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'99
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Nationwide(R) Variable Account - 10
December 31, 1999
[The BEST of AMERICA(R) LOGO]
ANNUAL REPORT
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[LOGO-NATIONWIDE]
Nationwide Life Insurance Company
Home Office: Columbus, Ohio
APO - 4740(12/99)
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[LOGO-NATIONWIDE]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[Photograph of president]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 1999 annual
report of the Nationwide Variable Account-10.
During 1999 equity investments extended their spirited advance to a fifth
consecutive year. The S&P 500 was the laggard of the major indices with a
year-over-year change of a respectable 19.53%. The NASDAQ topped the list at
over 85% with the other indices falling into line nearer the lower end of the
range. Fixed earnings investments did not fare as well in the current
environment of rising interest rates.
The U.S. economy remains strong, inflation remains docile and the available
labor pool is incessantly tight. Against this good-news-bad-news backdrop, the
Federal Reserve is increasingly concerned that recent productivity gains will
subside and ignite wage inflation. To date, the Fed has hiked short-term
interest rates a quarter percentage point on four occasions since last June.
Prospectively, they may well become more aggressive in their preemptive efforts
to dampen economic growth and avoid a new round of inflation.
We believe some caution may be warranted at this juncture. Certain market
sectors are well extended and may inevitably retreat to less lofty valuation
levels. However, we remain bullish for the long-term prospects of financial
assets. Your variable insurance contract provides an excellent resource to help
you achieve your long-term retirement savings and financial planning objectives.
We appreciate your trust in our company and in our investment products, and we
welcome and encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
February 10, 2000
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NATIONWIDE VARIABLE ACCOUNT-10
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
ASSETS:
Investments at market value:
Nationwide SAT - Money Market Fund (NSATMyMkt)
60,585 shares (cost $60,585) ............................ $60,585
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Total investments .................................... 60,585
Accounts receivable ........................................... 1
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Total assets ......................................... 60,586
ACCOUNTS PAYABLE ................................................. -
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CONTRACT OWNERS' EQUITY (NOTE 4) ................................. $60,586
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See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT-10
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
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STATEMENTS OF OPERATIONS
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FOR THE PERIOD DECEMBER 15, 1999
(COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
NSATMYMKT
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<S> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 106
Mortality and expense risk charges
(note 2) .......................................... (28)
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Net investment activity ........................... 78
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Proceeds from mutual fund shares sold ............... 22
Cost of mutual fund shares sold ..................... (22)
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Realized gain (loss) on investments ............... -
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Net increase (decrease) in contract owners'
equity resulting from operations .............. 78
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EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 60,508
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Net equity transactions ......................... 60,508
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NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 60,586
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... -
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CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 60,586
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</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT-10
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-10 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on March 31, 1999. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through the brokerage community;
however, other distributors are utilized.
(b) The Contracts
Only contracts without a sales charge, but with certain other fees are
offered for purchase. See note 2 for a discussion of contract expenses.
Contract owners in either the accumulation or payout phase may invest
in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Investment Portfolios (Dreyfus IP);
Dreyfus IP - European Equity Portfolio (DryEuroEq)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Federated Insurance Series - Quality Bond Fund II (FedQualBal)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio: Service Class
(FidVIPEIS)
Fidelity VIP - Growth Portfolio: Service Class (FidVIPGrS)
Fidelity VIP - High Income Portfolio: Service Class (FidVIPHIS)
Fidelity VIP - Overseas Portfolio: Service Class (FidVIPOvS)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio: Service Class
(FidVIPConS)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio: Service Class
(FidVIPGrOpS)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
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Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund (NSATBal)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund (NSATEqInc)
Nationwide SAT - Global Equity Fund (NSATGlobEq)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
Nationwide SAT - Mid Cap Index Fund (NSATMidCap)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
Nationwide SAT - Select Advisers Small Cap Fund (NSATSmCapGr)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Aggressive Growth Fund (OppAggGro)
Oppenheimer VAF - Capital Appreciation Fund (OppCapApp)
Oppenheimer VAF - Main Street Growth & Income Fund (OppMSGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen Life Investment Trust (Van Kampen
LIT);
Van Kampen LIT - Morgan Stanley Real Estate Securities Portfolio
(VKMSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
At December 31, 1999, contract owners have only invested in Nationwide
SAT - Money Market Fund. The contract owners' equity is affected by the
investment results of the fund, equity transactions by contract owners
and certain contract expenses (see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their
contracts and exclude any purchase payments for fixed dollar benefits,
the latter being included in the accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(Continued)
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NATIONWIDE VARIABLE ACCOUNT-10
NOTES TO FINANCIAL STATEMENTS
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual fund is based on the closing
net asset value per share at December 31, 1999. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 8% of purchase payments surrendered. After 5 years,
such charge will decline 1% per year, to 0%, after the purchase payment has
been held in the contract for 13 years. No sales charges are deducted on
redemptions used to purchase units in the fixed investment options of the
Company.
The Company deducts a mortality and expense risk charge assessed through
the daily unit value calculation equal to an annual rate of 1.40%.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
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(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
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<S> <C> <C> <C> <C>
Nationwide SAT - Money Market Fund: ..... 6,004 10.090878 $ 60,586 1%(a)
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$ 60,586
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</TABLE>
(a) Non-annualized. The return was computed for the period 12/15/99
(commencement of operations) through 12/31/99.
(b) The period return does not include contract charges satisfied by
surrendering units.
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Independent Auditors' Report
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The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-10
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-10 (comprised of the
Nationwide Separate Account Trust-Money Market Fund) (collectively, "the
Account") as of December 31, 1999, and the related statements of operations and
changes in contract owners' equity for the period December 15, 1999
(commencement of operations) through December 31, 1999. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for the period December 15, 1999 (commencement of operations) through
December 31, 1999 in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
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NATIONWIDE LIFE INSURANCE COMPANY Bulk Rate
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
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Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
