<PAGE> 1
[NATIONWIDE LOGO]
MFS
VARIABLE
ACCOUNT
SEMI-ANNUAL REPORT
TO
CONTRACT OWNERS
JUNE 30, 1997
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-719-W (6/97)
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO OF JOSEPH J. GASPER]
PRESIDENT'S MESSAGE
We are pleased to present the 1997 semi-annual report of the MFS Variable
Account.
Our Enterprise Vision statement states: "We exist to serve our customers."
Everything we do is focused on you, our customer, and on your needs.
We recognize that your expectations have changed and your standards for value
and service are higher than ever before. You are being asked to take more
responsibility for your own financial future, as employers and government
programs provide fewer guarantees.
We know that you expect service and products customized to fit your needs -
including financial advice - and you expect to receive service at any time,
anywhere and any way you choose.
We are responding to your changing needs and expectations with innovative
product offerings, continuing investment in the training and professional
development of our people, and our investment in technology to enable us to
serve you faster, better and more cost effectively.
Equity investments produced solid gains for the first half of 1997 with the Dow
Jones Industrial Average breaking the 8,000 mark on July 16. The U.S. economy,
in its seventh year of expansion, is growing vigorously and corporate profits
are better than anticipated.
Interest rates and inflation are still at very low levels. However, the risk of
a temporary spike remains as the Federal Reserve might be forced to raise
interest rates in order to keep our economy on an inflation-free growth path.
Even such policy actions are not expected to end the prosperous times which we
now enjoy. In the long run, equity valuations will reflect these excellent
economic conditions.
Thank you for giving Nationwide Life Insurance Company the opportunity to meet
your investment needs.
/s/Joseph J. Gasper
Joseph J. Gasper, President
3
<PAGE> 3
================================================================================
MFS VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
MFS Series Trust IV - MFS(R) Money Market Fund (MFSMyMkt)
58,313,400 shares (cost $58,313,400) ............................ $ 58,313,400
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
3,657,518 shares (cost $39,130,748) ............................. 46,084,731
Massachusetts Investors Trust - Class A (MFSInvTr)
2,986,147 shares (cost $37,997,321) ............................. 51,063,121
MFS(R) Bond Fund - Class A (MFSBdFd)
2,235,487 shares (cost $29,253,398) ............................. 29,620,196
MFS(R) Emerging Growth Fund - Class A (MFSEmGro)
436,802 shares (cost $10,724,313) ............................... 14,938,621
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
8,503,251 shares (cost $98,321,511) ............................. 127,208,631
MFS(R) High Income Fund - Class A (MFSHiInc)
6,120,547 shares (cost $31,435,480) ............................. 33,112,160
MFS(R) Research Fund - Class A (MFSRsrch)
2,411,940 shares (cost $35,007,616) ............................. 50,506,034
MFS(R) Total Return Fund - Class A (MFSTotRe)
4,414,139 shares (cost $58,357,392) ............................. 70,935,214
MFS(R) World Governments Fund - Class A (MFSWdGvt)
677,468 shares (cost $7,693,977) ................................ 7,472,475
Nationwide Separate Account Trust - Money Market Fund (NSATMyMkt)
1,880,246 shares (cost $1,880,246) .............................. 1,880,246
-------------
Total investments ............................................ 491,134,829
Accounts receivable ................................................... 149,823
-------------
Total assets ................................................. 491,284,652
ACCOUNTS PAYABLE ......................................................... 71,331
-------------
CONTRACT OWNERS' EQUITY (NOTE 3) ......................................... $ 491,213,321
=============
</TABLE>
See accompanying notes to financial statements.
================================================================================
4
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
TOTAL MFSMyMkt
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 5,495,980 6,118,259 1,326,824 1,465,847
Mortality, expense and administration
charges (note 2) ............................. (3,063,839) (3,009,703) (382,469) (417,079)
--------------- --------------- --------------- ---------------
Net investment activity ...................... 2,432,141 3,108,556 944,355 1,048,768
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 54,421,707 56,505,987 10,438,068 11,644,920
Cost of mutual fund shares sold ................ (49,160,548) (52,669,337) (10,438,068) (11,644,920)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... 5,261,159 3,836,650 -- --
Change in unrealized gain (loss) on investments 43,131,486 24,016,926 -- --
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 48,392,645 27,853,576 -- --
--------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 50,824,786 30,962,132 944,355 1,048,768
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... 9,408,221 10,517,484 3,009,754 1,249,941
Redemptions .................................... (33,832,527) (32,532,427) (5,186,982) (5,477,682)
Annuity benefits ............................... (270,143) (287,998) (44,347) (54,377)
Annual contract maintenance charge (note 2) .... (204,028) (230,132) (33,069) (41,633)
Contingent deferred sales charges (note 2) ..... (56,880) (74,416) (11,579) (18,899)
Adjustments to maintain reserves ............... (57,136) 29,011 (5,003) 21,707
--------------- --------------- --------------- ---------------
Net equity transactions .................... (25,012,493) (22,578,478) (2,271,226) (4,320,943)
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 25,812,293 8,383,654 (1,326,871) (3,272,175)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 465,401,028 454,761,893 59,634,697 65,653,207
--------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 491,213,321 463,145,547 58,307,826 62,381,032
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
MFSGrStk MFSInvTr
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... -- -- 274,013 274,590
Mortality, expense and administration
charges (note 2) ............................. (267,369) (240,787) (302,408) (243,723)
---------------- --------------- --------------- ---------------
Net investment activity ...................... (267,369) (240,787) (28,395) 30,867
---------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 4,969,313 4,460,355 3,290,916 3,968,791
Cost of mutual fund shares sold ................ (5,749,851) (4,602,255) (2,801,124) (4,024,426)
---------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... (780,538) (141,900) 489,792 (55,635)
Change in unrealized gain (loss) on investments 10,413,226 4,743,383 7,306,130 3,502,605
---------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 9,632,688 4,601,483 7,795,922 3,446,970
---------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
---------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 9,365,319 4,360,696 7,767,527 3,477,837
---------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... 2,292,933 1,421,745 3,154,171 272,756
Redemptions .................................... (3,427,388) (2,873,956) (2,365,836) (2,250,228)
Annuity benefits ............................... (12,959) (6,645) (13,987) (17,631)
Annual contract maintenance charge (note 2) .... (14,529) (15,554) (14,415) (14,619)
Contingent deferred sales charges (note 2) ..... (4,310) (5,608) (3,891) (4,859)
Adjustments to maintain reserves ............... (7,607) 1,178 21,422 1,983
---------------- --------------- --------------- ---------------
Net equity transactions .................... (1,173,860) (1,478,840) 777,464 (2,012,598)
---------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 8,191,459 2,881,856 8,544,991 1,465,239
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 37,885,509 35,393,254 42,689,756 36,224,229
---------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 46,076,968 38,275,110 51,234,747 37,689,468
================ =============== =============== ===============
</TABLE>
5
<PAGE> 5
<TABLE>
<CAPTION>
MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
MFSBdFd MFSEmGro
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 1,081,627 1,328,384 -- --
Mortality, expense and administration
charges (note 2) ............................. (200,496) (236,365) (94,362) (92,427)
--------------- --------------- --------------- ---------------
Net investment activity ...................... 881,131 1,092,019 (94,362) (92,427)
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 5,552,270 6,014,921 2,916,916 1,712,463
Cost of mutual fund shares sold ................ (6,140,881) (6,357,200) (1,694,458) (1,112,091)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... (588,611) (342,279) 1,222,458 600,372
Change in unrealized gain (loss) on investments 602,832 (2,059,648) 548,844 1,232,707
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 14,221 (2,401,927) 1,771,302 1,833,079
--------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 895,352 (1,309,908) 1,676,940 1,740,652
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... (345,807) (160,963) (411,114) 1,107,022
Redemptions .................................... (3,811,306) (2,874,094) (1,333,744) (423,235)
Annuity benefits ............................... (32,886) (45,524) (326) --
Annual contract maintenance charge (note 2) .... (12,173) (14,621) (9,852) (9,423)
Contingent deferred sales charges (note 2) ..... (6,011) (3,429) (1,286) (1,773)
Adjustments to maintain reserves ............... 9,952 1,730 216 (388)
--------------- --------------- --------------- ---------------
Net equity transactions .................... (4,198,231) (3,096,901) (1,756,106) 672,203
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (3,302,879) (4,406,809) (79,166) 2,412,855
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 32,932,598 39,564,364 15,017,791 12,840,573
--------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 29,629,719 35,157,555 14,938,625 15,253,428
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
MFSGrOpp MFSHiInc
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... -- -- 1,441,096 1,509,906
Mortality, expense and administration
charges (note 2) ............................. (779,316) (747,772) (214,103) (227,998)
--------------- --------------- --------------- ---------------
Net investment activity ...................... (779,316) (747,772) 1,226,993 1,281,908
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 7,993,824 9,860,657 5,727,698 6,286,318
Cost of mutual fund shares sold ................ (6,168,106) (8,296,724) (5,792,526) (5,988,129)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... 1,825,718 1,563,933 (64,828) 298,189
Change in unrealized gain (loss) on investments 15,483,334 12,068,070 471,254 (426,578)
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 17,309,052 13,632,003 406,426 (128,389)
--------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 16,529,736 12,884,231 1,633,419 1,153,519
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... 291,281 4,077,207 8,938 (474,894)
Redemptions .................................... (5,986,808) (7,707,325) (2,327,646) (2,457,835)
Annuity benefits ............................... (63,777) (71,077) (47,019) (44,004)
Annual contract maintenance charge (note 2) .... (59,261) (66,512) (17,126) (19,779)
Contingent deferred sales charges (note 2) ..... (12,301) (10,365) (3,074) (5,565)
Adjustments to maintain reserves ............... (93,595) (12,006) 9,530 5,986
--------------- --------------- --------------- ---------------
Net equity transactions .................... (5,924,461) (3,790,078) (2,376,397) (2,996,091)
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 10,605,275 9,094,153 (742,978) (1,842,572)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 116,502,318 108,418,392 33,862,351 35,233,154
--------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 127,107,593 117,512,545 33,119,373 33,390,582
=============== =============== =============== ===============
</TABLE>
6
<PAGE> 6
<TABLE>
<CAPTION>
MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
MFSRSrch MFSTotRe
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ -- -- 1,324,616 1,486,938
Mortality, expense and administration
charges (note 2) ............................. (309,427) (261,047) (450,803) (463,703)
--------------- --------------- --------------- ---------------
Net investment activity ...................... (309,427) (261,047) 873,813 1,023,235
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 4,049,396 2,539,816 6,704,161 6,842,361
Cost of mutual fund shares sold ................ (2,472,165) (1,538,464) (5,092,647) (5,354,950)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... 1,577,231 1,001,352 1,611,514 1,487,411
Change in unrealized gain (loss) on investments 4,313,694 4,126,812 4,170,264 365,955
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 5,890,925 5,128,164 5,781,778 1,853,366
--------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 5,581,498 4,867,117 6,655,591 2,876,601
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... 1,180,069 4,202,666 (257,587) (1,300,926)
Redemptions .................................... (2,835,221) (2,451,556) (5,084,767) (4,050,870)
Annuity benefits ............................... (22,394) (20,021) (28,622) (24,850)
Annual contract maintenance charge (note 2) .... (14,006) (13,152) (23,862) (26,992)
Contingent deferred sales charges (note 2) ..... (4,557) (4,999) (7,990) (16,477)
Adjustments to maintain reserves ............... 6,785 9,440 710 (1,258)
--------------- --------------- --------------- ---------------
Net equity transactions .................... (1,689,324) 1,722,378 (5,402,118) (5,421,373)
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 3,892,174 6,589,495 1,253,473 (2,544,772)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 46,619,691 36,318,378 69,680,071 71,974,301
--------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 50,511,865 42,907,873 70,933,544 69,429,529
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
MFSWdGvt NSATMyMkt
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... -- -- 47,804 52,594
Mortality, expense and administration
charges (note 2) ............................. (50,731) (64,982) (12,355) (13,820)
---------------- --------------- --------------- ---------------
Net investment activity ...................... (50,731) (64,982) 35,449 38,774
---------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold .......... 1,808,023 3,039,644 971,122 135,741
Cost of mutual fund shares sold ................ (1,839,600) (3,614,437) (971,122) (135,741)
---------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... (31,577) (574,793) -- --
Change in unrealized gain (loss) on investments (178,092) 463,620 -- --
---------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... (209,669) (111,173) -- --
---------------- --------------- --------------- ---------------
Reinvested capital gains ....................... -- -- -- --
---------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (260,400) (176,155) 35,449 38,774
---------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ...... 419,267 165,958 66,316 (43,028)
Redemptions .................................... (1,242,568) (1,900,193) (230,261) (65,453)
Annuity benefits ............................... (3,826) (3,869) -- --
Annual contract maintenance charge (note 2) .... (4,151) (6,007) (1,584) (1,840)
Contingent deferred sales charges (note 2) ..... (1,476) (2,371) (405) (71)
Adjustments to maintain reserves ............... 473 654 (19) (15)
---------------- --------------- --------------- ---------------
Net equity transactions .................... (832,281) (1,745,828) (165,953) (110,407)
---------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (1,092,681) (1,921,983) (130,504) (71,633)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 8,565,606 11,006,516 2,010,640 2,135,525
---------------- --------------- --------------- ---------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 7,472,925 9,084,533 1,880,136 2,063,892
================ =============== =============== ===============
See accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 7
- --------------------------------------------------------------------------------
MFS VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
MFS Variable Account (the Account) was established by resolution of the
Board of Directors of Nationwide(R) Life Insurance Company (the
Company) on March 3, 1976. 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 Massachusetts Financial
Services. Presently, the contracts are not actively marketed.
(b) The Contracts
Prior to February 12, 1979, the contracts purchased provided for a
front-end sales charge and certain other fees. Beginning February 12,
1979, only contracts (Spectrum) without a front-end sales charge but
with a contingent deferred sales charge and certain other fees were
offered for purchase. See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
payout phase may invest in any of the following funds:
MFS Series Trust IV - MFS(R) Money Market Fund (MFSMyMkt)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
Massachusetts Investors Trust - Class A (MFSInvTr)
MFS(R) Bond Fund - Class A (MFSBdFd)
MFS(R) Emerging Growth Fund - Class A (MFSEmGro)
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
MFS(R) High Income Fund - Class A (MFSHiInc)
MFS(R) Research Fund - Class A (MFSRsrch)
MFS(R) Total Return Fund - Class A (MFSTotRe)
MFS(R) World Governments Fund - Class A (MFSWdGvt)
Nationwide Separate Account Trust - Money Market Fund
(NSATMyMkt)(managed for a fee by an affiliated investment
advisor)
At June 30, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at June 30, 1997. 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.
8
<PAGE> 8
(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 Internal Revenue Service issued Rev. Rul. 81-225 on September 25,
1981 and IR-82-19 on February 3, 1982. The effect of Rev. Rul. 81-225
was to treat non-tax qualified contract holders, who purchased
contracts or made purchase payments after December 31, 1980, as the
owners of the underlying mutual fund shares for Federal income tax
purposes. However, for 1981, IR-82-19 did provide limited relief from
the ruling. Therefore, the Company maintained a capital gain reserve
liability, for all realized and unrealized capital gains existing on or
before December 31, 1981.
During 1982 and most of 1983, the Company continued to maintain
contract values which reflected a capital gain reserve liability for
those contracts and contract values affected by Rev. Rul. 81-225. On
December 16, 1983, the Company adjusted the affected (81-225) contract
values in order to treat the respective contract owners as the owners
of the underlying shares for Federal income tax purposes, as intended
by the ruling. As a result of this adjustment, contract owners' equity
was restored with amounts previously deducted to maintain the capital
gain reserve liability.
Because of the aforementioned, the Company no longer provides for
income taxes within the Account. Presently, 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) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
year presentation.
Net purchase payments received on contracts issued before February 12, 1979
represent gross contributions by the contract owners less a charge of 7.75%
by the Company to cover sales expenses.The Company does not deduct a sales
charge from purchase payments made for contracts issued beginning February
12, 1979. However, if any part of the contract value of such contracts is
surrendered the Company will, with certain exceptions, deduct from the
owner's contract value a contingent deferred sales charge equal to 5% of
the lesser of the total of all purchase payments made within 96 months
prior to the date of the request for surrender, or the amount surrendered;
no sales charges are deducted on redemptions used to purchase units in the
fixed investment options of the Company.
The following contract charges are deducted by the Company on each contract
issued prior to February 12, 1979: (a) a contract issue charge of $15
assessed against the initial purchase payment and a $15 annual contract
maintenance charge assessed against each contract by surrendering units;
and (b) a charge for mortality and expense risk assessed through the daily
unit value calculation equal to an annual rate of 0.80% and 0.20%,
respectively. Contract charges on contracts issued beginning February 12,
1979 include: (a) an annual contract maintenance charge of $30 which is
satisfied by surrendering units; and (b) a charge for mortality and expense
risk assessed through the daily unit value calculation equal to an annual
rate of 0.80% and 0.50%, respectively.
9
<PAGE> 9
(3) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at June 30, 1997, for
each series, in both the accumulation and payout phases. Due to the nature
of money market funds, an 81-225 adjustment (See note 1(d)) was not
required for either the MFS Series Trust IV - MFS(R) Money Market Fund or
the Nationwide(R) Separate Account Trust - Money Market Fund.
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
-------- -----------
<S> <C> <C> <C>
Contracts in accumulation phase:
MFS Series Trust IV - MFS(R) Money Market Fund:
Non-tax qualified .............................. 4,057 $ 35.876712 $ 145,552
Tax qualified spectrum ......................... 1,275,799 30.549913 38,975,548
Non-tax qualified spectrum ..................... 609,806 30.571142 18,642,466
Massachusetts Investors Growth Stock Fund - Class A:
Non-tax qualified .............................. 850 118.915284 101,078
Tax qualified spectrum ......................... 290,847 125.657393 36,547,076
Non-tax qualified spectrum ..................... 83,968 106.626724 8,953,233
Non-tax qualified spectrum (81-225) ............ 2,181 116.156061 253,336
Massachusetts Investors Trust - Class A:
Tax qualified .................................. 16 148.973513 2,384
Non-tax qualified .............................. 289 140.576042 40,626
Tax qualified spectrum ......................... 334,543 119.375833 39,936,349
Non-tax qualified spectrum ..................... 99,850 107.108793 10,694,813
Non-tax qualified spectrum (81-225) ............ 2,105 113.792477 239,533
MFS(R) Bond Fund - Class A:
Non-tax qualified .............................. 595 54.069760 32,172
Tax qualified spectrum ......................... 474,655 46.303941 21,978,397
Non-tax qualified spectrum ..................... 154,320 46.266076 7,139,781
Non-tax qualified spectrum (81-225) ............ 1,271 46.447014 59,034
MFS(R) Emerging Growth Fund - Class A:
Tax qualified spectrum ......................... 387,572 38.437950 14,897,473
Non-tax qualified spectrum (81-225) ............ 675 38.437950 25,946
MFS(R) Growth Opportunities Fund - Class A:
Non-tax qualified .............................. 1,653 143.377934 237,004
Tax qualified spectrum ......................... 781,396 133.137083 104,032,784
Non-tax qualified spectrum ..................... 177,686 113.092355 20,094,928
Non-tax qualified spectrum (81-225) ............ 13,123 124.784689 1,637,549
MFS(R) High Income Fund - Class A:
Non-tax qualified .............................. 358 67.909160 24,311
Tax qualified spectrum ......................... 374,657 59.441961 22,270,347
Non-tax qualified spectrum ..................... 170,720 58.540173 9,993,978
Non-tax qualified spectrum (81-225) ............ 4,999 59.441961 297,150
</TABLE>
10
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
MFS(R) Research Fund - Class A:
Non-tax qualified .............................. 390 139.987597 54,595
Tax qualified spectrum ......................... 278,722 138.022157 38,469,812
Non-tax qualified spectrum ..................... 95,031 120.599510 11,460,692
Non-tax qualified spectrum (81-225) ............ 1,596 136.411080 217,712
MFS(R) Total Return Fund - Class A:
Tax qualified .................................. 131 99.835092 13,078
Tax qualified spectrum ......................... 622,338 91.379456 56,868,908
Non-tax qualified spectrum ..................... 154,120 88.452263 13,632,263
Non-tax qualified spectrum (81-225) ............ 1,470 90.490454 133,021
MFS(R) World Governments Fund - Class A:
Tax qualified spectrum ......................... 129,186 49.343065 6,374,433
Non-tax qualified spectrum ..................... 19,753 48.106298 950,244
Non-tax qualified spectrum (81-225) ............ 1,775 49.266361 87,448
Nationwide Separate Account Trust - Money Market Fund:
Tax qualified spectrum ......................... 50,221 23.211263 1,165,693
Non-tax qualified spectrum ..................... 30,760 23.226357 714,443
============ ============
Reserves for annuity contracts in payout phase:
Tax qualified .................................. 57,076
Non-tax qualified .............................. 65,008
Tax qualified spectrum ......................... 2,574,828
Non-tax qualified spectrum ..................... 1,115,477
Non-tax qualified spectrum (81-225) ............ 5,742
------------
$491,213,321
============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 11
<TABLE>
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY -----------------
HOME OFFICE: ONE NATIONWIDE PLAZA o COLUMBUS, OHIO 43215-2220 Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
-----------------
Nationwide(R) is a registered federal service mark of Nationwide Mutual Insurance Company
</TABLE>
