<PAGE> 1
MFS
VARIABLE
ACCOUNT
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1996
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
[NATIONWIDE LIFE INSURANCE COMPANY LOGO]
APO-719-V (12/96)
<PAGE> 2
[NATIONWIDE LIFE INSURANCE COMPANY LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
[GRAPHIC]
PRESIDENT'S MESSAGE
On behalf of Nationwide Life Insurance Company, we are pleased to bring you the
1996 annual report of the MFS Variable Account.
The U.S. economy is enjoying the rewards of a stable political system and a
globally competitive business sector. These good times will last, although not
all years will show the stellar performance of the last two years. 1997 may be
the year in which normalcy will return.
The economic expansion has lasted six years already, and all resources are more
or less fully employed. The job market in particular is showing some strains,
and wages are rising a bit faster than before. Also, the competitive pressures
from abroad are increasing due to a sharp rise in the exchange value of our
currency. Business will be hard pressed under those conditions to continue
showing above-average profit increases. For the economy as a whole, inflation
has hit the low point in this business cycle and will slowly but surely be a
more important variable for monetary policy.
In the last few years, and especially in 1996, our economy expanded faster than
the natural rate of growth. This cannot continue without creating bottlenecks
that in turn induce price increases. Either the economy will slow under its own
weight or the Federal Reserve will have to step in. Some indicators point to a
softening of business activity. But whether this is enough will be a close call.
Again, the long-term trend is very positive for the U.S., its business activity,
and its financial markets. However, 1997 might turn out to have some more
surprises than anticipated right now.
/s/ Joseph J. Gasper
--------------------
Joseph J. Gasper, President
3
<PAGE> 3
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MFS VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS:
Investments at market value:
<S> <C>
MFS Series Trust IV - MFS(R) Money Market Fund (MFSMyMkt)
59,614,178 shares (cost $59,614,178) ....................... $ 59,614,178
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
3,796,104 shares (cost $41,344,359) ........................ 37,885,116
Massachusetts Investors Trust - Class A (MFSInvTr)
2,695,746 shares (cost $33,220,819) ........................ 38,980,489
MFS(R) Bond Fund - Class A (MFSBdFd)
2,488,582 shares (cost $33,159,970) ........................ 32,923,937
MFS(R) Emerging Growth Fund - Class A (MFSEmGro)
495,823 shares (cost $11,353,009) .......................... 15,018,474
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
7,983,708 shares (cost $90,144,901) ........................ 103,548,687
MFS(R) High Income Fund - Class A (MFSHiInc)
6,338,632 shares (cost $32,642,867) ........................ 33,848,293
MFS(R) Research Fund - Class A (MFSRsrch)
2,516,471 shares (cost $35,420,324) ........................ 46,605,048
MFS(R) Total Return Fund - Class A (MFSTotRe)
4,709,336 shares (cost $61,243,523) ........................ 69,651,081
MFS(R) World Governments Fund - Class A (MFSWdGvt)
757,919 shares (cost $8,607,896) ........................... 8,564,486
Nationwide Separate Account Trust-Money Market Fund (NSATMyMkt)
2,010,734 shares (cost $2,010,734) ......................... 2,010,734
-------------
Total investments ....................................... 448,650,523
Accounts receivable ............................................. 16,754,754
------------
Total assets ........................................... 465,405,277
Accounts payable .................................................. 4,249
------------
Contract owners' equity (note 4) .................................. $465,401,028
============
</TABLE>
See accompanying notes to financial statements.
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4
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MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ----------- -----------
Investment activity:
<S> <C> <C> <C>
Reinvested capital gains and dividends $ 45,028,420 41,437,779 29,599,574
Mortality and expense charges (note 2) (6,079,619) (5,701,022) (5,853,289)
------------- ----------- -----------
Net investment activity 38,948,801 35,736,757 23,746,285
------------- ----------- -----------
Proceeds from mutual fund shares sold 117,272,138 103,288,834 115,051,876
Cost of mutual fund shares sold (107,685,553) (99,147,354) (112,843,920)
------------- ----------- -----------
Realized gain loss) on investments 9,586,585 4,141,480 2,207,956
Change in unrealized gain (loss) on investments 13,552,160 51,182,271 (41,633,519)
------------- ----------- -----------
Net gain (loss) on investments 23,138,745 55,323,751 (39,425,563)
------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 62,087,546 91,060,508 (15,679,278)
------------- ----------- -----------
Equity transactions:
Purchase payments received from contract owners 19,727,032 16,996,001 15,834,294
Redemptions (70,243,669) (69,066,775) (73,513,222)
Annuity benefits (569,003) (582,314) (569,906)
Annual contract maintenance charge (note 2) (365,726) (405,553) (459,826)
Contingent deferred sales charges (note 2) (157,482) (185,166) (201,021)
Adjustments to maintain reserves 160,437 42,627 (3,929)
------------- ----------- -----------
Net equity transactions (51,448,411) (53,201,180) (58,913,610)
------------- ----------- -----------
Net change in contract owners' equity 10,639,135 37,859,328 (74,592,888)
Contract owners' equity beginning of period 454,761,893 416,902,565 491,495,453
------------- ----------- -----------
Contract owners' equity end of period $ 465,401,028 454,761,893 416,902,565
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
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5
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MFS VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(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 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 December 31, 1996, 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 December 31, 1996. 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.
6
<PAGE> 6
(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 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
(2) EXPENSES
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.
7
<PAGE> 7
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented for each
series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality and expense risk fee discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
8
<PAGE> 8
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31,
1996, 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 Separate Account Trust - Money Market Fund.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
UNITS UNIT VALUE
--------- -----------
<S> <C> <C> <C>
Contracts in accumulation phase:
MFS Series Trust IV - MFS(R) Money Market Fund:
Non-tax qualified ..................................... 4,058 $ 35.222087 $ 142,931
Tax qualified spectrum ................................ 1,343,440 30.037656 40,353,789
Non-tax qualified spectrum ............................ 615,505 30.058530 18,501,176
Massachusetts Investors Growth Stock Fund - Class A:
Non-tax qualified ..................................... 498 94.658415 47,140
Tax qualified spectrum ................................ 297,134 100.175691 29,765,604
Non-tax qualified spectrum ............................ 86,801 85.004193 7,378,449
Non-tax qualified spectrum (81-225) ................... 5,470 92.601102 506,528
Massachusetts Investors Trust - Class A:
Tax qualified ......................................... 16 125.889283 2,014
Tax qualified spectrum ................................ 331,572 101.029680 33,498,613
Non-tax qualified spectrum ............................ 96,073 90.647891 8,708,815
Non-tax qualified spectrum (81-225) ................... 2,037 96.304396 196,172
MFS(R) Bond Fund - Class A:
Non-tax qualified ..................................... 3,321 52.397975 174,014
Tax qualified spectrum ................................ 509,516 44.939826 22,897,560
Non-tax qualified spectrum ............................ 208,403 44.903088 9,357,938
Non-tax qualified spectrum (81-225) ................... 1,597 45.078692 71,991
MFS(R) Emerging Growth Fund - Class A:
Tax qualified spectrum ................................ 437,204 34.264981 14,980,787
Non-tax qualified spectrum (81-225) ................... 675 34.264981 23,129
MFS(R) Growth Opportunities Fund - Class A:
Non-tax qualified ..................................... 2,724 124.926291 340,299
Tax qualified spectrum ................................ 822,246 116.177967 95,526,869
Non-tax qualified spectrum ............................ 182,479 98.686554 18,008,224
Non-tax qualified spectrum (81-225) ................... 14,732 108.889502 1,604,160
MFS(R) High Income Fund - Class A:
Non-tax qualified ..................................... 358 64.483775 23,085
Tax qualified spectrum ................................ 408,255 56.528677 23,078,115
Non-tax qualified spectrum ............................ 176,997 55.671087 9,853,615
Non-tax qualified spectrum (81-225) ................... 6,379 56.528677 360,596
MFS(R) Research Fund - Class A:
Non-tax qualified ..................................... 110 124.427653 13,687
Tax qualified spectrum ................................ 283,320 122.865333 34,810,206
Non-tax qualified spectrum ............................ 105,263 107.355935 11,300,608
Non-tax qualified spectrum (81-225) ................... 1,676 121.431177 203,519
MFS(R) Total Return Fund - Class A:
Tax qualified ......................................... 131 90.602325 11,869
Tax qualified spectrum ................................ 671,118 83.053566 55,738,743
Non-tax qualified spectrum ............................ 167,776 80.393080 13,488,029
Non-tax qualified spectrum (81-225) ................... 1,979 82.245565 162,764
MFS(R) World Governments Fund - Class A:
Tax qualified spectrum ................................ 143,438 50.880072 7,298,136
Non-tax qualified spectrum ............................ 22,367 49.604787 1,109,510
Non-tax qualified spectrum (81-225) ................... 1,811 50.800980 92,001
Nationwide Separate Account Trust - Money Market Fund:
Tax qualified spectrum ................................ 55,730 22.783414 1,269,720
Non-tax qualified spectrum ............................ 32,499 22.798231 740,920
====== =========
Reserves for annuity contracts in payout phase:
Tax qualified 52,535
Non-tax qualified 70,050
Tax qualified spectrum 2,541,149
Non-tax qualified spectrum 1,090,226
Non-tax qualified spectrum (81-225) 5,743
-------------
$ 465,401,028
=============
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 9
- --------------------------------------------------------------------------------
SCHEDULE I
MFS VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MFSINVTR MFSBDFD MFSTOTRE
-------- ------- --------
1996***
<S> <C> <C> <C>
Beginning unit value - Jan. 1 $101.007177 ** 79.840336
- ----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 12.151296 9.492656
- ----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 13.860085 2.119334
- ----------------------------------------------------------------------------------------------------------------------
Contract charges (1.129275) (.850001)
- ----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $125.889283 90.602325
- ----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 25% 13%
======================================================================================================================
1995***
Beginning unit value - Jan. 1 $ 73.217470 ** 63.581031
- ----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 9.389953 6.796396
- ----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 19.267126 10.187101
- ----------------------------------------------------------------------------------------------------------------------
Contract charges (.867372) (.724192)
- ----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $101.007177 79.840336
- ----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 38% 26%
======================================================================================================================
1994***
Beginning unit value - Jan. 1 $ 74.716077 42.399834 65.964662
- ----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 8.586372 2.862666 2.763915
- ----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (9.338645) (4.752106) (4.502426)
- ----------------------------------------------------------------------------------------------------------------------
Contract charges (.746334) (.407003) (.645120)
- ----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ 73.217470 40.103391 63.581031
- ----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (2)% (5)% (4)%
======================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** This investment option was not being utilized.
*** No other investment options were being utilized.
</TABLE>
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10
<PAGE> 10
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MFSMYMKT MFSGRSTK MFSBDFD MFSGROPP MFSHIINC MFSRSRCH MFSTOTRE
-------- -------- ------- -------- -------- -------- --------
1996***
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $33.966291 77.839871 50.922705 103.553065 57.870879 100.977005 **
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.605064 22.453848 3.611265 13.480974 5.309675 6.050177
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (4.761510) (1.629887) 9.045917 1.918782 18.541253
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.349268) (.873794) (.506108) (1.153665) (.615561) (1.140782)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $35.222087 94.658415 52.397975 124.926291 64.483775 124.427653
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% 22% 3% 21% 11% 23%
================================================================================================================================
1995***
Beginning unit value - Jan. 1 $32.595660 61.261465 42.342529 77.773322 49.895862 73.593263 62.479885
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.704937 10.252961 3.454391 13.011382 4.720108 6.201200 6.678704
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 7.033136 5.596005 13.690716 3.805299 22.049861 10.010672
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.334306) (.707691) (.470220) (.922355) (.550390) (.867319) (.711663)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $33.966291 77.839871 50.922705 103.553065 57.870879 100.977005 78.457598
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% 27% 20% 33% 16% 37% 26%
================================================================================================================================
1994***
Beginning unit value - Jan. 1 $31.804010 66.343035 44.767184 81.961605 51.758789 74.327082 64.822235
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.114091 6.245985 3.022499 6.380267 4.381074 7.237361 2.716055
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (10.708702) (5.017439) (9.773345) (5.737464) (7.223674) (4.424461)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.322441) (.618853) (.429715) (.795205) (.506537) (.747506) (.633944)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $32.595660 61.261465 42.342529 77.773322 49.895862 73.593263 62.479885
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% (8)% (5)% (5)% (4)% (1)% (4)%
================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** This investment option was not being utilized.
*** No other investment options were being utilized.
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE> 11
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MFSMYMKT MFSGRSTK MFSINVTR MFSBDFD MFSEMGRO MFSGROPP
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $29.055232 82.628565 81.308640 43.808005 30.247061 96.595726
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.370810 23.764772 9.754053 3.102317 .411401 12.538074
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (5.011899) 11.148678 (1.404493) 4.043215 8.443093
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.388386) (1.205747) (1.181691) (.566003) (.436696) (1.398926)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 $30.037656 100.175691 101.029680 44.939826 34.264981 116.177967
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 3% 21% 24% 3% 13% 20%
=================================================================================================================
1995
Beginning unit value - Jan. 1 $27.967294 65.227303 59.116939 36.536936 21.706658 72.767772
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.460813 10.883902 7.560531 2.976527 .000000 12.137397
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 7.496845 15.541527 4.821993 8.878016 12.812372
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.372875) (.979485) (.910357) (.527451) (.337613) (1.121815)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 $29.055232 82.628565 81.308640 43.808005 30.247061 96.595726
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% 27% 38% 20% 39% 33%
=================================================================================================================
1994
Beginning unit value - Jan. 1 $27.370768 70.852048 60.509797 38.746280 20.977490 76.918993
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .957264 6.650437 6.934388 2.612018 .436556 5.969728
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (11.415978) (7.541473) (4.337835) .566606 (9.150770)
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.360738) (.859204) (.785773) (.483527) (.273994) (.970179)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 $27.967294 65.227303 59.116939 36.536936 21.706658 72.767772
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% (8)% (2)% (6)% 3% (5)%
=================================================================================================================
MFSHIINC MFSRSRCH MFSTOTRE MFSWDGVT NSATMYMKT
-------- -------- -------- -------- ---------
1996
Beginning unit value - Jan. 1 50.886631 100.013750 73.411912 48.914346 21.961256
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.662173 5.974756 8.708448 1.375200 1.116295
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.683533 18.345600 1.949204 1.232657 .000000
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.703660) (1.468773) (1.015998) (.642131) (.294137)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 56.528677 122.865333 83.053566 50.880072 22.783414
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 11% 23% 13% 4% 4%
=================================================================================================================
1995
Beginning unit value - Jan. 1 44.007083 73.111959 58.638949 42.911877 21.058716
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.157163 6.142147 6.254848 6.115071 1.183897
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.353463 21.879706 9.386344 .495697 .000000
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.631078) (1.120062) (.868229) (.608299) (.281357)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 50.886631 100.013750 73.411912 48.914346 21.961256
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 37% 25% 14% 4%
=================================================================================================================
1994
Beginning unit value - Jan. 1 45.788518 74.064821 61.021714 46.532702 20.538004
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.870377 7.195425 2.553354 2.288468 .791945
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (5.069261) (7.179946) (4.160311) (5.345421) .000000
- -----------------------------------------------------------------------------------------------------------------
Contract charges (.582551) (.968341) (.775808) (.563872) (.271233)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value -Dec. 31 44.007083 73.111959 58.638949 42.911877 21.058716
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (1)% (4)% (8)% 3%
=================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE> 12
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MFSMYMKT MFSGRSTK MFSINVTR MFSBDFD MFSGROPP
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan 1 $29.075421 70.114570 72.953374 43.772192 82.052560
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.371771 20.165623 8.751729 3.099782 10.650379
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (4.252868) 10.003041 (1.403340) 7.171939
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.388662) (1.023132) (1.060253) (.565546) (1.188324)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $30.058530 85.004193 90.647891 44.903088 98.686554
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 3% 21% 24% 3% 20%
==============================================================================================================================
1995
Beginning unit value - Jan 1 $27.986728 55.348697 53.042089 36.507070 61.812074
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.461834 9.235549 6.783611 2.974097 10.310027
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 6.361465 13.944489 4.818039 10.883379
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.373141) (.831141) (.816815) (.527014) (.952920)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $29.075421 70.114570 72.953374 43.772192 82.052560
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% 27% 38% 20% 33%
==============================================================================================================================
1994
Beginning unit value - Jan 1 $27.389788 60.121583 54.291825 38.714601 65.338300
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .957927 5.643236 6.221811 2.609884 5.070943
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (9.687046) (6.766521) (4.334289) (7.773057)
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.360987) (.729076) (.705026) (.483126) (.824112)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.986728 55.348697 53.042089 36.507070 61.812074
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% (8)% (2)% (6)% (5)%
==============================================================================================================================
MFSHIINC MFSRSRCH MFSTOTRE MFSWDGVT NSATMYMKT
-------- -------- -------- -------- ---------
1996
Beginning unit value - Jan 1 50.114634 87.388917 71.060281 47.688325 21.975540
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.591407 5.220557 8.429455 1.340731 1.117024
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.658007 16.029828 1.886778 1.201751 .000000
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.692961) (1.283367) (.983434) (.626020) (.294333)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 55.671087 107.355935 80.393080 49.604787 22.798231
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 11% 23% 13% 4% 4%
==============================================================================================================================
1995
Beginning unit value - Jan 1 43.339456 63.882963 56.760546 41.836304 21.072414
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.094062 5.366818 6.054479 5.961799 1.184666
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.302603 19.117811 9.085680 .483276 .000000
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.621487) (.978675) (.840424) (.593054) (.281540)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 50.114634 87.388917 71.060281 47.688325 21.975540
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 37% 25% 14% 4%
==============================================================================================================================
1994
Beginning unit value - Jan 1 45.093866 64.715547 59.066983 45.366368 20.551361
- ------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.811643 6.287139 2.471571 2.231109 .792462
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (4.992348) (6.273621) (4.027043) (5.211428) .000000
- ------------------------------------------------------------------------------------------------------------------------------
Contract charges (.573705) (.846102) (.750965) (.549745) (.271409)
- ------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 43.339456 63.882963 56.760546 41.836304 21.072414
- ------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (1)% (4)% (8)% 3%
==============================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 13
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM (81-225)
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MFSGRSTK MFSINVTR MFSBDFD MFSEMGRO MFSGROPP MFSHIINC
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $76.380777 77.505736 43.943375 30.247061 90.535764 50.886631
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 21.967845 9.297843 3.111902 .411401 11.751494 4.662173
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (4.632952) 10.627246 (1.408823) 4.043215 7.913421 1.683533
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (1.114568) (1.126429) (.567762) (.436696) (1.311177) (.703660)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $92.601102 96.304396 45.078692 34.264981 108.889502 56.528677
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 21% 24% 3% 13% 20% 11%
=======================================================================================================================
1995
Beginning unit value - Jan. 1 $60.295273 56.351973 36.649839 21.706658 68.202665 44.007083
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 10.060939 7.206917 2.985727 .000000 11.375954 4.157163
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 6.929991 14.814629 4.836885 8.878016 12.008582 3.353463
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.905426) (.867783) (.529076) (.337613) (1.051437) (.631078)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $76.380777 77.505736 43.943375 30.247061 90.535764 50.886631
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 27% 38% 20% 39% 33% 16%
=======================================================================================================================
1994
Beginning unit value - Jan. 1 $65.494712 57.679687 38.865999 20.977490 72.093454 45.788518
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends . 6.147578 6.610058 2.620091 .436556 5.595215 3.870377
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (10.552777) (7.188748) (4.351232) .566606 (8.576687) (5.069261)
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.794240) (.749024) (.485019) (.273994) (.909317) (.582551)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $60.295273 56.351973 36.649839 21.706658 68.202665 44.007083
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (8)% (2)% (6)% 3% (5)% (4)%
=======================================================================================================================
MFSRSRCH MFSTOTRE MFSWDGVT
-------- -------- --------
1996
Beginning unit value - Jan. 1 98.846334 72.697711 48.838310
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends 5.905015 8.623693 1.373062
- --------------------------------------------------------------------------------
Unrealized gain (loss) 18.131463 1.930268 1.230738
- --------------------------------------------------------------------------------
Contract charges (1.451635) (1.006107) (.641130)
- --------------------------------------------------------------------------------
Ending unit value - Dec. 31 121.431177 82.245565 50.800980
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 23% 13% 4%
================================================================================
1995
Beginning unit value - Jan. 1 72.258548 58.068470 42.845163
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends 6.070452 6.194025 6.105566
- --------------------------------------------------------------------------------
Unrealized gain (loss) 21.624321 9.294998 .494930
- --------------------------------------------------------------------------------
Contract charges (1.106987) (.859782) (.607349)
- --------------------------------------------------------------------------------
Ending unit value - Dec. 31 98.846334 72.697711 48.838310
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 37% 25% 14%
================================================================================
1994
Beginning unit value - Jan. 1 73.200301 60.428053 46.460353
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends 7.111436 2.528526 2.284911
- --------------------------------------------------------------------------------
Unrealized gain (loss) (7.096145) (4.119853) (5.337099)
- --------------------------------------------------------------------------------
Contract charges (.957044) (.768256) (.563002)
- --------------------------------------------------------------------------------
Ending unit value - Dec. 31 72.258548 58.068470 42.845163
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (1)% (4)% (8)%
================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
See note 3.
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 14
- --------------------------------------------------------------------------------
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of MFS Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of MFS Variable Account as of December 31, 1996, and the
related statements of operations and changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended. These financial statements and schedules of changes in unit
value are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules of changes in
unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value 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 include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of the
underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of MFS Variable Account as of December 31, 1996, and the results of its
operations and its changes in contract owners' equity and the schedules of
changes in unit value for each of the years in the three year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
- --------------------------------------------------------------------------------
15
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY Bulk Rate
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual Insurance Company
</TABLE>
