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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.
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 THE AVAILABLE SHARE CLASSES - WILL BE
PROVIDED.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE AVAILABLE:
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 Index 500 Portfolio
- VIP II Investment Grade Bond 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
*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).
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 53.
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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 - AVAILABLE IN
OR GOVERNMENT AGENCY EVERY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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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.
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TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.........................3
SUMMARY OF STANDARD CONTRACT
EXPENSES.....................................6
ADDITIONAL CONTRACT OPTIONS.......................7
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES.....................................9
EXAMPLE..........................................10
SYNOPSIS OF THE CONTRACTS........................11
FINANCIAL STATEMENTS.............................12
CONDENSED FINANCIAL INFORMATION..................12
NATIONWIDE LIFE INSURANCE COMPANY................12
GENERAL DISTRIBUTOR..............................13
TYPES OF CONTRACTS...............................13
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........................15
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS..................18
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND
DEDUCTIONS..................................19
Reduced Purchase Payment Option
CDSC Options and Charges
Death Benefit Options
Guaranteed Minimum Income Benefit Option
Extra Value Option
CONTRACT OWNERSHIP...............................23
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT........................25
Minimum Initial and Subsequent
Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Request
RIGHT TO REVOKE..................................28
SURRENDER (REDEMPTION)...........................29
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...................................30
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.......................................32
CONTRACT OWNER SERVICES..........................32
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE........................34
ANNUITIZING THE CONTRACT.........................34
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
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Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Option
("GMIB")
Annuity Payment Options
DEATH BENEFITS...................................39
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS...........................41
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement
Annuities, SEP IRAs or Simple IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.......................44
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping
Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS...........................48
LEGAL PROCEEDINGS................................49
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY..50
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION......................53
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS.......................................54
APPENDIX B: CONDENSED FINANCIAL INFORMATION......57
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SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- the contract owner meets an available exception under the contract; or
- a contract owner has replaced a standard benefit with an available option
for an additional charge.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)...................7%(1)
Range of CDSC over time:
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
(1) Each contract year, the contract owner may withdraw without a CDSC the
greater of:
(a) 10% of all purchase payments made to the contract; or
(b) any amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code This free withdrawal privilege is non-cumulative.
Free amounts not taken during any given contract year cannot be taken as
free amounts in a subsequent contract year (see "Contingent Deferred
Sales Charge").
Withdrawals may be restricted for contracts issued as Tax Sheltered Annuities
due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of the daily net assets of the variable account)
Mortality and Expense Risk Charges............0.95%
Total Variable Account Charges...........0.95%(3)
(2)These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options.
They are charged on a daily basis at the annual rate noted above.
(3)Charges shown include the Five-Year Reset Death Benefit that is standard to
every contract (see "Death Benefit Payment").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states may
not permit Nationwide to assess a loan processing fee (see "Loan Privilege").
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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 intitial
purchase payment to $1,000 and subsequent purchase payments to $25. This option
is not available to contracts issued as Investment-only Contracts.
Reduced Purchase Payment Option............0.25%
Total Variable Account Charges
(including Reduced Purchase
Payment Option)..........................1.20%
CDSC OPTION
For 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.
Five Year CDSC Option .......................0.15%
Total Variable Account Charges
(including Five Year CDSC Option)..........1.10%
Range of Five-Year CDSC over time:
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
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").
Additional Withdrawal Without
Charge and Disability Waiver ..............0.10%
Total Variable Account Charges (including
Additional Withdrawal Without Charge and
Disability Waiver) ....................1.05%
ADDITIONAL CDSC WAIVER OPTIONS FOR TAX SHELTERED ANNUITIES
Tax Sheltered Annuity applicants may also elect two additional CDSC waiver
options (see "CDSC Options and Charges").
10 Year and Disability Waiver..............0.05%
Total Variable Account Charges
(including 10 Year and Disability
Waiver) .................................1.00%
Hardship Waiver............................0.15%
Total Variable Account Charges
(including Hardship Waiver)..............1.10%
DEATH BENEFIT OPTIONS
An applicant may choose among the following death benefits as a replacement for
the Five-Year Reset Death Benefit that is standard to every contract. The
optional death benefits are:
Optional One-Year Step Up
Death Benefit................................0.05%
Total Variable Account Charges
(including One Year Step Up
Death Benefit).............................1.00%
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Optional 5% Enhanced Death
Benefit......................................0.10%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit)...................................1.05%
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").
Guaranteed Minimum Income Benefit
Option.......................................0.45%
Total Variable Account Charges
(including a Guaranteed Minimum
Income Benefit Option).....................1.40%
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").
Extra Value Option...........................0.45%
Total Variable Account Charges
(including Extra Value Option).............1.40%
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").
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total Underlying
Fees Expenses Fees 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>
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EXAMPLE
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The 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 your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract at the end of the
time period applicable time period applicable time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIP Equity-Income Portfolio: 98 161 218 377 35 107 182 377 * 107 182 377
Service Class
VIP Growth Portfolio: Service 99 164 222 386 36 110 186 386 * 110 186 386
Class
VIP High Income Portfolio: 100 165 224 389 37 111 188 389 * 111 188 389
Service Class
VIP Money Market Portfolio 94 149 198 340 31 95 162 340 * 95 162 340
VIP Overseas Portfolio: 102 171 234 407 39 117 198 407 * 117 198 407
Service Class
VIP II Asset Manager 99 164 221 384 36 110 185 384 * 110 185 384
Portfolio: Service Class
VIP II Asset Manager: Growth 100 166 225 391 37 112 189 391 * 112 189 391
Portfolio: Service Class
VIP II Contrafund(R) Portfolio: 99 164 222 386 36 110 186 386 * 110 186 386
Service Class
VIP II Investment Grade Bond 97 158 212 366 34 104 176 366 * 104 176 366
Portfolio
VIP II Index 500 Portfolio 94 150 198 341 31 96 162 341 * 96 162 341
VIP III Balanced Portfolio: 98 161 218 377 35 107 182 377 * 107 182 377
Service Class
VIP III Growth & Income 99 162 219 380 36 108 183 380 * 108 183 380
Portfolio: Service Class
VIP III Growth Opportunities 100 165 224 388 37 111 188 388 * 111 188 388
Portfolio: Service Class
VIP III Mid Cap Portfolio: 103 174 238 415 40 120 202 415 * 120 202 415
Service Class
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
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SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)" 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
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
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
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:
OPTION CONTRACT TYPE CHARGE
Five Year CDSC Option All* 0.15%
Additional Withdrawal All 0.10%
Without Charge and
Disability Waiver
10 Year and Disability Tax Sheltered 0.05%
Waiver Annuities
Hardship Waiver Tax Sheltered 0.15%
Annuities
*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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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.
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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;
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- - 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 $2000 (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
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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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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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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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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:
Number of Years from Date CDSC
of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
The CDSC is used to cover sales expenses, including commissions (maximum of 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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(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:
Number of Years from Date of CDSC
Purchase Payment Percentage
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
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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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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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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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
Contract Base Contract Contract With Extra
Year (0.95% total Value Option (1.40%
asset charges) total asset charges)
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
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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(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:
(Extra Value Amount)
Contract Years Percentage of First year
Purchase Payments
1 and 2 3%
3,4 and 5 2%
6 and 7 1%
After Year 7 0%
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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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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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
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
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
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 - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, contract
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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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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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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
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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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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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MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1,000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
NON-ERISA PLANS up to up to 80% of contract
$20,000 value (not more than
$10,000)
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide 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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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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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: Service Class 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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election of distributions of substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
(1) 10% of all purchase payments made to the contract as of the withdrawal
date;
(2) an amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code; or
(3) a percentage of the contract value based on the contract owner's age, as
shown in the table below:
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
Under age 59 1/2 5%
Age 59 1/2 through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year 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.
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
<TABLE>
<CAPTION>
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>
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
<TABLE>
<CAPTION>
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>
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
<TABLE>
<CAPTION>
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
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the 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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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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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
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in which the fifth anniversary of the contract owner's death occurs, unless:
(a) the contract owner names his or her surviving spouse as the beneficiary
and such spouse chooses to:
(1) treat the contract as an Individual Retirement Annuity, SEP IRA or
Simple IRA established for his or her benefit; or
(2) receive distribution of the contract in substantially equal payments
over his or her life (or a period not longer than his or her life
expectancy) and beginning no later than December 31 of the year in
which the contract owner would have reached age 70 1/2; or
(b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract owner's
death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA, 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
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<PAGE> 44
distribution of the contract in substantially equal payments over his or
her life (or a period not longer than his or her life expectancy)
beginning no later than December 31 of the year following the year in
which the contract owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- - 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;
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<PAGE> 45
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - used for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified 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.
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<PAGE> 46
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - 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> 47
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: o
the distribution is made directly to another Tax Sheltered Annuity or IRA; or o
the distribution satisfies the minimum distribution requirements imposed by the
Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal Revenue Service notifies Nationwide that mandatory
back-up withholding is required). Mandatory back-up withholding rates are 31% of
income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
(1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
(2) provide Nationwide with an individual taxpayer identification number.
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> 48
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> 49
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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<PAGE> 50
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 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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<PAGE> 51
- 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
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/99 to 12/31/99 to 12/31/99 Account
<S> <C> <C> <C> <C>
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
to 12/31/99
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Fund Effective
<S> <C> <C> <C> <C>
VIP Equity-Income Portfolio: 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>
52
<PAGE> 53
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History.........................................1
Services................................................................1
Purchase of Securities Being Offered....................................2
Underwriters............................................................2
Calculations of Performance.............................................2
Annuity Payments........................................................3
Financial Statements....................................................4
53
<PAGE> 54
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
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 Portfolio expects to invest a majority of its assets in equity
securities, but may also invest in debt securities of any quality.
54
<PAGE> 55
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.
Asset Manager Range Neutral Mix
Stock Class 30-70% 50%
Bond Class 20-60% 40%
Short-term Class 0-50% 10%
VIP II ASSET MANAGER: GROWTH PORTFOLIO: 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.
Asset Manager: Range Neutral Mix
Growth
Stock Class 50-100% 70%
Bond Class 0-50% 25%
Short-term Class 0-50% 5%
VIP II CONTRAFUND(R) PORTFOLIO: 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 approach to provide the best possible total return from
investments in a diversified
55
<PAGE> 56
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.
56
<PAGE> 57
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.758604 11.322947 5.25% 695,545 1999
Portfolio: Service
Class - Q 10.000000 10.758604 7.59% 76,194 1998
VIP Equity-Income 10.758604 11.322947 5.25% 1,069,193 1999
Portfolio: Service
Class - NQ 10.000000 10.758604 7.59% 108,197 1998
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
Class - Q 10.000000 9.218542 -7.81% 72,605 1998
VIP High Income 9.218542 9.868246 7.05% 1,334,025 1999
Portfolio: Service
Class - NQ 10.000000 9.218542 -7.81% 197,839 1998
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 for the VIP Money Market Portfolio as of December 31, 1999 was
4.74%.
57
<PAGE> 58
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.098876 12.204056 9.96% 113,345 1999
Portfolio: Service
Class - Q 10.000000 11.098876 10.99% 8,319 1998
VIP II Asset Manager 11.098876 12.204056 9.96% 308,073 1999
Portfolio: Service
Class - NQ 10.000000 11.098876 10.99% 17,136 1998
VIP II Asset Manager: 11.278688 12.862419 14.04% 91,493 1999
Growth Portfolio:
Service Class - Q 10.000000 11.278688 12.79% 24,911 1998
VIP II Asset Manager: 11.278688 12.862419 14.04% 135,720 1999
Growth Portfolio:
Service Class - NQ 10.000000 11.278688 12.79% 8,306 1998
VIP II Contrafund(R) 12.539357 15.419403 22.97% 628,642 1999
Portfolio: Service
Class -Q 10.000000 12.539357 25.39% 52,457 1998
VIP II Contrafund(R) 12.539357 15.419403 22.97% 992,736 1999
Portfolio: Service
Class - NQ 10.000000 12.539357 25.39% 81,444 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 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 III Balanced 11.340963 11.730743 3.44% 439,780 1999
Portfolio: Service
Class - Q 10.000000 11.340963 13.41% 44,418 1998
</TABLE>
58
<PAGE> 59
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.340963 11.730743 3.44% 650,044 1999
Portfolio: Service
Class - NQ 10.000000 11.340963 13.41% 55,013 1998
VIP III Growth & Income 12.392371 13.387303 8.03% 631,639 1999
Portfolio: Service
Class - Q 10.000000 12.392371 23.92% 48,420 1998
VIP III Growth & Income 12.392371 13.387303 8.03% 1,084,359 1999
Portfolio: Service
Class - NQ 10.000000 12.392371 23.92% 105,831 1998
VIP III Growth 11.936099 12.317183 3.19% 1,580,810 1999
Opportunities
Portfolio: Service
Class - Q 10.000000 11.936099 19.36% 123,265 1998
VIP III Growth 11.936099 12.317183 3.19% 2,388,172 1999
Opportunities
Portfolio: Service
Class - NQ 10.000000 11.936099 19.36% 260,816 1998
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.
59
<PAGE> 60
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.753771 11.312151 5.19% 700,294 1999
Portfolio: Service
Class - Q 10.000000 10.753771 7.54% 76,194 1998
VIP Equity-Income 10.753771 11.312151 5.19% 723,120 1999
Portfolio: Service
Class - NQ 10.000000 10.753771 7.54% 108,197 1998
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
Class - Q 10.000000 9.214386 -7.86% 72,605 1998
VIP High Income 9.214386 9.858827 6.99% 773,796 1999
Portfolio: Service
Class - NQ 10.000000 9.214386 -7.86% 458,599 1998
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
Class - Q 10.000000 11.093882 10.94% 8,319 1998
</TABLE>
*The 7-day yield for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.69%.
60
<PAGE> 61
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.093882 12.192406 9.90% 214,274 1999
Portfolio: Service
Class - NQ 10.000000 11.093882 10.94% 17,136 1998
VIP II Asset Manager: 11.273630 12.850172 13.98% 123,075 1999
Growth Portfolio:
Service Class - Q 10.000000 11.273630 12.74% 24,911 1998
VIP II Asset Manager: 11.273630 12.850172 13.98% 173,485 1999
Growth Portfolio:
Service Class - NQ 10.000000 11.273630 12.74% 8,306 1998
VIP II Contrafund(R) 12.533725 15.404707 22.91% 687,704 1999
Portfolio: Service
Class -Q 10.000000 12.533725 25.34% 52,457 1998
VIP II Contrafund(R) 12.533725 15.404707 22.91% 960,351 1999
Portfolio: Service
Class - NQ 10.000000 12.533725 25.34% 81,444 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 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 III Balanced 11.335864 11.719556 3.38% 401,736 1999
Portfolio: Service
Class - Q 10.000000 11.335864 13.36% 44,418 1998
VIP III Balanced 11.335864 11.719556 3.38% 552,217 1999
Portfolio: Service
Class - NQ 10.000000 11.335864 13.36%% 55,013 1998
</TABLE>
61
<PAGE> 62
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Growth & Income 12.386801 13.374521 7.97% 922,659 1999
Portfolio: Service
Class - Q 10.000000 12.386801 23.87% 48,820 1998
VIP III Growth & Income 12.386801 13.374521 7.97% 1,278,902 1999
Portfolio: Service
Class - NQ 10.000000 12.386801 23.87% 105,831 1998
VIP III Growth 11.930730 12.305429 3.14% 1,554,894 1999
Opportunities
Portfolio: Service
Class - Q 10.000000 11.930730 19.31% 123,265 1998
VIP III Growth 11.930730 12.305429 3.14% 2,150,035 1999
Opportunities
Portfolio: Service
Class - NQ 10.000000 11.930730 19.31% 260,816 1998
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.
62
<PAGE> 63
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 10.748944 11.301374 5.14% 125,193 1999
Portfolio: Service
Class - Q 10.000000 10.748944 7.49% 76,194 1998
VIP Equity-Income 10.748944 11.301374 5.14% 237,960 1999
Portfolio: Service
Class - NQ 10.000000 10.748944 7.49% 108,197 1998
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
Class - Q 10.000000 9.210254 -7.90% 72,605 1998
VIP High Income 9.210254 9.849428 6.94% 233,348 1999
Portfolio: Service
Class - NQ 10.000000 9.210254 -7.90% 197,839 1998
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
Class - Q 10.000000 11.088896 10.89% 8,319 1998
</TABLE>
*The 7-day yield for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.64%.
63
<PAGE> 64
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 11.088896 12.180770 9.85% 66,396 1999
Portfolio: Service
Class - NQ 10.000000 11.088896 10.89% 17,136 1998
VIP II Asset Manager: 11.268555 12.837906 13.93% 35,123 1999
Growth Portfolio:
Service Class - Q 10.000000 11.268555 12.69% 24,911 1998
VIP II Asset Manager: 11.268555 12.837906 13.93% 60,669 1999
Growth Portfolio:
Service Class - NQ 10.000000 11.268555 12.69% 8,306 1998
VIP II Contrafund(R) 12.528086 15.390001 22.84% 112,426 1999
Portfolio: Service
Class -Q 10.000000 12.528086 25.28% 52,457 1998
VIP II Contrafund(R) 12.528086 15.390001 22.84% 213,961 1999
Portfolio: Service
Class - NQ 10.000000 12.528086 25.28% 81,444 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 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 III Balanced 11.330772 11.708369 3.33% 71,054 1999
Portfolio: Service
Class - Q 10.000000 11.330772 13.31% 44,418 1998
</TABLE>
64
<PAGE> 65
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 11.330772 11.708369 3.33% 133,286 1999
Portfolio: Service
Class - NQ 10.000000 11.330772 13.31% 55,013 1998
VIP III Growth & Income 12.381235 13.361770 7.92% 152,587 1999
Portfolio: Service
Class - Q 10.000000 12.381235 23.81% 48,820 1998
VIP III Growth & Income 12.381235 13.361770 7.92% 295,741 1999
Portfolio: Service
Class - NQ 10.000000 12.381235 23.81% 105,831 1998
VIP III Growth 11.925368 12.293685 3.09% 290,728 1999
Opportunities
Portfolio: Service
Class - Q 10.000000 11.925368 19.25% 123,265 1998
VIP III Growth 11.925368 12.293685 3.09% 433,732 1999
Opportunities
Portfolio: Service
Class - NQ 10.000000 11.925368 19.25% 260,816 1998
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.
65
<PAGE> 66
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.59%.
66
<PAGE> 67
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
67
<PAGE> 68
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
68
<PAGE> 69
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.54%.
69
<PAGE> 70
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
70
<PAGE> 71
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
71
<PAGE> 72
OPTIONAL BENEFITS ELECTED (TOTAL 1.20%)
(VARIABLE ACCOUNT CHARGES OF 1.20% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.49%.
72
<PAGE> 73
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
73
<PAGE> 74
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
74
<PAGE> 75
OPTIONAL BENEFITS ELECTED (TOTAL 1.25%)
(VARIABLE ACCOUNT CHARGES OF 1.25% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.44%.
75
<PAGE> 76
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
76
<PAGE> 77
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
77
<PAGE> 78
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.28%.
78
<PAGE> 79
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
79
<PAGE> 80
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
80
<PAGE> 81
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.23%.
81
<PAGE> 82
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
82
<PAGE> 83
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
83
<PAGE> 84
OPTIONAL BENEFITS ELECTED (TOTAL 1.50%)
(VARIABLE ACCOUNT CHARGES OF 1.50% OF THE DAILY NET ASSETS OF THE VARIABLE
ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.18%.
84
<PAGE> 85
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
85
<PAGE> 86
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
86
<PAGE> 87
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.08%.
87
<PAGE> 88
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
88
<PAGE> 89
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
89
<PAGE> 90
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 4.03%.
90
<PAGE> 91
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
91
<PAGE> 92
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
92
<PAGE> 93
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 UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP Equity-Income 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 for the Fidelity VIP Money Market Portfolio as of December 31,
1999 was 3.83%.
93
<PAGE> 94
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP II Asset Manager 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>
94
<PAGE> 95
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION UNITS
BEGINNING OF PERIOD UNIT VALUE AT END OF PERIOD
PERIOD
<S> <C> <C> <C> <C> <C>
VIP III Balanced 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.
95
