Asset Manager: Growth Portfolio: Service Class 5.76% N/A 13.52% 01/20/97
VIP II Contrafund(R) Portfolio: Service Class 14.56% N/A 20.16% 01/20/97
VIP II Investment Grade Bond Portfolio -9.77% N/A 1.29% 11/01/96
VIP II Index 500 Portfolio 11.01% N/A 21.05% 01/20/97
VIP III Balanced Portfolio: Service Class -4.68% N/A 9.91% 01/03/95
VIP III Growth & Income Portfolio: Service Class -0.16% N/A 16.71% 01/20/97
VIP III Growth Opportunities Portfolio: Service Class -4.92% N/A 17.88% 01/03/95
VIP III Mid Cap Portfolio: Service Class N/A N/A 37.73% 01/11/99
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN*
PLEASE NOTE: THE PERFORMANCE NUMBERS BELOW REFLECT THE DEDUCTION OF THE AMOUNT
ASSESSED FOR THE BASE CONTRACT 0.95% (A CONTRACT WITH NO RIDER OPTIONS). FOR
CONTRACT OWNERS WHO HAVE CHOSEN ONE OR MORE RIDER OPTIONS, THE FUND PERFORMANCE
AS SHOWN WOULD BE REDUCED IN ACCORDANCE TO THE COSTS OF THE RIDER OPTIONS
SELECTED.
<TABLE>
<CAPTION>
10 Years
1 Year 5 Years to 12/31/99 Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 or Life of Fund Effective
------------------ ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio: Service Class 5.25% 17.45% 13.39% 10/09/86
VIP Growth Portfolio: Service Class 35.98% 28.46% 18.78% 10/09/86
VIP High Income Portfolio: Service Class 7.05% 9.76% 11.35% 09/19/85
VIP Money Market Portfolio 4.17% 4.48% 4.29% 04/01/82
VIP Overseas Portfolio: Service Class 41.11% 16.21% 10.35% 01/28/87
VIP II Asset Manager Portfolio: Service Class 9.96% 14.44% 12.04% 09/06/89
VIP II Asset Manager: Growth Portfolio: Service Class 14.04% N/A 18.92% 01/03/95
VIP II Contrafund(R) Portfolio: Service Class 22.97% N/A 26.50% 01/03/95
VIP II Investment Grade Bond Portfolio -1.99% 6.28% 6.17% 12/05/88
VIP II Index 500 Portfolio 19.37% 26.95% 19.95% 08/27/92
VIP III Balanced Portfolio: Service Class 3.44% N/A 12.35% 01/03/95
VIP III Growth & Income Portfolio: Service Class 8.03% N/A 20.86% 12/31/96
VIP III Growth Opportunities Portfolio: Service Class 3.19% N/A 20.35% 01/03/95
VIP III Mid Cap Portfolio: Service Class 47.39% N/A 48.33% 01/11/99
</TABLE>
* The returns shown reflect the performance for the Service Class shares of
the underlying mutual funds. Because the Service Class 2 shares of the
underlying mutual funds assess higher fund expenses (including a 12b-1 fee
of 0.25%) the actual performance of the Service Class 2 shares would be
lower than what is reflected above.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.................................... 1
Services........................................................... 1
Purchase of Securities Being Offered............................... 2
Underwriters....................................................... 2
Calculations of Performance........................................ 2
Annuity Payments................................................... 3
Financial Statements............................................... 4
</TABLE>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS FOR CONTRACTS ISSUED PRIOR TO
MAY 1, 2000
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.
VARIABLE INSURANCE PRODUCTS FUND
The Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. When 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 & Poor's Composite Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: To seek to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and established
companies, and smaller, less well-known companies which may have a narrow
product line or whose securities are thinly traded. These latter securities
will often involve greater risk than may be found in the ordinary
investment security. FMR's analysis and expertise plays an integral role in
the selection of securities and, therefore, the performance of the
Portfolio. Many securities which FMR believes would have the greatest
potential may be regarded as speculative, and investment in the Portfolio
may involve greater risk than is inherent in other mutual funds. It is also
important to point out that the Portfolio makes most sense for you if you
can afford to ride out changes in the stock market, because it invests
primarily in common stocks. FMR also can make temporary investments in
securities such as investment-grade bonds, high-quality preferred stocks
and short-term notes, for defensive purposes when it believes market
conditions warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Seeks high current income by investing primarily in
all types of income-producing debt securities, preferred stocks, and
convertible securities. FMR normally invests at least 65% of the
Portfolio's total assets in these securities. In choosing investments, the
Portfolio also considers growth of capital.
VIP MONEY MARKET PORTFOLIO
Investment Objective: Seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. 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: SERVICE CLASS
Investment Objective: Seeks long-term growth of capital by investing
primarily in securities of issuers whose principal activities are outside
of the U.S. FMR normally invests at least 65% of the Portfolio's total
assets in securities of issuers from at least three different countries
outside of North America (the U.S., Canada, Mexico, and Central America).
The
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Portfolio expects to invest a majority of its assets in equity securities,
but may also invest in debt securities of any quality.
VARIABLE INSURANCE PRODUCTS FUND II
The 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: SERVICE CLASS
Investment Objective: Seeks high total return with reduced risk over the
long term by allocating its assets among the following classes or types of
investments in a neutral mix: stock class, the bond class, and short-term
class/money market class.
<TABLE>
<CAPTION>
Asset Manager Range Neutral Mix
------------- ----- -----------
<S> <C> <C>
Stock Class 30-70% 50%
Bond Class 20-60% 40%
Short-term Class 0-50% 10%
</TABLE>
VIP II ASSET MANAGER: GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Seeks 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.
<TABLE>
<CAPTION>
Asset Manager: Range Neutral Mix
Growth
-------------- ----- -----------
<S> <C> <C>
Stock Class 50-100% 70%
Bond Class 0-50% 25%
Short-term Class 0-50% 5%
</TABLE>
VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that the Portfolio manager believes to be undervalued due to
an overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign stock, and securities convertible into
common stock.
VIP II INVESTMENT GRADE BOND PORTFOLIO
Investment Objective: Seeks a 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 investment-grade fixed-income
securities such as debentures, bonds and notes. government securities.
VIP II INDEX 500 PORTFOLIO
Investment Objective: To seek 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.
VARIABLE INSURANCE PRODUCTS FUND III
The Variable Insurance Products Fund III (VIP III) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
July 14, 1994. VIP III's shares are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
FMR is the manager of VIP III and it's portfolios.
VIP III BALANCED PORTFOLIO: SERVICE CLASS
Investment Objective: Seeks both income and growth of capital using a
balanced
57
<PAGE> 64
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 Funds 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: SERVICE CLASS
Investment Objective: Seeks high total return through a combination of
current income and capital appreciation by investing mainly in equity
securities.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Seeks long-term capital growth by investing primarily
in common stocks and securities convertible into common stocks. Under
normal circumstances, at least 65% of the Portfolio's total assets will be
invested in securities of companies that FMR believes have long-term growth
potential. The Portfolio has the ability to purchase foreign securities,
and preferred stock and bonds that may produce capital appreciation.
VIP III MID CAP PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term growth of capital by investing in equity
securities of companies with medium market capitalizations. FMR normally
invests at least 65% of the Portfolio's total assets in these securities.
The Portfolio has the flexibility, however, to invest the balance in other
market capitalizations and security types. Medium market capitalization
companies are those whose market capitalization is similar to the market
capitalization of companies in the S&P MidCap 400 at the time of the
Portfolio's investment. The S&P MidCap 400 is an unmanaged index of medium
capitalization stocks. Companies whose capitalization no longer meets this
definition after purchase continue to be considered medium-capitalized for
purposes of the 65% policy. The Portfolio also reserves the right to invest
in preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
58
<PAGE> 65
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS FOR CONTRACTS ISSUED ON OR
AFTER MAY 1, 2000
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.
VARIABLE INSURANCE PRODUCTS FUND
The Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS 2
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. When 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 & Poor's Composite Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS 2
Investment Objective: To seek to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and established
companies, and smaller, less well-known companies which may have a narrow
product line or whose securities are thinly traded. These latter securities
will often involve greater risk than may be found in the ordinary
investment security. FMR's analysis and expertise plays an integral role in
the selection of securities and, therefore, the performance of the
Portfolio. Many securities which FMR believes would have the greatest
potential may be regarded as speculative, and investment in the Portfolio
may involve greater risk than is inherent in other mutual funds. It is also
important to point out that the Portfolio makes most sense for you if you
can afford to ride out changes in the stock market, because it invests
primarily in common stocks. FMR also can make temporary investments in
securities such as investment-grade bonds, high-quality preferred stocks
and short-term notes, for defensive purposes when it believes market
conditions warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS 2
Investment Objective: Seeks high current income by investing primarily in
all types of income-producing debt securities, preferred stocks, and
convertible securities. FMR normally invests at least 65% of the
Portfolio's total assets in these securities. In choosing investments, the
Portfolio also considers growth of capital.
VIP MONEY MARKET PORTFOLIO
Investment Objective: Seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. 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: SERVICE CLASS 2
Investment Objective: Seeks long-term growth of capital by investing
primarily in securities of issuers whose principal activities are outside
of the U.S. FMR normally invests at least 65% of the Portfolio's total
assets in securities of issuers from at least three different countries
outside of North America (the U.S., Canada,
59
<PAGE> 66
Mexico, and Central America). The Portfolio expects to invest a majority of
its assets in equity securities, but may also invest in debt securities of
any quality.
VARIABLE INSURANCE PRODUCTS FUND II
The 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: SERVICE CLASS 2
Investment Objective: Seeks high total return with reduced risk over the
long term by allocating its assets among the following classes or types of
investments in a neutral mix: stock class, the bond class, and short-term
class/money market class.
<TABLE>
<CAPTION>
Asset Manager Range Neutral Mix
------------- ----- -----------
<S> <C> <C>
Stock Class 30-70% 50%
Bond Class 20-60% 40%
Short-term Class 0-50% 10%
</TABLE>
VIP II ASSET MANAGER: GROWTH PORTFOLIO: SERVICE CLASS 2
Investment Objective: Seeks 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.
<TABLE>
<CAPTION>
Asset Manager: Range Neutral Mix
Growth
-------------- ----- -----------
<S> <C> <C>
Stock Class 50-100% 70%
Bond Class 0-50% 25%
Short-term Class 0-50% 5%
</TABLE>
VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS 2
Investment Objective: To seek capital appreciation by investing primarily
in companies that the Portfolio manager believes to be undervalued due to
an overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign stock, and securities convertible into
common stock.
VIP II INVESTMENT GRADE BOND PORTFOLIO
Investment Objective: Seeks a 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 investment-grade fixed-income
securities such as debentures, bonds and notes. government securities.
VIP II INDEX 500 PORTFOLIO
Investment Objective: To seek 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.
VARIABLE INSURANCE PRODUCTS FUND III
The Variable Insurance Products Fund III (VIP III) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
July 14, 1994. VIP III's shares are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
FMR is the manager of VIP III and it's portfolios.
60
<PAGE> 67
VIP III BALANCED PORTFOLIO: SERVICE CLASS 2
Investment Objective: Seeks both 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 Funds 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: SERVICE CLASS 2
Investment Objective: Seeks high total return through a combination of
current income and capital appreciation by investing mainly in equity
securities.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS 2
Investment Objective: Seeks long-term capital growth by investing primarily
in common stocks and securities convertible into common stocks. Under
normal circumstances, at least 65% of the Portfolio's total assets will be
invested in securities of companies that FMR believes have long-term growth
potential. The Portfolio has the ability to purchase foreign securities,
and preferred stock and bonds that may produce capital appreciation.
VIP III MID CAP PORTFOLIO: SERVICE CLASS 2
Investment Objective: Long-term growth of capital by investing in equity
securities of companies with medium market capitalizations. FMR normally
invests at least 65% of the Portfolio's total assets in these securities.
The Portfolio has the flexibility, however, to invest the balance in other
market capitalizations and security types. Medium market capitalization
companies are those whose market capitalization is similar to the market
capitalization of companies in the S&P MidCap 400 at the time of the
Portfolio's investment. The S&P MidCap 400 is an unmanaged index of medium
capitalization stocks. Companies whose capitalization no longer meets this
definition after purchase continue to be considered medium-capitalized for
purposes of the 65% policy. The Portfolio also reserves the right to invest
in preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
61
<PAGE> 68
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
NO OPTIONAL BENEFITS ELECTED
(VARIABLE ACCOUNT CHARGES OF 0.95% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.758604 11.322947 5.25% 695,545 1999
Portfolio: Service 10.000000 10.758604 7.59% 76,194 1998
Class - Q
VIP Equity-Income 10.758604 11.322947 5.25% 1,069,193 1999
Portfolio: Service 10.000000 10.758604 7.59% 108,197 1998
Class - NQ
VIP Growth Portfolio: 13.265992 18.039523 35.98% 872,562 1999
Service Class - Q 10.000000 13.265992 32.66% 46,684 1998
VIP Growth Portfolio: 13.265992 18.039523 35.98% 1,429,991 1999
Service Class - NQ 10.000000 13.265992 32.66% 117,255 1998
VIP High Income 9.218542 9.868246 7.05% 881,536 1999
Portfolio: Service 10.000000 9.218542 -7.81% 72,605 1998
Class - Q
VIP High Income 9.218542 9.868246 7.05% 1,334,025 1999
Portfolio: Service 10.000000 9.218542 -7.81% 197,839 1998
Class - NQ
VIP Money Market 10.407380 10.841227 4.17% 350,462 1999
Portfolio - Q* 10.000000 10.407380 4.07% 133,561 1998
VIP Money Market 10.407380 10.841227 4.17% 661,559 1999
Portfolio - NQ* 10.000000 10.407380 4.07% 103,226 1998
VIP Overseas Portfolio: 10.586638 14.938906 41.11% 264,838 1999
Service Class - Q 10.000000 10.586638 5.87% 16,755 1998
VIP Overseas Portfolio: 10.586638 14.938906 41.11% 391,883 1999
Service Class - NQ 10.000000 10.586638 5.87% 68,968 1998
</TABLE>
*The 7-day yield on the VIP Money Market Portfolio as of December 31, 1999 was
4.74%.
62
<PAGE> 69
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.098876 12.204056 9.96% 113,345 1999
Portfolio: Service 10.000000 11.098876 10.99% 8,319 1998
Class - Q
VIP II Asset Manager 11.098876 12.204056 9.96% 308,073 1999
Portfolio: Service 10.000000 11.098876 10.99% 17,136 1998
Class - NQ
VIP II Asset Manager: 11.278688 12.862419 14.04% 91,493 1999
Growth Portfolio: 10.000000 11.278688 12.79% 24,911 1998
Service Class - Q
VIP II Asset Manager: 11.278688 12.862419 14.04% 135,720 1999
Growth Portfolio: 10.000000 11.278688 12.79% 8,306 1998
Service Class - NQ
VIP II Contrafund(R) 12.539357 15.419403 22.97% 628,642 1999
Portfolio: Service 10.000000 12.539357 25.39% 52,457 1998
Class - Q
VIP II Contrafund(R) 12.539357 15.419403 22.97% 992,736 1999
Portfolio: Service 10.000000 12.539357 25.39% 81,444 1998
Class - NQ
VIP II Investment Grade 10.690813 10.478118 -1.99% 381,199 1999
Bond Portfolio - Q 10.000000 10.690813 6.91% 38,420 1998
VIP II Investment Grade 10.690813 10.478118 -1.99% 699,366 1999
Bond Portfolio - NQ 10.000000 10.690813 6.91% 125,354 1998
VIP II Index 500 12.204206 14.567662 19.37% 1,930,305 1999
Portfolio - Q 10.000000 12.204206 22.04% 45,723 1998
VIP II Index 500 12.204206 14.567662 19.37% 1,206,553 1999
Portfolio - NQ 10.000000 12.204206 22.04% 71,382 1998
VIP III Balanced 11.340963 11.730743 3.44% 439,780 1999
Portfolio: Service 10.000000 11.340963 13.41% 44,418 1998
Class - Q
</TABLE>
63
<PAGE> 70
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.340963 11.730743 3.44% 650,044 1999
Portfolio: Service 10.000000 11.340963 13.41% 55,013 1998
Class - NQ
VIP III Growth & Income 12.392371 13.387303 8.03% 631,639 1999
Portfolio: Service 10.000000 12.392371 23.92% 48,420 1998
Class - Q
VIP III Growth & Income 12.392371 13.387303 8.03% 1,084,359 1999
Portfolio: Service 10.000000 12.392371 23.92% 105,831 1998
Class - NQ
VIP III Growth 11.936099 12.317183 3.19% 1,580,810 1999
Opportunities 10.000000 11.936099 19.36% 123,265 1998
Portfolio: Service
Class - Q
VIP III Growth 11.936099 12.317183 3.19% 2,388,172 1999
Opportunities 10.000000 11.936099 19.36% 260,816 1998
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 14.643713 46.44% 48,890 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 14.643713 46.44% 61,089 1999
Portfolio: Service
Class-NQ
</TABLE>
The VIP III Mid Cap Portfolio was added to the variable account on January 11,
1999. Therefore, the Condensed Financial Information reflects the period from
January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
64
<PAGE> 71
OPTIONAL BENEFITS ELECTED (TOTAL 1.00%)
(VARIABLE ACCOUNT CHARGES OF 1.00% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.753771 11.312151 5.19% 700,294 1999
Portfolio: Service 10.000000 10.753771 7.54% 76,194 1998
Class - Q
VIP Equity-Income 10.753771 11.312151 5.19% 723,120 1999
Portfolio: Service 10.000000 10.753771 7.54% 108,197 1998
Class - NQ
VIP Growth Portfolio: 13.260038 18.022329 35.91% 910,888 1999
Service Class - Q 10.000000 13.260038 32.60% 46,684 1998
VIP Growth Portfolio: 13.260038 18.022329 35.91% 1,383,685 1999
Service Class - NQ 10.000000 13.260038 32.60% 117,255 1998
VIP High Income 9.214386 9.858827 6.99% 685,851 1999
Portfolio: Service 10.000000 9.214386 -7.86% 72,605 1998
Class - Q
VIP High Income 9.214386 9.858827 6.99% 773,796 1999
Portfolio: Service 10.000000 9.214386 -7.86% 458,599 1998
Class - NQ
VIP Money Market 10.402557 10.830732 4.12% 204,043 1999
Portfolio - Q* 10.000000 10.402557 4.03% 133,561 1998
VIP Money Market 10.402557 10.830732 4.12% 351,108 1999
Portfolio - NQ* 10.000000 10.402557 4.03% 103,226 1998
VIP Overseas Portfolio: 10.581883 14.924674 41.04% 228,910 1999
Service Class - Q 10.000000 10.581883 5.82% 16,755 1998
VIP Overseas Portfolio: 10.581883 14.924674 41.04% 368,270 1999
Service Class - NQ 10.000000 10.581883 5.82% 68,968 1998
VIP II Asset Manager 11.093882 12.192406 9.90% 173,975 1999
Portfolio: Service 10.000000 11.093882 10.94% 8,319 1998
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.69%.
65
<PAGE> 72
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.093882 12.192406 9.90% 214,274 1999
Portfolio: Service 10.000000 11.093882 10.94% 17,136 1998
Class - NQ
VIP II Asset Manager: 11.273630 12.850172 13.98% 123,075 1999
Growth Portfolio: 10.000000 11.273630 12.74% 24,911 1998
Service Class - Q
VIP II Asset Manager: 11.273630 12.850172 13.98% 173,485 1999
Growth Portfolio: 10.000000 11.273630 12.74% 8,306 1998
Service Class - NQ
VIP II Contrafund(R) 12.533725 15.404707 22.91% 687,704 1999
Portfolio: Service 10.000000 12.533725 25.34% 52,457 1998
Class - Q
VIP II Contrafund(R) 12.533725 15.404707 22.91% 960,351 1999
Portfolio: Service 10.000000 12.533725 25.34% 81,444 1998
Class - NQ
VIP II Investment Grade 10.686005 10.468109 -2.04% 342,030 1999
Bond Portfolio - Q 10.000000 10.686005 6.86% 38,420 1998
VIP II Investment Grade 10.686005 10.468109 -2.04% 368,204 1999
Bond Portfolio - NQ 10.000000 10.686005 6.86% 125,354 1998
VIP II Index 500 12.198716 14.553757 19.31% 753,992 1999
Portfolio - Q 10.000000 12.198716 21.99% 45,723 1998
Fidelity VIP II Index 12.198716 14.553757 19.31% 1,077,454 1999
500 Portfolio - NQ 10.000000 12.198716 21.99% 71,382 1998
VIP III Balanced 11.335864 11.719556 3.38% 401,736 1999
Portfolio: Service 10.000000 11.335864 13.36% 44,418 1998
Class - Q
VIP III Balanced 11.335864 11.719556 3.38% 552,217 1999
Portfolio: Service 10.000000 11.335864 13.36% 55,013 1998
Class - NQ
</TABLE>
66
<PAGE> 73
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Growth & Income 12.386801 13.374521 7.97% 922,659 1999
Portfolio: Service 10.000000 12.386801 23.87% 48,820 1998
Class - Q
VIP III Growth & Income 12.386801 13.374521 7.97% 1,278,902 1999
Portfolio: Service 10.000000 12.386801 23.87% 105,831 1998
Class - NQ
VIP III Growth 11.930730 12.305429 3.14% 1,554,894 1999
Opportunities 10.000000 11.930730 19.31% 123,265 1998
Portfolio: Service
Class - Q
VIP III Growth 11.930730 12.305429 3.14% 2,150,035 1999
Opportunities 10.000000 11.930730 19.31% 260,816 1998
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 14.636558 46.37% 84,669 1999
Portfolio: Service
Class - Q
VIP III Mid Cap 10.000000 14.636558 46.37% 63,767 1999
Portfolio: Service
Class - NQ
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
67
<PAGE> 74
OPTIONAL BENEFITS ELECTED (TOTAL 1.05%)
(VARIABLE ACCOUNT CHARGES OF 1.05% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.748944 11.301374 5.14% 125,193 1999
Portfolio: Service 10.000000 10.748944 7.49% 76,194 1998
Class - Q
VIP Equity-Income 10.748944 11.301374 5.14% 237,960 1999
Portfolio: Service 10.000000 10.748944 7.49% 108,197 1998
Class - NQ
VIP Growth Portfolio: 13.254076 18.005139 35.85% 139,137 1999
Service Class - Q 10.000000 13.254076 32.54% 46,684 1998
VIP Growth Portfolio: 13.254076 18.005139 35.85% 324,870 1999
Service Class - NQ 10.000000 13.254076 32.54% 117,255 1998
VIP High Income 9.210254 9.849428 6.94% 146,880 1999
Portfolio: Service 10.000000 9.210254 -7.90% 72,605 1998
Class - Q
VIP High Income 9.210254 9.849428 6.94% 233,348 1999
Portfolio: Service 10.000000 9.210254 -7.90% 197,839 1998
Class - NQ
VIP Money Market 10.397737 10.820248 4.06% 85,348 1999
Portfolio - Q* 10.000000 10.397737 3.98% 133,561 1998
VIP Money Market 10.397737 10.820248 4.06% 200,667 1999
Portfolio - NQ* 10.000000 10.397737 3.98% 103,226 1998
VIP Overseas Portfolio: 10.577127 14.910446 40.97% 47,782 1999
Service Class - Q 10.000000 10.577127 5.77% 16,755 1998
VIP Overseas Portfolio: 10.577127 14.910446 40.97% 66,203 1999
Service Class - NQ 10.000000 10.577127 5.77% 68,968 1998
VIP II Asset Manager 11.088896 12.180770 9.85% 42,988 1999
Portfolio: Service 10.000000 11.088896 10.89% 8,319 1998
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.64%.
68
<PAGE> 75
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.088896 12.180770 9.85% 66,396 1999
Portfolio: Service 10.000000 11.088896 10.89% 17,136 1998
Class - NQ
VIP II Asset Manager: 11.268555 12.837906 13.93% 35,123 1999
Growth Portfolio: 10.000000 11.268555 12.69% 24,911 1998
Service Class - Q
VIP II Asset Manager: 11.268555 12.837906 13.93% 60,669 1999
Growth Portfolio: 10.000000 11.268555 12.69% 8,306 1998
Service Class - NQ
VIP II Contrafund(R) 12.528086 15.390001 22.84% 112,426 1999
Portfolio: Service 10.000000 12.528086 25.28% 52,457 1998
Class - Q
VIP II Contrafund(R) 12.528086 15.390001 22.84% 213,961 1999
Portfolio: Service 10.000000 12.528086 25.28% 81,444 1998
Class - NQ
VIP II Investment Grade 10.681197 10.458120 -2.09% 142,145 1999
Bond Portfolio - Q 10.000000 10.681197 6.81% 38,420 1998
VIP II Investment Grade 10.681197 10.458120 -2.09% 203,464 1999
Bond Portfolio - NQ 10.000000 10.681197 6.81% 125,354 1998
VIP II Index 500 12.193234 14.539880 19.25% 118,845 1999
Portfolio - Q 10.000000 12.193234 21.93% 45,723 1998
VIP II Index 500 12.193234 14.539880 19.25% 250,685 1999
Portfolio - NQ 10.000000 12.193234 21.93% 71,382 1998
VIP III Balanced 11.330772 11.708369 3.33% 71,054 1999
Portfolio: Service 10.000000 11.330772 13.31% 44,418 1998
Class - Q
</TABLE>
69
<PAGE> 76
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.330772 11.708369 3.33% 133,286 1999
Portfolio: Service 10.000000 11.330772 13.31% 55,013 1998
Class - NQ
VIP III Growth & Income 12.381235 13.361770 7.92% 152,587 1999
Portfolio: Service 10.000000 12.381235 23.81% 48,820 1998
Class - Q
VIP III Growth & Income 12.381235 13.361770 7.92% 295,741 1999
Portfolio: Service 10.000000 12.381235 23.81% 105,831 1998
Class - NQ
VIP III Growth 11.925368 12.293685 3.09% 290,728 1999
Opportunities 10.000000 11.925368 19.25% 123,265 1998
Portfolio: Service
Class - Q
VIP III Growth 11.925368 12.293685 3.09% 433,732 1999
Opportunities 10.000000 11.925368 19.25% 260,816 1998
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 14.629390 46.29% 21,916 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 14.629390 46.29% 10,769 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
70
<PAGE> 77
OPTIONAL BENEFITS ELECTED (TOTAL 1.10%)
(VARIABLE ACCOUNT CHARGES OF 1.10% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.347646 -6.52% 7,287 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.347646 -6.52% 1,926 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.372047 23.72% 12,175 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.372047 23.72% 1,987 1999
Service Class - NQ
VIP High Income 10.000000 9.711691 -2.88% 4,712 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.711691 -2.88% 4,502 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.273279 2.73% 2,487 1999
Portfolio - Q*
VIP Money Market 10.000000 10.273279 2.73% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.111592 31.12% 2,518 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.111592 31.12% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.599754 6.00% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.59%.
71
<PAGE> 78
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.599754 6.00% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.846645 8.47% 3,541 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.846645 8.47% 976 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.323961 13.24% 8,180 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.323961 13.24% 2,518 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.838507 8.39% 12,510 1999
Portfolio - Q
VIP II Index 500 10.000000 10.838507 8.39% 6,221 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.813933 -1.86% 11,323 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.813933 -1.86% 6,219 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.773610 -2.26% 10,428 1999
Portfolio: Service
Class - Q
</TABLE>
72
<PAGE> 79
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.773610 -2.26% 2,856 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.061118 0.61% 13,370 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.061118 0.61% 1,659 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.909749 -0.90% 15,297 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.909749 -0.90% 4,111 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.502242 35.02% 77 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.502242 35.02% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
73
<PAGE> 80
OPTIONAL BENEFITS ELECTED (TOTAL 1.15%)
(VARIABLE ACCOUNT CHARGES OF 1.15% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.344503 -6.55% 3,388 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.344503 -6.55% 0 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.367900 23.68% 8,021 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.367900 23.68% 39,902 1999
Service Class - NQ
VIP High Income 10.000000 9.708435 -2.92% 1,531 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.708435 -2.92% 0 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.269790 2.70% 12,006 1999
Portfolio - Q*
VIP Money Market 10.000000 10.269790 2.70% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.107190 31.07% 244 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.107190 31.07% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.596211 5.96% 4,567 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.54%.
74
<PAGE> 81
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.596211 5.96% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.843019 8.43% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.843019 8.43% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.320167 13.20% 2,663 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.320167 13.20% 49,325 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.834863 8.35% 2,318 1999
Portfolio - Q
VIP II Index 500 10.000000 10.834863 8.35% 0 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.810644 -1.89% 4,162 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.810644 -1.89% 0 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.770329 -2.30% 8,159 1999
Portfolio: Service
Class - Q
</TABLE>
75
<PAGE> 82
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.770329 -2.30% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.057746 0.58% 3,405 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.057746 0.58% 29,185 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.906423 -0.94% 9,376 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.906423 -0.94% 21,582 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.497714 34.98% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.497714 34.98% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
76
<PAGE> 83
OPTIONAL BENEFITS ELECTED (TOTAL 1.20%)
(VARIABLE ACCOUNT CHARGES OF 1.20% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.341371 -6.59% 1,430 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.341371 -6.59% 991 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.363757 23.64% 1,660 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.363757 23.64% 2,283 1999
Service Class - NQ
VIP High Income 10.000000 9.705170 -2.95% 1,211 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.705170 -2.95% 535 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.266304 2.66% 257 1999
Portfolio - Q*
VIP Money Market 10.000000 10.266304 2.66% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.102821 31.03% 284 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.102821 31.03% 881 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.592651 5.93% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.49%.
77
<PAGE> 84
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.592651 5.93% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.839384 8.39% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.839384 8.39% 420 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.316365 13.16% 685 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.316365 13.16% 2,726 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.831230 8.31% 1,951 1999
Portfolio - Q
VIP II Index 500 10.000000 10.831230 8.31% 4,626 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.807349 -1.93% 504 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.807349 -1.93% 122 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.767051 -2.33% 151 1999
Portfolio: Service
Class - Q
</TABLE>
78
<PAGE> 85
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.767051 -2.33% 106 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.054379 0.54% 577 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.054379 0.54% 4,593 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.903104 -0.97% 3,926 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.903104 -0.97% 2,978 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.493199 34.93% 31 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.493199 34.93% 499 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
79
<PAGE> 86
OPTIONAL BENEFITS ELECTED (TOTAL 1.25%)
(VARIABLE ACCOUNT CHARGES OF 1.25% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.338236 -6.62% 257 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.338236 -6.62% 980 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.359610 23.60% 673 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.359610 23.60% 1,395 1999
Service Class - NQ
VIP High Income 10.000000 9.701921 -2.98% 326 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.701921 -2.98% 1,924 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.262817 2.63% 0 1999
Portfolio - Q*
VIP Money Market 10.000000 10.262817 2.63% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.098422 30.98% 0 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.098422 30.98% 32 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.589098 5.89% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.44%.
80
<PAGE> 87
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.589098 5.89% 3,092 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.835743 8.36% 263 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.835743 8.36% 246 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.312579 13.13% 1,562 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.312579 13.13% 2,319 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.827599 8.28% 803 1999
Portfolio - Q
VIP II Index 500 10.000000 10.827599 8.28% 573 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.804059 -1.96% 0 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.804059 -1.96% 5,985 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.763773 -2.36% 127 1999
Portfolio: Service
Class - Q
</TABLE>
81
<PAGE> 88
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.763773 -2.36% 1,506 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.051000 0.51% 1,485 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.051000 0.51% 2,033 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.899770 -1.00% 995 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.899770 -1.00% 1,977 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.488675 34.89% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.488675 34.89% 42 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
82
<PAGE> 89
OPTIONAL BENEFITS ELECTED (TOTAL 1.40%)
(VARIABLE ACCOUNT CHARGES OF 1.40% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.328815 -6.71% 0 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.328815 -6.71% 887 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.347169 23.47% 4,046 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.347169 23.47% 1,119 1999
Service Class - NQ
VIP High Income 10.000000 9.692137 -3.08% 0 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.692137 -3.08% 107 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.883253 11.285433 3.70% 0 1999
Portfolio - Q* 10.465899 10.883253 3.99% 0 1998
10.000000 10.465899 4.66% 0 1997
VIP Money Market 10.883253 11.285433 3.70% 0 1999
Portfolio - NQ* 10.465899 10.883253 3.99% 0 1998
10.000000 10.465899 4.66% 0 1997
VIP Overseas Portfolio: 10.000000 13.085254 30.85% 2,046 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.085254 30.85% 202 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.578425 5.78% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.28%.
83
<PAGE> 90
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.578425 5.78% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.824826 8.25% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.824826 8.25% 219 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.301172 13.01% 210 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.301172 13.01% 101 1999
Portfolio: Service
Class - NQ
VIP II Index 500 15.809112 18.785022 18.82% 125 1999
Portfolio - Q 12.494291 15.809112 26.53% 0 1998
10.000000 12.494291 24.94% 0 1997
VIP II Index 500 15.809112 18.785022 18.82% 2,556 1999
Portfolio - NQ 12.494291 15.809112 26.53% 0 1998
10.000000 12.494291 24.94% 0 1997
VIP II Investment Grade 11.609070 11.326409 -2.43% 0 1999
Bond Portfolio - Q 10.817010 11.609070 7.32% 0 1998
10.000000 10.817010 8.17% 0 1997
VIP II Investment Grade 11.609070 11.326409 -2.43% 481 1999
Bond Portfolio - NQ 10.817010 11.609070 7.32% 0 1998
10.000000 10.817010 8.17% 0 1997
VIP III Balanced 10.000000 9.753925 -2.46% 0 1999
Portfolio: Service
Class - Q
</TABLE>
84
<PAGE> 91
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.753925 -2.46% 3,154 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.040866 0.41% 1,435 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.040866 0.41% 4,769 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.889792 -1.10% 11,626 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.889792 -1.10% 7,514 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.475098 34.75% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.475098 34.75% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
85
<PAGE> 92
OPTIONAL BENEFITS ELECTED (TOTAL 1.45%)
(VARIABLE ACCOUNT CHARGES OF 1.45% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.325673 -6.74% 3,290 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.325673 -6.74% 180 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.343020 23.43% 2,607 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.343020 23.43% 0 1999
Service Class - NQ
VIP High Income 10.000000 9.688885 -3.11% 0 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.688885 -3.11% 0 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.462911 10.844055 3.64% 0 1999
Portfolio - Q* 10.066783 10.462911 3.94% 0 1998
10.000000 10.066783 0.67% 0 1997
VIP Money Market 10.462911 10.844055 3.64% 0 1999
Portfolio - NQ* 10.066783 10.462911 3.94% 0 1998
10.000000 10.066783 0.67% 0 1997
VIP Overseas Portfolio: 10.000000 13.080864 30.81% 1,262 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.080864 30.81% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.574877 5.75% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.23%.
86
<PAGE> 93
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.574877 5.75% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.821191 8.21% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.821191 8.21% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.297372 12.97% 2,852 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.297372 12.97% 0 1999
Portfolio: Service
Class - NQ
VIP II Index 500 13.065126 15.516650 18.76% 0 1999
Portfolio - Q 10.330898 13.065126 26.47% 0 1998
10.000000 10.330898 3.31% 0 1997
VIP II Index 500 13.065126 15.516650 18.76% 190 1999
Portfolio - NQ 10.330898 13.065126 26.47% 0 1998
10.000000 10.330898 3.31% 0 1997
VIP II Investment Grade 10.883913 10.613518 -2.48% 0 1999
Bond Portfolio - Q 10.146469 10.883913 7.27% 0 1998
10.000000 10.146469 1.46% 0 1997
VIP II Investment Grade 10.883913 10.613518 -2.48% 257 1999
Bond Portfolio - NQ 10.146469 10.883913 7.27% 0 1998
10.000000 10.146469 1.46% 0 1997
VIP III Balanced 10.000000 9.750647 -2.49% 0 1999
Portfolio: Service
Class - Q
</TABLE>
87
<PAGE> 94
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.750647 -2.49% 115 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.037482 0.37% 0 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.037482 0.37% 284 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.886469 -1.14% 3,120 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.886469 -1.14% 0 1999
Opportunities
Portfolio: Service
Class - NQ
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
88
<PAGE> 95
OPTIONAL BENEFITS ELECTED (TOTAL 1.50%)
(VARIABLE ACCOUNT CHARGES OF 1.50% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.322535 -6.77% 0 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.322535 -6.77% 0 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.338879 23.39% 866 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.338879 23.39% 271 1999
Service Class - NQ
VIP High Income 10.000000 9.685624 -3.14% 267 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.685624 -3.14% 0 1999
Portfolio: Service
Class - NQ
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: 10.000000 13.076471 30.76% 255 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.076471 30.76% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.571321 5.71% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.18%.
89
<PAGE> 96
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.571321 5.71% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.817549 8.18% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.817549 8.18% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.293580 12.94% 265 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.293580 12.94% 300 1999
Portfolio: Service
Class - NQ
VIP II Index 500 13.057468 15.499687 18.70% 184 1999
Portfolio - Q 10.330070 13.057468 26.40% 0 1998
10.000000 10.330070 3.30% 0 1997
VIP II Index 500 13.057468 15.499687 18.70% 215 1999
Portfolio - NQ 10.330070 13.057468 26.40% 0 1998
10.000000 10.330070 3.30% 0 1997
VIP II Investment Grade 10.877515 10.601902 -2.53% 244 1999
Bond Portfolio - Q 10.145651 10.877515 7.21% 0 1998
10.000000 10.145651 1.64% 0 1997
VIP II Investment Grade 10.877515 10.601902 -2.53% 0 1999
Bond Portfolio - NQ 10.145651 10.877515 7.21% 0 1998
10.000000 10.145651 1.64% 0 1997
VIP III Balanced 10.000000 9.747370 -2.53% 0 1999
Portfolio: Service
Class - Q
</TABLE>
90
<PAGE> 97
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.747370 -2.53% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.034112 0.34% 530 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.034112 0.34% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.883134 -1.17% 648 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.883134 -1.17% 0 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.466052 34.66% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.466052 34.66% 85 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
91
<PAGE> 98
OPTIONAL BENEFITS ELECTED (TOTAL 1.60%)
(VARIABLE ACCOUNT CHARGES OF 1.60% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.316254 -6.84% 0 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.316254 -6.84% 0 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.330569 23.31% 539 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.330569 23.31% 0 1999
Service Class - NQ
VIP High Income 10.000000 9.679099 -3.21% 0 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.679099 -3.21% 0 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.238387 2.38% 0 1999
Portfolio - Q*
VIP Money Market 10.000000 10.238387 2.38% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.067686 30.68% 0 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.067686 30.68% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.564193 5.64% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.08%.
92
<PAGE> 99
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.564193 5.64% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.810265 8.10% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.810265 8.10% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.285979 12.86% 572 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.285979 12.86% 0 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.802136 8.02% 765 1999
Portfolio - Q
VIP II Index 500 10.000000 10.802136 8.02% 0 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.780998 -2.19% 0 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.780998 -2.19% 0 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.740797 -2.59% 0 1999
Portfolio: Service
Class - Q
</TABLE>
93
<PAGE> 100
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.740797 -2.59% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.027355 0.27% 0 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.027355 0.27% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.876485 -1.24% 0 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.876485 -1.24% 0 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.456992 34.57% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.456992 34.57% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
94
<PAGE> 101
OPTIONAL BENEFITS ELECTED (TOTAL 1.65%)
(VARIABLE ACCOUNT CHARGES OF 1.65% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.313103 -6.87 0 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.313103 -6.87 0 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.326422 23.26% 0 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.326422 23.26% 0 1999
Service Class - NQ
VIP High Income 10.000000 9.675845 -3.24% 0 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.675845 -3.24% 0 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.234896 2.35% 0 1999
Portfolio - Q*
VIP Money Market 10.000000 10.234896 2.35% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.063292 30.63% 0 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.063292 30.63% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.560644 5.61% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.03%.
95
<PAGE> 102
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.560644 5.61% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.806627 8.07% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.806627 8.07% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.282174 12.82% 397 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.282174 12.82% 0 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.798506 7.99% 271 1999
Portfolio - Q
VIP II Index 500 10.000000 10.798506 7.99% 0 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.777709 -2.22% 0 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.777709 -2.22% 0 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.737517 -2.62% 0 1999
Portfolio: Service
Class - Q
</TABLE>
96
<PAGE> 103
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.737517 -2.62% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.023974 0.24% 0 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.023974 0.24% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.873148 -1.27% 0 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.873148 -1.27% 0 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.452461 34.52% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.452461 34.52% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
97
<PAGE> 104
OPTIONAL BENEFITS ELECTED (TOTAL 1.85%)
(VARIABLE ACCOUNT CHARGES OF 1.85% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.000000 9.300541 -6.99% 0 1999
Portfolio: Service
Class - Q
VIP Equity-Income 10.000000 9.300541 -6.99% 0 1999
Portfolio: Service
Class - NQ
VIP Growth Portfolio: 10.000000 12.309803 23.10% 0 1999
Service Class - Q
VIP Growth Portfolio: 10.000000 12.309803 23.10% 0 1999
Service Class - NQ
VIP High Income 10.000000 9.662795 -3.37% 0 1999
Portfolio: Service
Class - Q
VIP High Income 10.000000 9.662795 -3.37% 0 1999
Portfolio: Service
Class - NQ
VIP Money Market 10.000000 10.220920 2.21% 0 1999
Portfolio - Q*
VIP Money Market 10.000000 10.220920 2.21% 0 1999
Portfolio - NQ*
VIP Overseas Portfolio: 10.000000 13.045702 30.46% 0 1999
Service Class - Q
VIP Overseas Portfolio: 10.000000 13.045702 30.46% 0 1999
Service Class - NQ
VIP II Asset Manager 10.000000 10.549398 5.46% 0 1999
Portfolio: Service
Class - Q
</TABLE>
*The 7-day yield on the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 3.83%.
98
<PAGE> 105
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 10.000000 10.549398 5.46% 0 1999
Portfolio: Service
Class - NQ
VIP II Asset Manager: 10.000000 10.792052 7.92% 0 1999
Growth Portfolio:
Service Class - Q
VIP II Asset Manager: 10.000000 10.792052 7.92% 0 1999
Growth Portfolio:
Service Class - NQ
VIP II Contrafund(R) 10.000000 11.266962 12.67% 0 1999
Portfolio: Service
Class - Q
VIP II Contrafund(R) 10.000000 11.266962 12.67% 253 1999
Portfolio: Service
Class - NQ
VIP II Index 500 10.000000 10.783929 7.84% 0 1999
Portfolio - Q
VIP II Index 500 10.000000 10.783929 7.84% 253 1999
Portfolio - NQ
VIP II Investment Grade 10.000000 9.764515 -2.35% 0 1999
Bond Portfolio - Q
VIP II Investment Grade 10.000000 9.764515 -2.35% 0 1999
Bond Portfolio - NQ
VIP III Balanced 10.000000 9.724377 -2.76% 0 1999
Portfolio: Service
Class - Q
</TABLE>
99
<PAGE> 106
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENTAGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END
PERIOD UNIT VALUE OF PERIOD
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIP III Balanced 10.000000 9.724377 -2.76% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth & Income 10.000000 10.010436 0.10% 0 1999
Portfolio: Service
Class - Q
VIP III Growth & Income 10.000000 10.010436 0.10% 0 1999
Portfolio: Service
Class - NQ
VIP III Growth 10.000000 9.859832 -1.40% 0 1999
Opportunities
Portfolio: Service
Class - Q
VIP III Growth 10.000000 9.859832 -1.40% 0 1999
Opportunities
Portfolio: Service
Class - NQ
VIP III Mid Cap 10.000000 13.434341 34.34% 0 1999
Portfolio: Service
Class-Q
VIP III Mid Cap 10.000000 13.434341 34.34% 0 1999
Portfolio: Service
Class-Q
</TABLE>
The Fidelity VIP III Mid Cap Portfolio was added to the variable account on
January 11, 1999. Therefore, the Condensed Financial Information reflects the
period from January 11, 1999 to December 31, 1999.
The VIP Equity-Income Portfolio: Service Class 2, VIP Growth Portfolio: Service
Class 2, VIP High Income Portfolio: Service Class 2, VIP Overseas Portfolio:
Service Class 2, VIP II Asset Manager Portfolio: Service Class 2, VIP II Asset
Manager: Growth Portfolio: Service Class 2, VIP II Contrafund(R) Portfolio:
Service Class 2, VIP III Balanced Portfolio: Service Class 2, VIP III Growth &
Income Portfolio: Service Class 2, VIP III Growth Opportunities Portfolio:
Service Class 2 and the VIP III Mid Cap Portfolio were added to the variable
account effective May 1, 2000. Therefore, no Condensed Financial Information is
available.
100
<PAGE> 107
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 43218-2610, or calling 1-800-494-1132, Voice
Response (available 24 hours) 1-800-573-2447, TDD 1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................... 1
Services................................................................. 1
Purchase of Securities Being Offered..................................... 2
Underwriters............................................................. 2
Calculations of Performance.............................................. 2
Annuity Payments......................................................... 3
Financial Statements..................................................... 4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Fidelity Advisor Variable Account is a separate investment
account of Nationwide Life Insurance Company ("Nationwide"). 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 the 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 contract owner and records
with respect to the contract value.
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.
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.
1
<PAGE> 108
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Fidelity
Investments Institutional Services Company, Inc. ("Fidelity"), 82 Devonshire
Street, Boston, Massachusetts 02109. Nationwide has paid no underwriting
commission to Fidelity.
CALCULATIONS 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 shall 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. The VIP Money Market
Portfolio's seven-day current yield for the maximum number of options available
as of December 31, 1999 was 3.42%. The VIP Money Market Portfolio's effective
yield will be computed similarly but includes the effect of assumed compounding
on an annualized basis of the current unit value yield quotations of the VIP
Money Market Portfolio. The VIP Money Market Portfolio's seven-day effective
yield for the maximum number of options available as of December 31, 1999 was
3.08%.
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
portfolio, portfolio quality and average maturity, changes in interest rates,
and the portfolio's expenses. Although the 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 in the
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 the standard 7 year CDSC schedule and the
deduction of all charges that could be made to a contract if all available
options were chosen as of December 31, 1999 (2.65%), except for premium taxes,
which may be imposed by certain states. Nonstandardized total return may also be
advertised, and is calculated in a manner similar to
2
<PAGE> 109
standardized average annual total return except the nonstandardized total return
is based on a hypothetical initial investment of $25,000 and the deduction of
charges for the base contract (0.95%). 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. 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.
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> 110
<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> 111
<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> 112
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) To be filed by Financial Statements:
(1) Financial statements included in Prospectus
(Part A):
Condensed Financial Information.
(2) Financial statements included in Part B:
Those financial statements required by Item 23
to be included in Part B have been incorporated
therein by reference to the Statement of
Additional Information
(Part A).
Nationwide Fidelity Advisor Variable Account:
Independent Auditors' Report.
Statements of Assets, Liabilities
and Contract Owners' Equity as of
December 31, 1999.
Statements of Operations for the years ended
December 31, 1999, and 1998.
Statements of Changes in Contract Owners'
Equity for the years ended December 31, 1999
and 1998.
Notes to Financial Statements.
Nationwide Life Insurance Company:
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.
<PAGE> 113
Item 24. (b) Exhibits
(1) Resolution of Depositor's Board of Directors
authorizing the establishment of the Registrant.
- Filed previously with the Registration Statement
(File No. 33-82174) on November 8, 1994, and hereby
incorporated by reference.
(2) Not Applicable
(3) Form of the Underwriting or Distribution contracts
between the Registrant and the Principal Underwriter.
- Filed previously with Post-Effective Amendment
No. 9 to the Registration Statement (File No.
33-89560) and hereby incorporated by reference.
(4) The form of the variable annuity contract. - Filed
previously with Registration Statement (File No.
33-89560) on October 31, 1997, and hereby
incorporated by reference.
(5) The variable annuity application. - Filed previously
with Post-Effective Amendment No. 4 to the
Registration Statement (File No. 33-89560) and hereby
incorporated by reference.
(6) Articles of Incorporation of the Depositor. - Filed
previously with the Registration Statement (File No.
33-82174) on November 8, 1994, and hereby
incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement (File No. 33-89560) and is
hereby incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Computation of Performance Quotations - Filed
previously with the Registration Statement (File No.
33-82174) on November 8, 1994, and hereby
incorporated by reference.
<PAGE> 114
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount 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
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
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
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
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
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
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
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 117
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 118
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 119
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 120
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 121
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 122
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 123
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 124
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (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> 125
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <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> 126
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <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> 127
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
--------------------------- --------------------------- ----------------------------
| CARIBBEAN ALLIANCE | | ALLIED | | |
| INSURANCE COMPANY | | GROUP, INC. | | |
| | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 1,900,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $19,000,000 | | |100% $1,243,344,521| | | |
--------------------------- | --------------------------- | ----------------------------
| |
--------------------------- | --------------------------- | ----------------------------
| 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 | | ALLIED | | | NATIONWIDE |
| GROUP INSURANCE | | DOCUMENT SOLUTIONS, | | | HOME MORTGAGE |
| MARKETING COMPANY | | INC. | | | 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 |
--------------------------- ----------------------------
----------------------------
| WESTERN |
| HERITAGE INSURANCE |
| COMPANY |
| |
|Common Stock: 4,776,076 |--------------------------------
|------------- Shares |
| |
| Cost |
| ---- |
|SIC-100% $57,000,000 |
----------------------------
</TABLE>
<PAGE> 128
<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 |
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| RP&C | | | SUN DIRECT | | | SVM SALES |
| INTERNATIONAL | | | VERSICHERUNGS - | | | GmbH |
| | | | AKTIENGESCLISCHAFT | | | |
|Common Stock: 1,000 | | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|------------ Shares |--------- |------------ |------------|------------ |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|Casualty-20.3% $2,400,740 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
---------------------------------------------------------------------------------------------------------------------|
|
--------------------------------------------------------------------------------------------------------------- |
| | | | |
| | | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | SCOTTSDALE | | | NATIONWIDE CASH | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | | CORPORATION |
| | | | | | | | |
| | | | | | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 100 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $11,226 | | |Casualty 12,992,922 $1,182,959,447 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 111,835,185 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | ARENA LLC | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |....| | |-----| ---- |
| |------------ Shares | | | | | |Casualty-16% $91,600 |
| | | | | | | |Fire-16% $91,742 |
| | Cost | | | | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-90% | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE | | | NATIONWIDE INTERNATIONAL |
| | GENERAL AGENCY, INC. | | | EXCLUSIVE DISTRIBUTION | | | UNDERWRITERS |
| | | | | COMPANY, LLC (NEDCO) | | | |
------|Common Stock: 1,000 | |....| | |-----|Common Stock: 1,000 |
| |------------ Shares | | | Single Member Limited | | |------------- Shares |
| | | | | Liability Company | | | |
| | Cost | | | | | | Cost |
| | ---- | | |Casualty-100% | | | ---- |
| |Casualty-100% $5,000,000 | | | | | |Casualty-100% $10,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| || | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | COLONIAL COUNTY | | | INSURANCE | | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | INTERMEDIARIES, INC. | | | COMPANY |
| | COMPANY | | | | | | |
| | | | |Common Stock: 1,615 Shares | | |Common Stock: 52,000 |
| | | | |------------- | |-----|-------------- Shares |
| | | | | Cost | | |
| |Surplus Debentures: | | | ---- | | Cost |
| |------------------- | | |NEDCO-100% $1,615,000 | | ---- |
| | Cost | | -------------------------------- |Casualty-100% $106,164,995 |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- -------------------------------------
| |Lone Star 150,000 | | | eNATIONWIDE, LLC | |
| -------------------------------- | | (eNat) | -------------------------------------
| | | | | CALFARM INSURANCE |
| -------------------------------- | | | | AGENCY |
| | NATIONWIDE SERVICES | |....| Single Member Limited | | |
| | COMPANY, LLC | | Liability Company | | |
| | | | | | |
| |Single Member Limited | |----| | |Common Stock: 1,000 shares |
|.....|Liability Company | | | | |------------- |
| | | | | | | |
| | | | |Casualty-100% | | |
| |Casualty-100% | | | | | |
| | | | -------------------------------- |CalFarm Insurance |
| -------------------------------- | |Company - 100% |
| | -------------------------------- -------------------------------------
| | | DISCOVER INSURANCE | |
| -------------------------------- | | COMPANY, LLC | -------------------------------------
| | AMERICAN MARINE | | | | | CAL-AG INSURANCE |
| | UNDERWRITERS, INC. | | | | | SERVICES |
| | | | | Single Member Limited | | |
| |Common Stock: 20 Shares | |....| Liability Company | |Common Stock: 100 Shares |
|-----|------------ | | | | |------------ |
| | Cost | | | | | |
| | ---- | | |eNat-100% | |CalFarm Insurance |
| |Casualty-100% $5,020 | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| --------------------------------- | | DISCOVER COMPANY |
| | NATIONWIDE INSURANCE | | | OF TEXAS, LLC |
| | COMPANY OF FLORIDA | | | |
| | | | | Single Member Limited |
| | Liability Company | |....| Liability Company |
| |Common Stock: 10,000 Shares | | |
|-----|------------- | | |
| Cost | |eNat-100% |
| ---- | | |
|Casualty-100% $300,000,000 | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
June 30, 2000
</TABLE>
Page 1
<PAGE> 130
<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, |
| | | | | || | | | || | INC |
| 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. | | | ASSET ALLOCATION TRUST | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |..| | OHIO BUSINESS TRUST |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | | || | OF OKLAHOMA, INC |
| | | | | | Cost | | || | |
| NW Life-70% | | | | | ---- | | || | |
| NW Mutual-30% | | | | | NFIDAI-100% $153,000 | | || | |
----------------------------- | ----------------------------- ----------------------------- | || -----------------------
| | ||
----------------------------- | ----------------------------- | || -----------------------
| NATIONWIDE | | | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | | | || | |
| | | | | | || | |
| Units: |..| | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | OF TEXAS, INC |
| | | Cost | | || | |
| NW Life-97.6% | | ---- | | || | |
| NW Mutual-2.4% | | NFIDAI-100% $100 | | || | |
----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INSURANCE AGENCY, | | || | |
| INC. OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INSURANCE AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 131
<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 $1,182,959,447 |
|FIRE 649,510 111,385,185 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public-100% |
|CLASS B NW CORP-100% |
---------------|-------------
|
-----------|-------------------------|-------------------------|--------------------------|-------------------------|
| | | | |
-----------|------------ ------------|------------ ------------|------------ -------------|------------ ------------|-------------
|NFS DISTRIBUTORS, INC.| | NATIONWIDE FINANCIAL | | NATIONWIDE FINANCIAL | |PENSION ASSOCIATES, INC.| |VILLANOVA CAPITAL, INC. |
| (NFSDI) | | SERVICES CAPITAL | |SERVICES (BERMUDA) INC.| |Common Stock: 1,000 | |Common Stock: 958,750 |
| | | TRUST II | |Common Stock: 250,000 | |------------ Shares | |------------- Shares |
| | | | |------------- Shares | | | |NFS-96% |
| | | | | Cost | | Cost | |Preferred Stock: 500,000|
|NFS-100% | | | | ---- | | ---- | |--------------- Shares |
| | | NFS-100% | |NFS-100% $3,500,000 | | NFS-100% $2,839,392| |NFS-100% |
-----------|------------ ------------------------- ------------------------- -------------------------- ------------|-------------
|
-----------|---------|----------------|--------------------------| |-------------------------|---------------
-----------|-------- | ---------------|------------ -------------|------------ -----------|------------- -----------|-------------
|NATIONAL DEFERRED | | |THE 401(k) COMPANIES, INC.| | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL |
|COMPENSATION, INC.| | | (401(k)) | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)|
| | | | | |Common Stock: 236,494 | | | |Common Stock: 82,343 |
| | | |Common Stock: Control | |------------- Shares | | | |------------ Shares |
| | | |------------- ------- | | | | | | |
|NFSDI-100% | | |Class A Other-100% | | | | | |VILLANOVA CAPITAL, INC.|
| | | |Class B NFS-100% | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% |
---||--------------- | ---------------------------- -------------|------------ -----------------|------- -----------|-------------
|| | | | | |
|| | | | | |------------|
|| | | | | |
|| --------------|------------|---------------------------- | -------------------------- | ---------------------------- |
|| | IRVIN L. SCHWARTZ ||| NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | |
|| | AND ASSOCIATES, INC. |||SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | | INVESTORS SERVICES, INC. | |
|| | ||| | | | NEW MEXICO | | | | |
|| |Common Stock: Control: |||Common Stock: 10,000 | | | Common Stock: 1,000 | | |Common Stock: 5 | |
===== |------------- -------- |||------------- Shares |--|--| ------------- Shares | |--|------------- Shares | |
|Class A Other-100%||| Cost | | | Cost | | | Cost | |
|Class B NFSDI-100%||| ---- | | | ---- | | | ---- | |
| |||NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| | | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| 401(k) INVESTMENT ||| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | NATIONWIDE GLOBAL FUNDS | |
| SERVICES, INC. |||SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | | |
| ||| | | | SO. DAKOTA | | | | |
|Common Stock: 1,000,000 |||Common Stock: 1,000 | | |Common Stock: 1,000 | | | | |
|------------ Shares |-|------------- Shares |--|--|------------- Shares | |==| LUXEMBOURG SICAV | |--
| ||| Cost | | | Cost | | | | |
| Cost ||| ---- | | | ---- | | | | |
| ---- |||NRS-100% $1,000 | | |NRS-100% $1,000 | | | | |
|401(k)-100% $7,800 ||---------------------------- | -------------------------- | ---------------------------- |
---------------------------| | | |
|---------------------------- | -------------------------- | ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | ALLIED GROUP MERCHANT | |
| 401(k) INVESTMENT ||| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | | BANKING CORPORATION | |
| ADVISORS, INC. ||| ARKANSAS | | | OF WYOMING | | | | |
| |||Common Stock: 50,000 |-----|Common Stock: 500 Shares| |--|Common Stock: 10,000 | |--
|Common Stock: 1,000 |||------------- Shares | | |------------- | |------------- Shares | |
|------------ Shares |-| Cost | | | Cost | | Cost | |
| ||| ---- | | | ---- | | ---- | |
| Cost |||NRS-100% $500 | | |NRS-100% $500 | |VSA-100% $146,653 | |
| ---- ||---------------------------- | -------------------------- ---------------------------- |
|401(k)-100% $1,000 || | |
---------------------------|---------------------------- | -------------------------- ---------------------------- |
|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | |
---------------------------|| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | |
| 401(k) COMPANY ||| AGENCY, INC. | | | OF OHIO | | | |
| |||Common Stock: 1,000 | | | | |Common Stock: 2,000 | |
|Common Stock: 855,000 |||------------- Shares |--|==| | |------------- Shares |--|--
|------------ Shares ||| | | | | | | |
| ||| Cost | | | | | Cost | |
| Cost ||| ---- | | | | | ---- | |
| ---- |-|NRS-100% $1,000 | | | | |Morley-100% $50,000 | |
|401(k)-100% $1,000 ||---------------------------- | -------------------------- ---------------------------- |
---------------------------| | |
|---------------------------- | -------------------------- ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
| |||SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| ||| | | | OKLAHOMA | | | |
| RIVERVIEW AGENCY, INC. |||Common Stock: 500 | | | | |Common Stock: 1,000 | |
| |||------------- Shares |--|==| | |------------- Shares |--|--
| ||| Cost | | | | | Cost | |
| |=| ---- | | | | | ---- | |
| | |NRS-100% $500 | | | | |Morley-100% $25,000 | |
--------------------------- ---------------------------- | -------------------------- ---------------------------- |
| |
---------------------------- | -------------------------- ---------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT| | MORLEY & | |
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. | | ASSOCIATES, INC. | |
| | | | OF TEXAS | | | |
|Common Stock: 1,000 |-- ==| | |Common Stock: 3,500 |--|
|------------- Shares | | | |------------- Shares |
| Cost | | | | Cost |
| ---- | | | | ---- |
|NRS-100% $1,000 | | | |Morley-100% $1,000 |
---------------------------- -------------------------- ----------------------------
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
---------------|-------------- ------------------------------- | ----------------------------
| NATIONWIDE GLOBAL | | GATES MCDONALD | | | NATIONWIDE |
| HOLDINGS, INC. (NGH) | | & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) |
| | | | | | |
|Common Stock: 1 Share | --|Common Stock: 254 Shares | | |---|Common Stock: 100 Shares |
|------------ | | |------------ | | | |------------ |
| Cost | | | Cost | | | | Cost |
| ---- | | | ---- | | | | ---- |
|NW Corp.-100% $257,000,000 | | |NW Corp.-100% $25,683,532 | | | | |
| | | |------------------------------ | | |NW Corp.-100% $14,603,732|
------------------------------ | | | ----------------------------
| |------------------------------ | | ----------------------------
| | MEDPROSOLUTIONS, INC. | | | | NATIONWIDE MANAGEMENT |
------------------------------ --| | | | | SYSTEMS, INC. |
| VILLANOVA MUTUAL FUND | | | Cost | | | | |
| CAPITAL TRUST (VMF) | | | ---- | | |---|Common Stock: 100 Shares |
----|----| | | |Gates-100% $6,700,000 | | | |------------- |
| | | | | | | | | Cost |
| | | | | | | | | ---- |
| | | | ------------------------------- | | |NHP Inc.-100% $25,149 |
| | | | | | ----------------------------
| | | | |------------------------------ | | ----------------------------
| | DELAWARE BUSINESS TRUST | | | GATES MCDONALD & | | | | NATIONWIDE |
| ------------------------------ | | COMPANY OF NEW YORK, INC. | | | | AGENCY, INC. |
| --| | | | | |
| ------------------------------ | |Common Stock: 3 Shares | | |---|Common Stock: 100 Shares |
| | NORTHPOINTE | | |------------ | | |------------ |
| | CAPITAL LLC | | | Cost | | | Cost |
| | | | | ---- | | | ---- |
|----| | | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 |
| | | ------------------------------- | ----------------------------
| | | |
| | | ------------------------------- | ----------------------------
|VILLANOVA CAPITAL, INC.-100%| | | GATES MCDONALD & | | | MRM INVESTMENTS, INC. |
------------------------------ | | COMPANY OF NEVADA | | | |
--| | -------|Common Stock: 1 Shares |
------------------------------ | |Common Stock: 40 Shares | |------------ |
| EXCALIBER FUNDING | | |------------ | | Cost |
| CORPORATION | | | Cost | | ---- |
---------|Common Stock: 1,000 Shares | | | ---- | |NW Corp.-100% $7,000,000 |
|------------- | | |Gates-100% $93,750 | ----------------------------
| Cost | | -------------------------------
| ---- | |
|Morley-100% $1,000 | | -------------------------------
------------------------------ | | GATES MCDONALD |
| | HEALTH PLUS, INC. |
------------------------------ --| |
| CALIBER FUNDING | | |Common Stock: 200 Shares |
| CORPORATION | | |------------ |
| | | | Cost |
---------| | | | ---- |
| | | |Gates-100% $2,000,000 |
| Morley-100% | | -------------------------------
| | |
------------------------------ | -------------------------------
| |NEVADA INDEPENDENT COMPANIES-|
| |MANUFACTURING TRANSPORTATION |
| | AND DISTRIBUTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| |Gates-100% |
| -------------------------------
|
------------------------------ | -------------------------------
| MORLEY RESEARCH | | | NEVADA INDEPENDENT |
| ASSOCIATES, LTD. | | | COMPANIES-HEALTH AND |
---------| | --| NONPROFIT |
|Common Stock: 1,000 Shares | | |Common Stock: 1,000 Shares |
|------------- | | |------------ |
| Cost | | | |
| ---- | | |Gates-100% |
|Morley-100% $1,000 | | -------------------------------
------------------------------ |
| -------------------------------
------------------------------ | | NEVADA INDEPENDENT |
| MORLEY CAPITAL | | | COMPANIES-CONSTRUCTION |
| MANAGEMENT | --| |
| | | |Common Stock: 1,000 Shares |
---------|Common Stock: 500 Shares | | |------------ |
|------------- | | | |
| Cost | | |Gates-100% |
| ---- | | -------------------------------
|Morley-100% $5,000 | |
------------------------------ | -------------------------------
| | 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% | June 30, 2000
-------------------------------
Page 2
</TABLE>
<PAGE> 133
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract owners of Qualified and Non-Qualified
Contracts as of February 1, 2000 was 3,037 and 5,362,
respectively.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended 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.
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.
<PAGE> 134
(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 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
<PAGE> 135
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 risks
assumed by Nationwide.
<PAGE> 136
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 26, 2000
<PAGE> 137
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE FIDELITY
ADVISOR VARIABLE ACCOUNT, certifies that it meets the requirements of the
Securities Act Rule 485(b) for effectiveness of the Post-Effective Amendment and
has caused this Post-Effective Amendment to be signed on its behalf in the City
of Columbus, and State of Ohio, on this 20th day of September, 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 Registration Statement has been
signed by the following persons in the capacities indicated on the 20th day of
September, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
----------------------------------------
Lewis J. Alphin
A. I. BELL Director
----------------------------------------
A. I. Bell
NANCY C. BREIT Director
----------------------------------------
Nancy C. Breit
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
---------------------------------------- Officer and Director
Joseph J. Gasper
W.G. JURGENSEN Chief Executive Officer Elect
---------------------------------------- and Director
W.G. Jurgensen
DIMON R. MCFERSON Chairman and Chief Executive
---------------------------------------- Officer and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and
---------------------------------------- Director
David O. Miller
YVONNE L. MONTGOMERY Director
----------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
---------------------------------------- Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/ STEVEN SAVINI
---------------------------------------- ----------------------------------
Arden L. Shisler Steven Savini
Attorney-in-Fact
ROBERT L. STEWART Director
----------------------------------------
Robert L. Stewart
</TABLE>
