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[NATIONWIDE MULTI-FLEX LOGO]
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ANNUAL REPORT
DECEMBER 31, 1995
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NATIONWIDE(R)
MULTI-FLEX [NATIONWIDE INSURANCE LOGO]
VARIABLE ACCOUNT
APO-724-T (12/95)
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[NATIONWIDE LIFE INSURANCE COMPANY LETTERHEAD]
[PHOTO OF PETER F. FRENZER, PRESIDENT]
PRESIDENT'S MESSAGE
Nationwide Life Insurance Company is pleased to bring you the 1995 annual report
of the Nationwide Multi-Flex Variable Account.
Both equity and fixed income investments turned in a stellar performance during
1995. The major market indices ended the year fully one-third or more higher
than their levels at the beginning of the year. These results equate directly to
the returns enjoyed by our variable annuity participants and contract owners.
Low interest rates and modest inflation should provide a continued favorable
environment for stocks and fixed income investments during 1996. Slowing levels
of economic activity and uncertainty about corporate profits may, however,
dampen a repeat of the strong 1995 market performance. The diverse offering of
investment options within your contract should enable you to take advantage of
changing market conditions.
The year 1995 was a record-setting sales year for our variable investment
products. For this we thank you, our valued customer, for your confidence in the
Nationwide Insurance Enterprise and in our products. Please do not hesitate to
let us know how we can better serve your financial planning and retirement
needs.
/s/ PETER F. FRENZER
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Peter F. Frenzer, President
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CONTENTS
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HOW TO READ THE ANNUAL REPORT............................................... 4
Explanation on how to read and understand
the various financial reports
A FEW WORDS ABOUT OUR FUNDS................................................. 6
Fund Objectives and Narratives
written by the fund managers*
FUND PERFORMANCES........................................................... 20
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY................ 22
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY.................................................. 24
NOTES TO FINANCIAL STATEMENTS............................................... 25
SCHEDULES OF CHANGES IN UNIT VALUE.......................................... 28
INDEPENDENT AUDITORS' REPORT................................................ 30
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* The discussions refer to a stock market index. The Standard & Poor's 500 Index
(S&P 500) is an unmanaged index of 500 U.S. common stocks and the historical
performance assumes the reinvestment of dividends.
The performance figures quoted by the fund managers do not include the annual
mortality, expense and administration charges of the annuity contract. The
Fund's portfolio is subject to change.
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HOW TO READ THE ANNUAL REPORT
This Annual Report is sent to all customers who own one of the following
contracts:
- Nationwide Multi-Flex Variable Annuity
- NEA Valuebuilder Annuity
- Nationwide Variable Annuity -
Citibank, New York
All or some of the funds in the Nationwide Multi-Flex Variable Account (the
Account) are available through these contracts. The Account is a separate
account trust which offers investment options in fifteen mutual funds from seven
mutual fund houses. An explanation of the funds and their objectives can be
found on pages 6 through 18.
The Annual Report has three major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, found on page 22, lists all the funds in the Account, the number
of shares owned, the amount paid for the shares (i.e., cost) and their market
value on December 31, 1995. The funds are presented in alphabetical order by
investment company. The market value of the assets change as the underlying
mutual fund shares change in value. As contract owners make exchanges between
the funds, the number of shares in each fund increases and decreases. When money
is deposited (withdrawn) by contract owners, shares of the mutual funds are
bought (sold) by the Account. The total market value of the funds is equal to
the Total investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares added to the contract owners' accounts, but not yet added to Total
investments. Total investments plus Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 23.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 24, show the activity in the Account from
January 1 to December 31, 1995, 1994 and 1993.
The Investment activity section shows the changes in unrealized gain or loss of
the mutual funds in the Account, realized gain or loss as shares of the funds
are bought and sold, and dividends and capital gains earnings from the
underlying mutual funds.
The Equity transactions section illustrates the purchase payments received by
the Account as new contracts are sold, existing contract owners deposit
additional funds, money is withdrawn, contracts are canceled and annuity
benefits are paid.
Expenses are the charges associated with the contract. Note 2 on page 26
outlines these charges.
Net change in contract owners' equity equals Investment activity plus Equity
transactions minus Expenses.
The Contract owners' equity at the beginning of the period plus the Net change
in Contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
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SCHEDULES OF CHANGES IN UNIT VALUE
As a contract owner, you invest in the mutual funds offered in your annuity
contract. However, you do not buy shares of the mutual fund. Instead, the
Account buys shares of the fund and you in turn purchase units of the Account.
Except for the units surrendered for the annual contract maintenance charge, the
number of units you own will not change unless you contribute to or withdraw
money from your account. The value of your contract can change based on the
value of the units you own. For example, if you purchase 100 units at $10 per
unit, the value of your contract is $1,000. If the value of the units increases
to $12 per unit, your contract value increases to $1,200. Therefore, to
determine the value of your account, multiply the number of units of each fund
you own by the fund's unit value.
The Schedules of Changes in Unit Value show you the unit value at the beginning
of the period and at the end of the period. The percentage increase (decrease)
in unit value shows how it changed in value. This is computed by subtracting the
beginning unit value from the ending unit value and dividing the difference by
the beginning unit value. This can be used as a measure of the performance of
the funds over the three annual periods reported.
As you review the following pages of the Annual Report, the Notes to Financial
Statements beginning on page 25 will also help explain and clarify the various
statements and schedules.
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A FEW WORDS ABOUT OUR FUNDS
[DREYFUS LOGO]
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
OBJECTIVE - To provide capital growth by investing in stocks that enhance the
quality of life in America.
NARRATIVE BY DREYFUS CORPORATION
The Dreyfus Socially Responsible Growth Fund, Inc. performed nicely in 1995. The
Fund's stellar results make the Dreyfus Socially Responsible Growth Fund, Inc.
one of the top-performing socially-responsible equity funds. The Fund's returns
also compare quite favorably with the Lipper universe of equity mutual funds
putting it easily in the top of the second quartile of growth funds and in the
second quartile of all equity funds. In our shareholder letter dated June, 1995
we stated our high level of confidence in achieving a superior level of returns
and performance. We have begun to achieve that. As we look to 1996, we remain
confident that the Portfolio is positioned to continue this level of solid
performance.
In terms of the economic sectors of the Fund, we made several changes in the
weightings. The primary areas of focus for the Fund have been Consumer Staples,
Technology, and Financials. During the last six months we have increased the
weightings in Technology and Financials, maintained the exposure to the Consumer
Staples, while reducing the weightings in the Industrial sector. These thematic
changes are indicative of our overall view of what is driving the current
economic environment. The shift in Technology weight from 19% to 27% represents
our belief that this traditional growth sector is experiencing a secular
improvement in demand driven by global competition and productivity growth. We
moved the Financials from 11% to 18% believing that the Fed would continue to
lower interest rates and that our positions would continue to benefit from the
consolidation trend in the industry. We reduced our weighting in the Industrial
stocks due to continued concerns over the strength in the economy as well as
valuation, both of which indicated that better opportunities were elsewhere.
Consequently, we increased the average growth rate of securities in the
portfolio by focusing on more traditional growth sectors of the economy.
Year-to-date there are many individual securities that have contributed nicely
to the positive performance trends of the Fund. In the Consumer Cyclical sector,
Regal Cinemas, Capital Cities ABC, Walt Disney, Nike, and Phillips Electronics
have had superior performance. These names represent secular growth stocks that
will grow regardless of the economic environment because of globally-oriented,
diversified operations. Among Consumer Staple stocks in the Portfolio that have
contributed to performance, Coca-Cola, Cordis, Amgen, Medtronic, Becton
Dickinson, Bristol Myers and Merck are a few standouts. The food, beverage and
household products companies have benefited from more positive investor
sentiment toward their long term, globally-driven growth rates. The health care
stocks benefited from an improved outlook for their operations due to the rising
optimism for new drug approvals and investor confidence in the consistency of
their growth.
Stock selection in the Financial area contributed mightily to the Fund's
positive results as did a more benign interest rate outlook. Advanta, a credit
card company, and banks such as Citicorp, Bank of New York, Baybanks and
Midlantic, and specialty financial services companies such as Green Tree
Financial, a provider of mobile home financing, and Federal National Mortgage
Corp. performed beautifully for the majority of the fiscal year. Additionally,
insurers American International Group and Allstate rose on expectations of lower
interest rates and possible industry consolidation.
Our focus in the Technology sector was in stocks of companies with fairly
established market positions, superior technology, and outstanding management
teams. Individual issues such as 3Com, Applied Materials, Hewlett Packard,
Linear Technology, and SunMicrosystems, were all stellar performers. Each of
these companies stand to benefit not just from demand for a single product, but
a broad, diversified product offering with multiple down-stream beneficiaries.
These qualities lower the risk profile of the Fund's technology weighting
relative to the typical technology stock and lowers the general level of
volatility in that sector.
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SOCIALLY RESPONSIBLE GROWTH FUND, INC. (CONT'D)
Overall, from a stock selection standpoint the Fund has benefited from the
rising tide of takeovers that has been prevalent this year. Companies are under
pressure to grow revenues in a very competitive environment and are therefore
buying other firms to broaden and deepen their product offerings. Several Fund
holdings were taken over this year: Cordis, a medical technology firm; Baybank,
a large regional banking firm; Capital Cities ABC, broadcasting company, and
Scott Paper, paper manufacturer. There are several other names in the Portfolio
that we believe will benefit from this theme over the coming years.
Going forward we feel that the Federal Reserve's hold on the market will
persist, however, this time we expect that the Fed's action will benefit stocks
because rates will actually be reduced rather than raised, as the economy shows
signs of slowing. The Dreyfus Socially Responsible Growth Fund, Inc. is well
positioned to benefit from such a trend. We are confident that the Fund is
positioned to achieve performance superior to funds that do not have our
socially-responsible charter. Now that the transition of fiscal 1995 is over, we
are getting down to the business of providing superior returns to our
shareholders while honoring your socially-responsible investment objectives. We
are confident in the outlook for the Fund and appreciative of the demonstrated
confidence of our shareholders. We take your socially-responsible directives
seriously as we endeavor to provide the maximum return on and return of
shareholder capital.
DREYFUS STOCK INDEX FUND++
OBJECTIVE - To provide investment results that correspond to the price and yield
performance of the S&P 500.+
NARRATIVE BY DREYFUS CORPORATION
The objective of the Stock Index Fund is to provide investment results that
correspond to the price and yield performance of publicly traded common
stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Price Index, better known as the S&P 500.
The manager generally selects stocks for the Fund's portfolio in the order of
their weightings in the S&P 500, beginning with the heaviest weighted stocks.
With respect to the Fund's assets invested in the stocks in the S&P 500, the
percentage of such assets invested in each stock is approximately the same as
the percentage it represents in the S&P 500.
The Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 0.95, without taking into account
expenses. The Fund's ability to correlate its performance with the S&P 500 may
be affected by, among other things, changes in securities markets, the manner in
which the S&P 500 is calculated by Standard & Poor's Corporation, the timing of
purchases and redemptions, the size of the Fund's portfolio, and the size of
cash flow into and out of the Fund. There can be no assurance that the Fund's
investment objective will be achieved and an investment in the Fund involves
risks similar to those of investing in common stocks.
DREYFUS VARIABLE INVESTMENT FUND - QUALITY BOND PORTFOLIO
OBJECTIVE - Seeks to provide the maximum current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
(Not offered in Nationwide Multi-Flex Variable Annuity and Nationwide Variable
Annuity - Citibank, New York)
NARRATIVE BY DREYFUS CORPORATION
We are pleased to provide you with this report on the Dreyfus Variable
Investment Fund: Quality Bond Portfolio.
Additional evidence that economic activity remained sluggish and that inflation
continued to be under control moved the Federal Reserve to further ease the
Federal Funds rate in December. (The Federal Funds rate is the rate at which the
nation's banks borrow money from each other and all other short-term rates key
off it.) This was the second reduction for this important short-term rate in
1995, the first occurring in July. The latest 25 basis point
- ---------------
+ "Standard & Poor's 500", "S&P 500(R)" are trademarks of the Standard & Poor's
Corporation and have been licensed for use. The fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation.
++ Formerly the Dreyfus Life and Annuity Index Fund.
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QUALITY BOND PORTFOLIO (CONT'D)
reduction in December put the rate at 5.50%. Major incentives for this
additional reduction were the inflation report in November - the increase in the
Consumer Price Index was flat for the first time in 4 1/2 years - and the
generally slow rate of economic growth. As it did in July, the Federal Reserve
left unchanged the discount rate - the rate at which the Federal Reserve lends
to member banks. The discount rate remained at 5.25% throughout 1995.
Signs of economic slowdown increased during the latter half of the year.
Weakening retail sales and very modest industrial production lent credence to
fears about the possibility of recession. Consumer spending was inhibited last
year by the slow rate of new job creation, sluggish growth in wages and
salaries, and the continued trend of corporate cost-related layoffs. The
lethargic pace of consumer spending last year culminated in one of the worst
holiday sales periods since the business slump in 1990-1991, despite steep price
markdowns by retailers.
Industrial production climbed modestly during the year. By November, the
nation's factories operated at only 83.1% of capacity, down for the third
consecutive month. This was a reflection of weakening demand and further
evidence of the diminishing pressure to raise prices. Furthermore, inventories
built up by year-end, another sign of slackening demand.
The political stalemate in Washington over the balanced budget adds additional
uncertainty to the economy; ultimately an accord will be reached and fiscal
policy will likely be a restraining force on the economy. As we go forward
without a budget agreement, reductions in annually appropriated spending will
tend to retard the economy. With an agreement, the combination of cuts in
appropriations and other spending reductions should have the same effect.
There are strong indications that inflation is under control. Until mid-year
1995, fear of inflation was the overriding concern of the Federal Reserve. Now,
the focus seems to have shifted to actions designed to avoid recession. In an
election year, few things are less desirable for political incumbents than
recession.
During the course of the year the Fund's average duration was between 5 3/4
years to 6 years. Among funds of this type these durations were somewhat longer
than the average fund. As a result of our maintaining these longer durations our
Fund was ranked in the top 1/3 of all competing funds by Lipper for the year and
number one for the last three years. We have eliminated holdings of USF&G Corp,
Rite Aid Corp and Heller Financial. We had added Commercial Credit, Dresdner
Banks, Emerson Electric, and General Motors Acceptance Corp. to the Portfolio.
These changes occurred as a result of our attempt at increasing the quality of
the Portfolio. The Fund has received a four star overall rating from Morningstar
Inc.
DREYFUS VARIABLE INVESTMENT FUND - SMALL CAP PORTFOLIO
OBJECTIVE - To maximize capital appreciation by investing in common stocks of
emerging smaller-sized companies.
(Not offered in Nationwide Multi-Flex Variable Annuity and Nationwide Variable
Annuity - Citibank, New York)
NARRATIVE BY DREYFUS CORPORATION
The Fund's average annual total returns were 29.38% and 60.13% for the one-year
and five-year periods ended December 31, 1995. On the basis of this record, the
Portfolio was awarded Morningstar's Five Star Overall ranking of annuity
portfolios in the equity category.
1995 can only be characterized as a terrific year in the equity markets. Small
capitalization stocks, which are of course the feature of the Small Cap
Portfolio, had dramatic returns as well. It should not be surprising, however,
that in this environment, the small company universe represented by the Russell
2000 Index, underperformed the more widely followed S&P 500. This represented
the second year in a row of underperformance for small stocks. The fundamentals
of smaller companies are sound in the US; however, investors in a hurry to
deploy large sums of money quickly in a bull market, are using larger
capitalization stocks as their investment vehicles. These companies are
generally the large US-based multinationals that benefit from the weakened
dollar. The valuation gap is intriguingly wide between the firms in which we
like to invest
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SMALL CAP PORTFOLIO (CONT'D)
and the so-called "nifty-fifty". This valuation gap has produced a fertile
climate in which to seek out relative and real values among small caps.
Your Fund participates in the global investment theme by seeking out small
companies with large foreign sales and whose products hold a dominant worldwide
position. In this vein, we continue to hold OM Group, a cobalt refiner and
metallurgist and Bush Boake Allen, a multinational specialized flavors and
fragrances company. We have accumulated positions in Keystone International, a
manufacturer of valves; Stewart & Stevenson, a packager of industrial gas
turbine systems, Titan Wheel, a producer of agriculture equipment wheels, and
Cambrex, which sells bulk actives to the pharmaceutical industry worldwide. With
an eye towards global markets, a major theme continues to be commercial
aerospace, where the suppliers to the largest US export company, Boeing, are
small cap firms. The Fund continues to own Rohr and Precision Castparts, and has
recently added Thiokol and Crane.
Capital good stocks have outperformed consumer stocks for the past two years.
Your Fund has benefited from this development. The low value of the US dollar
coupled with increases in American productivity, should extend this trend.
Although we continue to underweight the consumer sector, there are some notable
exceptions. We have substantial positions in Tiffany & Co., Tootsie Roll,
Canandaigua Wine CL. A, and Meredith Corp., which is a less recognized but
powerful publisher and broadcaster. We have high confidence in the fundamentals
and managements of these firms.
As was widely reported, the technology sector propelled the market for the first
three quarters of 1995. You may remember in our last shareholder letter that we
indicated if this sector continued its unsustainable advance, that we would
reduce our weighting. We did just that. The remaining technology holdings, in
our opinion, represent niche companies at what we believe to be bargain prices.
These include: Security Dynamics Technology, a maker of security identification
cards for remote access; Aspect Telecommunications, a producer of call
processing equipment; and, Auspex Systems, a manufacturer of network file
servers for the moving and storing of data. We deployed the proceeds from our
technology sales into the healthcare industry. We view healthcare as exhibiting
many of the same exciting growth characteristics as technology stocks, but with
more compelling valuations. The two largest holdings in the Fund are Mentor
Corp., a plastic surgery products company, and Guidant Corp., a manufacturer of
cardiology equipment.
As we peer into 1996, we want to assure you that we will only entrust your funds
with stocks of companies we believe in and managements we trust.
[FIDELITY INVESTMENTS LOGO]
VARIABLE INSURANCE PRODUCTS FUND
EQUITY-INCOME PORTFOLIO
OBJECTIVE - To seek reasonable income by investing primarily in income-producing
equity securities.
(Not offered in Nationwide Multi-Flex Variable Annuity)
AN INTERVIEW WITH BETTINA DOULTON, PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM, BETTINA?
A. Compared to its peers, the Fund did very well over the past 12 months.
However, it slightly trailed the performance of the Standard & Poor's Composite
Index for the 12-month period. The index had a total return of 37.58% for the 12
months ended December 31, 1995. The stock market rally in 1995 was narrow - led
by the technology and finance sectors, as well as large-cap and blue-chip stocks
- - and many funds did not beat the performance of the index during the past 12
months.
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EQUITY-INCOME PORTFOLIO (CONT'D)
Q. WHAT HELPED THE FUND'S PERFORMANCE?
A. The Fund's performance came from a number of sectors, including finance and
telephone utilities, as well as from some of the larger holdings, including the
Fund's largest investment, Philip Morris. This company's business was propelled
by gains in market share for its Marlboro brand domestically, and by increased
volumes and profits in its international tobacco business.
Q. LET'S TAKE A LOOK AT YOUR INVESTMENTS IN THE FINANCE SECTOR. WHICH STOCKS
HAVE TURNED OUT WELL?
A. The Fund's finance investments are fairly diverse. I pick the stocks for the
Fund one-by-one, but many of the top performers over the past 12 months came
from this sector. Among them, Citicorp benefited from growth in its emerging
market credit card business. Fannie Mae - the Federal National Mortgage
Association - was helped by improved business conditions, a strong supply of
mortgages and widening spreads, such that profit growth was solid. And American
Express, having restructured in order to reduce costs, posted strong and
consistent earnings growth from improved marketing of its existing and new
credit card products. Beyond that, some of the Fund's insurance stocks - GenRe,
American International Group, Aetna and CIGNA - contributed well to the Fund's
return.
Q. HOW ABOUT TELEPHONE UTILITIES?
A. I've owned several of the regional Bell operating companies, such as
Ameritech, BellSouth, Bell Atlantic, NYNEX and SBC Communications. The
regulatory environment is improving on a state-by-state basis, allowing these
companies to focus more on profitability and competitiveness. They've also been
able to improve revenues by offering value-added services, such as call waiting
and caller identification, cellular services, and additional access lines for
computer modem use.
Q. WHICH STOCKS DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED?
A. A couple of areas were disappointing. First, Wal-Mart struggled as it went
through a major transition. It was upgrading and expanding its older most
profitable stores, converting them into so-called super centers - general
merchandise stores with grocery stores attached. The negative impact on the
company's profits associated with this process - as well as the difficult retail
environment - was worse and more prolonged than anticipated. Second, despite
better managing their account bases and internal operations, WMX Technologies
and Browning-Ferris Industries - broadly based pollution control companies -
were hurt by the weakening economy, such that the pace of revenue and profit
growth was not as strong as expected.
Q. GENERAL ELECTRIC WAS ONE OF THE FUND'S TOP FIVE STOCKS AT THE END OF THE
PERIOD. WHY WAS IT ATTRACTIVE TO YOU?
A. GE offered a diverse business portfolio, shareholder-oriented management and
a consistent earnings history, qualities that appeared attractive given the
economic climate. I felt the same way about Emerson Electric and Allied Signal.
These companies - through geographical expansion and improvements in
productivity - were able to sustain consistent earnings and free cash flow. I
believed the economy was weakening to an extent that the relative performance
expected from these companies would be rewarded.
Q. DOES THAT MEAN YOUR OUTLOOK IS COLORED BY CONCERNS FOR THE ECONOMY?
A. Yes it does. Economic indicators point out that the economy is slowing. Wages
have been stagnant and consumers' disposable income is down. Interest rates will
have to decline, in part so that capital will flow back into the developing
economies, believed to be a prime driver for future global economic growth
including U.S. exports. As it stands at the end of 1995, economies outside of
the U.S. also have slowed, leading me to believe that demand for U.S. exports
will wane. Given this backdrop, I have concerns about corporate profitability in
1996 and think it will be a tough investing environment. As a result, I'll be
looking for companies with aspects to their business that will enable them to
sustain good earnings growth despite a weakening economy.
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HIGH INCOME PORTFOLIO
OBJECTIVE - Seeks to obtain a high level of current income by investing
primarily in high risk, lower-rated, high-yielding, fixed income securities,
while also considering growth of capital.
(Not offered in Nationwide Multi-Flex Variable Annuity and Nationwide Variable
Annuity - Citibank, New York)
AN INTERVIEW WITH BARRY COFFMAN, PORTFOLIO MANAGER
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. It did well relative to its peers and to its benchmark. For the 12 months
ended December 31, 1995, the Merrill Lynch High Yield Master Index returned
19.91%.
Q. WHAT KIND OF YEAR WAS 1995 FOR THE HIGH-YIELD MARKET?
A. 1995 was very strong in absolute terms, but it was unusual in that it was the
first time in several years that the high-yield bond market underperformed both
the Treasury and stock markets. Some of the same factors that boosted the
Treasury market - namely concerns about a slowing economy and fears of a
recession - kept high-yield bonds from performing as well as Treasuries. That's
because investors feared that a slowing economy would translate into lower
earnings and deteriorating credit quality for some high yield companies. In
addition, a slight increase in the number of companies that defaulted on their
debt last year - and rising expectations that the default rate will increase
slightly in 1996 - caused the high-yield market to underperform the stock
market.
Q. WAS THERE ANY PARTICULAR REASON THE FUND OUTPERFORMED BOTH ITS PEERS AND ITS
BENCHMARK?
A. I think it's important to point out that the Fund outperformed even though it
was underweighted, relative to the index, in securities rated "Ba". Those
securities outperformed as a group due to their higher sensitivity to interest
rates and the widening of credit spreads during the year. The key to the Fund's
better performance can be attributed to the strength of its individual holdings
and its lower exposure to some sectors - like retail - which significantly
underperformed. The Fund's largest holding at the end of the period - PanAmSat
Corp., which operates an international satellite communications system and
provides satellite services to the broadcasting and business communications
market, performed quite well. The company launched a third satellite and
continued to have a large backlog of contracted time from companies, including
ESPN and Viacom, for its existing and yet-to-be-launched satellites. Another of
the Fund's strong performers was Big Flower Press, a large specialty printer of
advertising inserts, comics and television guides. I invested in the bonds and
equity of this company, both of which did well as its fortunes improved.
Q. HOW DID THE FUND'S GAMING HOLDINGS DO?
A. Performance was mixed. On one hand, there were few new jurisdictions that
approved gaming facilities in 1995. That lack of new competition and good growth
in the Atlantic City market, in particular, helped many of our casino holdings.
On the other hand, Harrah's Jazz was a disappointment. In November, the company
filed for bankruptcy protection. I eliminated the bonds after the bankruptcy
declaration. However, Harrah's problems don't appear to have had any residual
effects on other casino holdings.
Q. WHAT TYPES OF INVESTMENTS DID YOU ADD OVER THE PAST SIX MONTHS?
A. I focused on finding smaller companies that didn't have much visibility in
the market - meaning that few investors followed them. I bought companies in
which I developed a high degree of confidence regarding their future business
plans. As an example, one recent addition to the Fund was Mother's Work, the
largest retailer of maternity clothes. In 1995, the company bought two of its
primary competitors and now controls more than half of the country's maternity
stores.
Q. WHAT'S YOUR OUTLOOK?
A. The high-yield market's performance will obviously be dependent on the health
of the economy. And in my view, there's no way of knowing for sure what the
outcome will be. So I'll continue to look at each company, attempting to assess
how it's likely to do in a variety of economic environments. I'll focus on
finding companies that are properly capitalized, with sufficient financial
flexibility and business fundamentals that can withstand a downturn in the
economy.
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[NATIONWIDE FINANCIAL SERVICES LOGO]
NATIONWIDE(R) SEPARATE ACCOUNT TRUST
CAPITAL APPRECIATION FUND
OBJECTIVE - To obtain long-term growth.
(Not offered in NEA Valuebuilder Annuity)
NARRATIVE BY CHARLES BATH, FUND MANAGER
The Capital Appreciation Fund benefited from the excellent performance of the
broadcasting sector due to several high profile acquisitions in this industry.
CBS was one of the largest holdings in the Capital Appreciation Fund prior to
its acquisition by Westinghouse. I have invested in the broadcasting industry
for several years due to the industry's significant free cash flow, reasonable
valuation, and shareholder-oriented managements. These investments have paid off
handsomely. I am attempting to maintain significant investments in the
broadcasting industry through ownership of Disney (Walt) Co. and Tribune Co.
These are diversified media companies with significant broadcasting investments.
These companies are also characterized by strong free cash flow and solid
managements.
I have continued to maintain minimal investments in technology stocks. IBM was
recently purchased due to its attractive valuation and strong balance sheet.
However, I anticipate the Capital Appreciation Fund's technology weighting will
remain low. Companies in this sector are often characterized by intense
competition and speculative valuation. While these stocks have performed very
well the past few years, I feel it would be a mistake to make significant
investments in this highly volatile market sector.
The cyclical exposure in the Capital Appreciation Fund was increased with the
recent purchases of Bowater and Champion International. Cyclical stocks
performed poorly in the second half of 1995 due to concerns regarding the
strength of the economy. It has consistently been my strategy to focus on
attractive values rather than to make economic predictions. While these paper
companies will probably remain small holdings, their modest valuations provide
an attractive investment opportunity.
GOVERNMENT BOND FUND
OBJECTIVE - To provide as high a level of income as is consistent with the
preservation of capital.
NARRATIVE BY WAYNE FRISBEE, FUND MANAGER
During 1995 those bond market investors that stayed invested during a difficult
prior year were rewarded for their patience. Long-term interest rates dropped by
approximately 190 basis points during the year resulting in significantly higher
prices for bonds and bond funds. Intermediate-term interest rates dropped by
even more than long-term rates with rates on the five-year U.S. Treasury note,
for example, falling from 7.83 percent to 5.37 percent. The Government Bond Fund
participated in this rally by maintaining market exposure as interest rates
declined during the year.
The rally in the fixed-income markets has been due to the confluence of several
factors. The most notable of these are the perception of an improving fiscal
policy in the United States, and a Federal Reserve that is given credit for
engineering an economy that has continued to expand without igniting inflation
concerns. Continued reports of subdued inflation have been interpreted both as
signs of successful Federal Reserve policy and as indications of continued value
in the bond market.
The Government Bond Fund continues to be invested in sectors of the government,
agency, and mortgage-backed markets perceived to be undervalued. Approximately
one-third of Portfolio assets are invested in the Collateralized Mortgage
Obligation (CMO) market. The additional yield on these conservatively-structured
investments continues to make them attractive Portfolio holdings.
MONEY MARKET FUND
OBJECTIVE - To seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing primarily
in money market instruments.
NARRATIVE BY KAREN MADER, FUND MANAGER
Short-term interest rates rose during the first half of 1995. The Federal
Reserve increased rates due to both an expanding economy and concern about
inflation. By July 1995, the scenario had changed.
12
<PAGE> 13
MONEY MARKET FUND (CONT'D)
Expansion and inflation concerns had diminished leading to a reduction in the
Fed Funds rate to the current rate of 5.50% from 6.00%. The Federal Reserve
reduced the Fed Funds by 25 basis points in both July and December of 1995. In
the near future, the Federal Reserve may decide to lower rates again if economic
indicators point to a slowing economy.
The Separate Account Money Market Fund continues to invest in only the highest
rated money market instruments. An internal credit review is completed on every
company that the Fund invests in. The Fund's yield remains competitive with the
other funds included in Donoghue's Taxable First Tier Money Market Group.
TOTAL RETURN FUND
OBJECTIVE - To obtain a reasonable long term total return (i.e., earnings growth
plus potential dividend yield) on invested capital from a flexible combination
of current return and capital gains through investments in common stocks,
convertible issues, money market instruments and bonds with a primary emphasis
on common stocks.
NARRATIVE BY JOHN M. SCHAFFNER, FUND MANAGER
In 1995, the stock market was led upward for the first three quarters by
exceptional strength in the technology sector. In the final quarter, technology
stocks were weak but the market as a whole continued upwards, as leadership
shifted to blue chip stocks.
The Total Return Fund's performance in 1995 was influenced significantly by
strength in energy stocks, where the Fund, with about 14% of assets, is
overweighted. Financial stocks, where the Fund has a weighting of about 11%,
also recorded strong year over year performance as did telecommunications, where
the Fund's asset weighting is about 10%. Several of the stocks the Fund
categorizes as conglomerates, such as Eastman Kodak, Honeywell, Rockwell
International and EG&G also performed well. Holdings in chemicals, especially
specialty chemicals, lagged the market, as did the Fund's holdings in the auto
industry and machinery and capital goods.
The Fund is currently shifting its emphasis in the financial sector. Weightings
in commercial banks are being reduced in favor of increased holdings of
insurance stocks. Bank stocks in general are selling at multiples of book, close
to recent premiums paid in takeovers. In addition, most banks are not
positioned as well as insurance companies to take advantage of future asset
accumulation as the population ages and saves more for retirement. The Fund has
also increased its exposure to technology on recent weakness in this sector,
buying IBM and adding to Intel. The policy to control exposure to this sector,
outlined in the previous report, remains in effect. The Fund's technology
holdings are only in the strongest companies, with reasonable valuations and
good capital gain potential, with a limited commitment of total assets.
[NEUBERGER & BERMAN LOGO]
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
BALANCED PORTFOLIO
OBJECTIVE - The Portfolio seeks long-term capital growth and reasonable current
income without undue risk to principal.
(Not offered in Nationwide Multi-Flex Variable Annuity)
NARRATIVE BY MARK GOLDSTEIN, THERESA HAVELL & THOMAS WOLFE, PORTFOLIO MANAGERS
Our Portfolio blend through 1995 consisted of two basic security types: value
and growth stocks averaging in the medium-capitalization range, and short- to
intermediate-term bonds with an average overall credit quality of AA.
GROWTH PORTION
The equity portfolio benefited from a strong bull market in 1995, as many of our
highest sector weightings fully participated in the market's rise. Lower
interest rates and strong earnings results provided the major impetus for equity
markets. Among the best performing sectors were financial, technology, health
care, and certain specialty
13
<PAGE> 14
BALANCED PORTFOLIO (CONT'D)
retailers. The most significant new purchase in 1995 was a major increase in the
weighting of the HMO industry, as Wall Street analysts abandoned the sector
earlier in the year due to worries about more competitive pricing and rising
medical costs. As the HMO valuations fell to historically low levels relative to
its 20% industry growth rate, we added significantly to our HMO holdings. In the
fourth quarter of the year the HMO industry provided some of the best returns in
the Portfolio.
Technology, our top-performing sector through September, included major
positions in Intel, Texas Instruments, and Micron Technology. This sector
weakened during the final quarter as pricing concerns surfaced due to rising
capacity additions in the Far East. With production costs falling 25%-30% per
year, industry margins should remain stable for the foreseeable future. We have
recently added to our positions.
Overall, we are pleased with how 1995 turned out for the Portfolio, despite a
drop-off in fourth quarter performance due to weakness in technology, finance,
gaming and restaurant stocks. We hope to continue to tackle each stock
individually on a fundamental value ("bottom-up") basis, and in doing so uncover
fast-growing companies with entrepreneurial managements and pristine balance
sheets.
LIMITED MATURITY BOND PORTION
1995 produced outstanding returns in the bond portfolio, a result of a dramatic
lowering of yields as the market perceived a slowing economy and a lessening of
inflationary pressures. The Federal Reserve Board appeared to agree with the
market's view and lowered the Fed Funds rate by 25 basis points in early July
and again in December.
The duration (the measure of how bond prices respond to shifts in interest
rates, taking into account maturity, coupon, call protection and other factors)
of the Portfolio was lengthened in the first half, then held steady during the
summer months as the rally subsided as market participants became concerned
about a pick-up in economic activity. However, by the end of the third quarter
inflationary expectations declined and rates resumed a downward trend. We again
extended duration in October, which greatly benefited fourth quarter
performance.
During the fourth quarter, we added investment-grade corporate bonds and
high-quality asset-backed securities to the Portfolio. This allowed us to take
advantage of slightly higher yield premiums, which were available at reasonable
prices. We believe the fundamentals of these two sectors remain solid and that
significant incremental returns will result from relatively heavy weightings. We
remained underweighted in mortgages throughout the year as the interest rate
rally resulted in their underperformance versus other sectors. We will stick to
our discipline of holding investment-grade credits and not attempting to predict
the direction of rates, as well as stressing the preservation of principal and
steady income production.
[STRONG FUNDS LOGO]
STRONG VARIABLE INSURANCE PRODUCTS FUNDS
STRONG SPECIAL FUND II, INC.
OBJECTIVE - To seek capital appreciation through investments in a diversified
portfolio of equity securities.
(Not offered in Nationwide Multi-Flex Variable Annuity and Nationwide Variable
Annuity - Citibank, New York)
NARRATIVE BY RICHARD WEISS & MARINA CARLSON, FUND MANAGERS
In pursuit of capital growth, the Strong Special Fund II, Inc. invests at least
70% of its total assets in equity securities. It currently emphasizes
medium-sized companies that the Fund's advisor believes are under-researched and
attractively valued.
NEAR-PERFECT ENVIRONMENT FOR STOCKS
Low interest rates, combined with moderate inflation and healthy corporate
earnings provided a near-perfect environment for U.S. common stocks
14
<PAGE> 15
STRONG SPECIAL FUND II, INC. (CONT'D)
in 1995, and contributed to the stock market rally that ran practically unabated
through year-end. Technology and financial stocks led this momentum-driven
market, aided by large inflows into equity mutual funds.
Large companies which, measured by the S&P 500, were up 37.58% through year-end,
saw the biggest gains as investors favored traditional large-cap stocks through
much of the year. Though mid-cap stocks slightly lagged larger counterparts,
they also posted significant gains, as reflected by the S&P MidCap 400's 30.94%
total return for the same period.
The Fund had good exposure to some of the best performing sectors this year -
especially publishing, broadcasting, and technology.
A DISCIPLINED APPROACH TO INVESTING
Our investing style remained consistent through the year - we do not believe in
chasing market momentum. Rather, we continue to evaluate existing and
prospective holdings by analyzing their "private value." That simply means we
evaluate companies as if we were private buyers - determining how much we would
be willing to pay to own the entire company. In doing so, we have a disciplined
way to view the company's inherent value and impartially evaluate potential
winners and losers.
We look at underfollowed stocks - those with low institutional ownership and low
analyst coverage - because we believe they tend to be undervalued by the market.
We take a close look at unpopular, or "quiet," sectors because we think that, in
a market increasingly dominated by institutions, unpopular sectors can yield
superior returns for those willing to look beyond this year's favorites.
Some of the Fund's top performers this year include Paging Network, Inc., a
provider of paging services in the U.S., and Sun Microsystems, Inc., a computer
hardware manufacturer.
This year, a number of companies in the Fund received takeover bids at a price
very close to our private market value. In the publishing and broadcasting
sector alone, we own two companies that received takeover bids. Both companies,
Capital Cities/ABC, Inc. and CBS, Inc., obtained bids within several dollars of
our private market valuations. The Capital Cities/ABC takeover is awaiting a
vote by shareholders in January, and the CBS takeover is complete.
CYCLE MAY REWARD MID-CAP STOCKS
We believe the stage now may be set for a longer-term cycle during which mid-cap
stocks have the potential to outperform large-cap issues. Given this year's
rally in large caps, we find mid-cap issues very attractive, based on their
relative value and expected earnings growth.
We are, however, somewhat cautious going into the new year, and are not totally
convinced that the much talked-about "soft landing" has occurred. Even with the
Fed's bias toward easing credit, the economy is sluggish, and it remains unclear
whether this slowdown will evolve into a recession. The market has already
basically discounted for slow growth but, if growth is slower than anticipated,
the stock market could react negatively.
Looking ahead, we will continue to place emphasis on underfollowed, growing
firms selling at significant discounts from their private market values. This
attention to discipline and value should help to protect the Fund from sharp
declines if the market turns down - while providing the potential for upside
appreciation in the meantime.
15
<PAGE> 16
[TWENTIETH CENTURY LOGO]
TCI ADVANTAGE
OBJECTIVE - To seek current income and capital growth
(Not offered in Nationwide Multi-Flex Variable Annuity)
NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.
A rising equity market accompanied by gradually declining short term interest
rates during the 12-month period that ended December 31, 1995, were good news
for investors. In that climate, TCI Advantage achieved a 16.75% return - the
best calendar year gain since its August 1, 1991, inception. The Fund trailed
its benchmark blended index fund, which posted a 21.91% return. The S&P 500
index gained 37.58%.
TCI Advantage is a well diversified, blended Portfolio. Its approximate 40%
stock position is compiled using Twentieth Century's focus on companies that
exhibit accelerating earnings and revenues, and it is designed to provide
long-term opportunities for capital growth. Income is derived from an
approximate 40% stake in intermediate-term government bonds, with share price
consistency aided by a 20% weighting in money market securities. The goal is to
provide income while still providing the modest, long-term share-price growth
investors need to outpace the rate of inflation.
TCI Advantage's common stock holdings are targeted to the shares of larger
well-established companies demonstrating earnings and revenue acceleration. For
most of the year this approach proved rewarding, and shareholders benefited from
strong returns in such industries as healthcare, pharmaceuticals and technology.
Yet, as concerns about a slowing U.S. economy developed late in the period, many
investors moved to more defensively postured firms characterized by steady
(albeit unspectacular) earnings growth. Most such firms do not meet the Fund's
standards for accelerating growth, but they were major components of the S&P
500's solid gains in the fourth quarter of 1995. History shows us that over time
investors will favor companies with the above-average earnings growth we seek on
your behalf.
The Federal Reserve Board raised interest rates early in the period and lowered
rates later in the year. Responding to falling interest rates, the bond market
experienced a sharp price rebound from 1994 declines, which translated into
relatively strong performance for the year. The fixed income markets especially
favored longer term bonds. TCI Advantage invests in less volatile short- and
intermediate-term bonds and money market instruments. As a result, while it
provided steady income and good performance, it did not fully share in the bond
market's appreciation.
Because it is designed for conservative investors, TCI Advantage is not likely
to match major stock indices in a year like 1995. Its portfolio design of large
company stocks, bonds and cash, however, does give it strong potential for
holding its value during down market years.
TCI Advantage continues to pursue its goal: to provide shareholders with the
opportunity to invest in a Portfolio of domestic stocks with earnings and
revenue acceleration, conservative government bonds and money market securities.
We remain confident that the Fund has the potential to provide investors with a
long-term rate of return that could comfortably outpace the rate of inflation.
TCI GROWTH
OBJECTIVE - To seek capital growth by investing in common stocks (including
securities convertible into common stocks) that meet certain fundamental and
technical standards of selection and, in the opinion of the Fund's management,
have better than average potential for appreciation.
(Not offered in Nationwide Multi-Flex Variable Annuity)
16
<PAGE> 17
TCI GROWTH (CONT'D)
NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.
TCI Growth reported a gain of 31.10% for the 12 months ended December 31, 1995,
reflecting the year's powerful market climb. According to Lipper Analytical
Services, the average total return for funds with growth investment objectives
was 30.79% during the period. The S&P 500 index returned 37.58% for the 12
months.
TCI Growth's best gains came during the year's first three quarters. It climbed
steadily in the first half of the period and surged sharply in the third
quarter. Hot selling new technologies, the introduction of Windows 95 in August,
for example, contributed to the market's extended rally during this period. With
nearly half of its portfolio in technology stocks during the 12-month period,
the Fund made the most of this trend. Moderate holdings in international stocks
provided a positive effect on returns as well.
In the face of growing economic uncertainty late in the year, many investors
moved from technology stocks to stocks of large, more established companies with
steady earnings, which investors typically consider to be defensive. This change
in emphasis clipped Fund performance, especially in comparison with the positive
return of the S&P, which was heavily influenced by the returns of large "steady
growers" in the index.
TCI Growth, which invests in the stocks of small, medium and large companies, is
designed for investors seeking capital growth. To meet that objective the Fund
seeks to single out companies with earnings and revenue acceleration because we
have found that such an approach can provide attractive returns over the long
run.
TCI Growth's continued performance (despite the recent setback in
technology-oriented companies) reaffirms to us the potential of combining
growth-oriented stocks with a disciplined buying and selling process. We
strongly believe that this strategy has the potential to provide significant
benefits to those shareholders investing to achieve long-term financial goals.
[TEMPLETON LOGO]
TEMPLETON VARIABLE PRODUCTS SERIES FUND
TEMPLETON INTERNATIONAL FUND
OBJECTIVE - To seek long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and governments outside
the United States.
(Not offered in Nationwide Multi-Flex Variable Annuity and Nationwide Variable
Annuity - Citibank, New York)
NARRATIVE BY DAN JACOBS, FUND MANAGER
At the end of the fiscal year, the Fund held 90.4% of its total net assets in
equities, 0.1% in bonds, and 9.5% in short-term obligations and other assets.
European holdings comprised our largest geographic exposure, representing 57.0%
of the Fund's total net assets, up from 44.0% on December 31, 1994. During the
period, Europe's equity markets outperformed other international markets, and
our relatively high weightings in this region helped offset the effects of
declining markets elsewhere in the world. Markets in Sweden, Spain, and the
Netherlands performed particularly well. Sectors with the most significant gains
were financial stocks whose earnings and prices reflected lower costs due to
improved balance sheets, and pharmaceuticals, which had been unpopular in 1994
as investors flocked to cyclical holdings, but rebounded nicely in 1995.
During the year, we purchased shares of several European banking institutions,
including Unidanmark AS (Denmark), Den Norske Bank (Norway), Sparbanken Sverige
AB and
17
<PAGE> 18
TEMPLETON INTERNATIONAL FUND (CONT'D)
Stadshypotek AB (Sweden), and Banco Popular Espanol and Bankinter SA (Spain).
Believing that the pharmaceutical sector was undervalued after a difficult 1994,
we increased our holdings of Ciba-Geigy AG in Switzerland and Pharmacia AB in
Sweden, which recently merged with Upjohn.
Asian markets turned in mixed performances during the reporting period.
Uncertainty surrounding Hong Kong's 1997 reversion to China, and threats of
trade wars between China and the U.S., had a negative effect on the Hong Kong
equity market initially, but then it rebounded to end the year with a gain of
more than 20%. Japan's market experienced a small loss, while the Australian and
New Zealand markets posted gains in excess of 10%. We took advantage of this
volatility in the Asian markets and increased our holdings of Hutchinson Whampoa
Ltd., Jardine Strategic Holdings Ltd., and Swire Pacific Ltd., three Hong
Kong-based multi-industry companies. We also purchased shares of Australia & New
Zealand Banking Group Ltd. and Westpac Banking Corp., two Australian banks whose
stocks appreciated after being depressed earlier in the year.
Our exposure to Latin America hindered the Fund's performance at the beginning
of the year, as the effects of Mexico's currency devaluation spilled over into
other emerging markets. However, volatility in Latin American equity markets
gave us the opportunity to purchase shares of some telecommunications companies
that we feel should benefit from growth and restructuring in this region.
Examples include Telefonica de Argentina SA, Telecomunicacoes Brasileiras SA
(Telebras), and Compania de Telecomunicaciones de Chile SA. We will continue to
monitor this region and look for stocks that appear to be well-positioned to
take advantage of future economic growth.
This discussion reflects the strategies we employed for the Fund during the past
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies, and our
evaluations, conclusions and decisions regarding portfolio holdings, may change
in light of new circumstances as they arise. Although past performance of a
specific investment or sector cannot guarantee future performance, such
information can be useful in analyzing securities we purchase or sell for the
Fund.
There are, of course, special risks involved with global investing related to
market, currency, economic, political, and other factors; developing markets
involve similar but heightened risks. These risks are discussed in the
prospectus.
18
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[THIS PAGE LEFT BLANK INTENTIONALLY]
19
<PAGE> 20
FUND PERFORMANCES
- --------------------------------------------------------------------------------
TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED** (NON-STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS
AND INCOME DIVIDENDS REINVESTED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NON-ANNUALIZED PERCENT CHANGE*** ANNUALIZED PERCENT CHANGE***
INCEPTION 1 YR. TO 5 YR. TO INCEPTION TO 5 YR. TO INCEPTION TO
FUNDS++ DATE*+ 12/31/95 12/31/95+ 12/31/95+ 12/31/95 12/31/95
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc. 10/07/93 32.82% NA* 42.39% NA* 17.14%
Stock Index Fund 09/29/89 35.01% 96.54% 90.63% 14.47% 10.87%
VIF - Quality Bond Portfolio 08/31/90 18.86% 58.78% 61.88% 9.69% 9.45%
VIF - Small Cap Portfolio 08/31/90 27.70% 801.77% 816.69% 55.25% 51.50%
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 33.34% 146.28% 181.59% 19.75% 11.87%
High Income Portfolio 09/19/85 19.04% 123.12% 175.07% 17.41% 10.34%
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund 04/15/92 27.68% NA* 41.60% NA* 9.83%
Government Bond Fund 11/08/82 17.21% 48.39% 196.55% 8.21% 8.62%
Money Market Fund 11/10/81 4.29% 15.61% 124.86% 2.94% 5.90%
Total Return Fund 11/08/82 27.42% 103.11% 421.74% 15.22% 13.39%
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Balanced Portfolio 02/28/89 22.16% 58.10% 83.17% 9.59% 9.26%
STRONG VIP FUNDS
Strong Special Fund II, Inc. 05/08/92 24.19% NA* 80.72% NA* 17.62%
TCI PORTFOLIOS, INC.
TCI Advantage 08/01/91 15.23% NA* 30.35% NA* 6.19%
TCI Growth 11/20/87 29.40% 87.41% 139.62% 13.39% 11.37%
TEMPLETON VPS FUND
Templeton International Fund 05/01/92 14.28% NA* 49.24% NA* 11.54%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Performance information is not available for all or part of the
period indicated (See Fund Inception Date).
** SEC and NASD regulations require that any reporting of product
performance be accompanied by standardized data and the disclosures
are on the following page. Please review this information and a
product prospectus before investing.
*** Percent change in unit value price represents total return after the
deduction of a 1.3% annual asset fee.
+ Numbers in this column represent the total percentage change in the
unit value for the period indicated. This is not an annual return
figure.
++ Funds are neither insured nor guaranteed by the U.S. Government. For
the Money Market Fund, there is no assurance that a stable $1 fund
NAV (used to calculate Unit Value) can be maintained. Figures quoted
represent past performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before
the fund was actually available in the separate account. That
hypothetical performance is calculated by imposing contract charges
on actual fund performance, to determine how the fund would have
performed if it had been available in the separate account.
20
<PAGE> 21
- --------------------------------------------------------------------------------
TOTAL RETURN: ASSUMING CONTRACT SURRENDERED (STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS
AND INCOME DIVIDENDS REINVESTED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION 1 YR. TO 5 YR. TO 10 YR. TO INCEPTION TO
FUNDS++ DATE*+ 12/31/95 12/31/95 12/31/95 12/31/95
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc. 10/07/93 24.42% NA* NA* 11.26%
Stock Index Fund 09/29/89 26.61% 11.80% NA* 7.61%
VIF - Quality Bond Portfolio 08/31/90 10.46% 6.81% NA* 6.13%
VIF - Small Cap Portfolio 08/31/90 19.30% 54.17% NA* 49.66%
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 24.94% 17.36% NA* 9.02%
High Income Portfolio 09/19/85 10.64% 15.11% 7.61% 7.75%
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund 04/15/92 19.28% NA* NA* 5.82%
Government Bond Fund 11/08/82 8.81% 5.26% 5.78% 6.24%
Money Market Fund 11/10/81 (4.11)% (0.42)% 1.81% 3.75%
Total Return Fund 11/08/82 19.02% 12.73% 8.79% 11.58%
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Balanced Portfolio 02/28/89 13.76% 6.74% NA* 6.62%
STRONG VIP FUNDS
Strong Special Fund II, Inc. 05/08/92 15.79% NA* NA* 14.12%
TCI PORTFOLIOS, INC.
TCI Advantage 08/01/91 6.83% NA* NA* 2.32%
TCI Growth 11/20/87 21.00% 10.77% NA* 8.65%
TEMPLETON VPS FUND
Templeton International Fund 05/01/92 5.88% NA* NA* 7.66%
- ----------------------------------------------------------------------------------------------
</TABLE>
The above illustration represents past fund performance based on a $1,000
hypothetical investment. The performance figures reflect the deduction of a 1.3%
annual asset fee, a $30 annual administrative charge, and a maximum of a 6.0%
contingent deferred sales charge (after one year, declining thereafter). They
also reflect the application of an annual 10% free withdrawal privilege
available after the first year. Investment principal and investment returns
are not guaranteed under these variable options. Account values at the time of
redemption may be more or less than the purchase payment, due to market
fluctuations and any specific charges that may apply. This is neither an offer
to sell nor a solicitation to buy securities. The results shown are not a
representation of future investment performance. Any comparisons should be
made only after a recognition of the differences in the investment policies
and objectives of the funds' investments. This report is authorized for
distribution to prospective investors only when preceded or accompanied by
prospectuses containing more complete information, which should be read
carefully before investing or sending money.
* Performance information is not available for all or part of the
period indicated (See Fund Inception Date).
++ Funds are neither insured nor guaranteed by the U.S. Government. For
the Money Market Fund, there is no assurance that a stable $1 fund
NAV (used to calculate Unit Value) can be maintained. Figures quoted
represent past performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before
the fund was actually available in the separate account. That
hypothetical performance is calculated by imposing contract charges
on actual fund performance, to determine how the fund would have
performed if it had been available in the separate account.
21
<PAGE> 22
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
78,822 shares (cost $1,252,048)............................. $ 1,364,403
Dreyfus Stock Index Fund (DryStkIx)
561,820 shares (cost $7,968,697)............................ 9,663,302
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
8,731 shares (cost $102,951)................................ 103,115
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
220,339 shares (cost $9,089,948)............................ 10,164,253
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
2,624,158 shares (cost $41,441,185)......................... 50,567,526
Fidelity VIP - High Income Portfolio (FidHiInc)
216,993 shares (cost $2,448,997)............................ 2,614,767
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
2,632,477 shares (cost $28,987,804)......................... 35,485,789
Nationwide SAT - Government Bond Fund (NWGvtBd)
12,713,763 shares (cost $142,631,773)....................... 144,428,349
Nationwide SAT - Money Market Fund (NWMyMkt)
45,825,142 shares (cost $45,825,142)........................ 45,825,142
Nationwide SAT - Total Return Fund (NWTotRet)
32,544,844 shares (cost $304,605,445)....................... 375,567,496
Neuberger & Berman - Balanced Portfolio (NBBal)
2,043,380 shares (cost $30,526,160)......................... 35,800,020
Strong VIP-Strong Special Fund II, Inc. (StSpec2)
9,703 shares (cost $161,870)................................ 165,335
TCI Portfolios - TCI Advantage (TCIAdv)
1,579,029 shares (cost $8,612,430).......................... 9,774,190
TCI Portfolios - TCI Growth (TCIGro)
4,014,784 shares (cost $35,810,661)......................... 48,418,300
Templeton VPS - Templeton International Fund (TemIntFd)
406,574 shares (cost $5,624,503)............................ 6,151,470
------------
Total investments....................................... 776,093,457
Accounts receivable............................................. 150,546
------------
Total assets............................................ 776,244,003
ACCOUNTS PAYABLE.................................................. 156,206
------------
CONTRACT OWNERS' EQUITY........................................... $776,087,797
============
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Contracts in accumulation phase:
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified...................................... 94,479 $13.333625 $ 1,259,748
Non-tax qualified.................................. 7,847 13.333625 104,629
Dreyfus Stock Index Fund:
Tax qualified...................................... 489,045 13.807559 6,752,518
Non-tax qualified.................................. 210,808 13.807559 2,910,744
Dreyfus VIF - Quality Bond Portfolio:
Tax qualified...................................... 9,201 10.493309 96,549
Non-tax qualified.................................. 626 10.493309 6,569
Dreyfus VIF - Small Cap Portfolio:
Tax qualified...................................... 709,274 13.249127 9,397,261
Non-tax qualified.................................. 57,885 13.249127 766,926
Fidelity VIP - Equity-Income Portfolio:
Tax qualified...................................... 2,504,171 14.412060 36,090,263
Non-tax qualified.................................. 1,004,513 14.412060 14,477,102
Fidelity VIP - High Income Portfolio:
Tax qualified...................................... 210,727 11.779381 2,482,234
Non-tax qualified.................................. 11,249 11.779381 132,506
Nationwide SAT - Capital Appreciation Fund:
Tax qualified...................................... 1,711,709 14.442619 24,721,561
Non-tax qualified.................................. 739,691 14.442619 10,683,075
Nationwide SAT - Government Bond Fund:
Tax qualified...................................... 3,276,421 29.463573 96,535,069
Non-tax qualified.................................. 1,618,704 29.474435 47,710,386
Nationwide SAT - Money Market Fund:
Tax qualified...................................... 1,618,571 19.595876 31,717,317
Non-tax qualified.................................. 665,100 21.291272 14,160,825
Nationwide SAT - Total Return Fund:
Tax qualified...................................... 5,049,123 51.701438 261,046,920
Non-tax qualified.................................. 2,273,685 50.214359 114,171,635
Neuberger & Berman - Balanced Portfolio:
Tax qualified...................................... 1,697,674 14.753402 25,046,467
Non-tax qualified.................................. 728,876 14.753402 10,753,401
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified...................................... 14,374 10.456863 150,307
Non-tax qualified.................................. 1,437 10.456863 15,027
TCI Portfolios - TCI Advantage:
Tax qualified...................................... 513,818 13.035463 6,697,856
Non-tax qualified.................................. 209,516 13.035463 2,731,138
Initial Funding by Depositor (note 1a)............. 25,000 13.802855 345,071
TCI Portfolios - TCI Growth:
Tax qualified...................................... 1,986,887 16.447846 32,680,011
Non-tax qualified.................................. 956,826 16.447846 15,737,727
Templeton VPS - Templeton International Fund:
Tax qualified...................................... 503,599 11.329203 5,705,375
Non-tax qualified.................................. 39,371 11.329203 446,042
======== =========
Reserves for annuity contracts in payout phase:
Tax qualified...................................... 285,200
Non-tax qualified.................................. 270,338
------------
$776,087,797
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE> 24
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends............. $ 46,393,801 29,703,314 20,461,444
------------ ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares.. 88,238,390 76,838,985 38,515,569
Cost of mutual fund shares sold.................. (75,818,878) (73,196,125) (36,994,402)
------------ ----------- -----------
Realized gain (loss) on investments.............. 12,419,512 3,642,860 1,521,167
Change in unrealized gain (loss) on investments.. 96,906,383 (34,476,283) 20,137,926
------------ ----------- -----------
Net gain (loss) on investments................. 109,325,895 (30,833,423) 21,659,093
------------ ----------- -----------
Net investment activity...................... 155,719,696 (1,130,109) 42,120,537
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners.... 83,073,876 116,273,060 185,254,645
Redemptions........................................ (77,469,618) (60,979,679) (31,928,233)
Annuity benefits................................... (70,923) (64,720) (87,623)
Adjustments to maintain reserves................... (11,132) (9,850) (1,896)
------------ ----------- -----------
Net equity transactions...................... 5,522,203 55,218,811 153,236,893
------------ ----------- -----------
EXPENSES (NOTE 2):
Contract charges................................... (10,351,310) (9,137,529) (7,053,075)
Contingent deferred sales charges.................. (817,609) (948,537) (535,109)
------------ ----------- -----------
Total expenses............................... (11,168,919) (10,086,066) (7,588,184)
------------ ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 150,072,980 44,002,636 187,769,246
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD.......... 626,014,817 582,012,181 394,242,935
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $776,087,797 626,014,817 582,012,181
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE> 25
- --------------------------------------------------------------------------------
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Multi-Flex Variable Account (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on October 7, 1981. The Account has been registered as a
unit investment trust under the Investment Company Act of 1940. On August 21,
1991, the Company (the Depositor) transferred to the Account 50,000 shares of
the TCI Portfolios, Inc. - TCI Advantage fund for which the Account was credited
with 25,000 accumulation units. The value of the accumulation units purchased by
the Company on August 21, 1991 was $250,000.
The Company offers tax qualified and non-tax qualified Individual Deferred
Variable Annuity Contracts through the Account. The primary distributions for
the contracts is through Company Agents and an affiliated sales organization;
however, other distributors may be utilized.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase. See note
2 for a discussion of contract expenses. With certain exceptions, contract
owners in either the accumulation or payout phase may invest in any of the
following:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity
Index Fund, Inc. (DLAI))
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
Fidelity VIP - High Income Portfolio (FidHiInc)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolio of the Neuberger & Berman Advisers Management Trust (Neuberger
& Berman);
Neuberger & Berman - Balanced Portfolio (NBBal)
Funds of the Strong Variable Insurance Products Funds (Strong VIP);
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Advantage (TCIAdv)
TCI Portfolios - TCI Growth (TCIGro)
Portfolio of the Templeton Variable Products Series Fund (Templeton
VPS);
Templeton VPS - Templeton International Fund (TemIntFd)
25
<PAGE> 26
At December 31, 1995, 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, 1995. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(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. For
contracts issued prior to February 1, 1989, the contingent deferred sales charge
will be 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. For contracts issued on or after February 1, 1989, the Company will
deduct a contingent deferred sales charge not to exceed 7% of the lesser of
purchase payments or the amount surrendered, such charge declining 1% per year,
to 0%, after the purchase payment has been held in the contract for 84 months.
No sales charges are deducted on redemptions used to purchase units in the fixed
investment options of the Company.
The following administrative charges are deducted by the Company: (a) an
annual contract maintenance charge of $30, with certain exceptions, which is
satisfied by surrendering units; and (b) for contracts issued prior to February
1, 1989, 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; for
contracts issued on or after February 1, 1989, a mortality risk charge, an
expense risk charge and an administration charge assessed through the daily unit
value calculation equal to an annual rate of 0.80%, 0.45% and 0.05%,
respectively. No charges were deducted from the initial funding, or from
earnings thereon.
26
<PAGE> 27
(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 risk charge, expense risk charge and administration charge
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.
- --------------------------------------------------------------------------------
27
<PAGE> 28
- --------------------------------------------------------------------------------
SCHEDULE I
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryQualBd DrySmCap FidEqinc FidHilnc NWCapApp
-------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.039093 10.227308 10.000000 10.374796 10.808255 9.895223 11.311683
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .367042 .366275 .300901 .305817 .845166 .716438 .642190
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.080069 3.371719 .235955 2.722323 2.923160 1.310923 2.653706
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.152579) (.157743) (.043547) (.153809) (.164521) (.143203) (.164960)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.333625 13.807559 10.493309 13.249127 14.412060 11.779381 14.442619
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 33% 35% 5%(b) 28% 33% 19% 28%
====================================================================================================================
1994
Beginning unit value - Jan. 1 $10.000000 10.271065 ** 10.000000 10.227513 10.000000 11.564256
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .258763 .287154 .168745 .767502 .000000 .182737
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.132737) (.197934) .294439 (.048719) (.018339) (.286833)
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.086933) (.132977) (.088388) (.138041) (.086438) (.148477)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.039093 10.227308 10.374796 10.808255 9.895223 11.311683
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0%(b) 0% 4%(b) 6% (1)%(b) (2)%
====================================================================================================================
1993
Beginning unit value - Jan. 1 ** $10.000000 ** ** 10.000000 ** 10.689287
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.574735 .059299 .260100
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.266407) .205206 .755961
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.037263) (.036992) (.141092)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.271065 10.227513 11.564256
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 3%(b) 2%(b) 8%
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWGvtBd NWGvtBd
Qual Non-Qual
------- --------
<S> <C> <C>
1995
Beginning unit value - Jan. 1 25.138302 25.147577
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.778825 1.779480
- ------------------------------------------------------
Unrealized gain (loss) 2.904595 2.905666
- ------------------------------------------------------
Contract charges (.358149) (.358288)
- ------------------------------------------------------
Ending unit value - Dec. 31 29.463573 29.474435
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 17% 17%
======================================================
1994
Beginning unit value - Jan. 1 26.318797 26.328516
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.651042 1.651652
- ------------------------------------------------------
Unrealized gain (loss) (2.499476) (2.500401)
- ------------------------------------------------------
Contract charges (.332061) (.332190)
- ------------------------------------------------------
Ending unit value - Dec. 31 25.138302 25.147577
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (4)% (4)%
======================================================
1993
Beginning unit value - Jan. 1 24.348055 24.357055
- ------------------------------------------------------
Reinvested capital gains
and dividends 1.555308 1.555884
- ------------------------------------------------------
Unrealized gain (loss) .753100 .753371
- ------------------------------------------------------
Contract charges (.337666) (.337794)
- ------------------------------------------------------
Ending unit value - Dec. 31 26.318797 26.328516
- ------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 8% 8%
======================================================
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not utilized or was not available.
28
<PAGE> 29
SCHEDULE I, CONTINUED
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NWMyMkt NWMyMkt NWTotRet NWTotRet
Qual Non-Qual Qual Non-Qual NBBal StSpec2
1995 ------- -------- -------- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $18.790546 20.416267 40.575816 39.408735 12.077573 10.000000
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.056381 1.147773 4.020137 3.904506 .307323 .046668
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 7.711672 7.489864 2.548627 .453424
- -------------------------------------------------------------------------------------------------------
Contract charges (.251051) (.272768) (.606187) (.588746) (.180121) (.043229)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $19.595876 21.291272 51.701438 50.214359 14.753402 10.456863
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 4% 4% 27% 27% 22% 5%(b)
=======================================================================================================
1994
Beginning unit value - Jan. 1 $18.325918 19.911440 40.671816 39.501981 12.661508 **
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .706658 .767804 2.052197 1.993171 .493737
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 (1.612762) (1.56637) (.91770)
- -------------------------------------------------------------------------------------------------------
Contract charges (.242030) (.262977) (.535435) (.520043) (.160502)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.790546 20.416267 40.575816 39.408735 12.077573
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 3% 3% 0% 0% (5)%
=======================================================================================================
1993
Beginning unit value - Jan. 1 $18.069824 19.633190 37.150744 36.082181 12.050347 **
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .494501 .537285 1.515648 1.472053 .185739
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .000000 2.516539 2.444160 .585239
- -------------------------------------------------------------------------------------------------------
Contract charges (.238407) (.259035) (.511115) (.496413) (.159817)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.325918 19.911440 40.671816 39.501981 12.661508
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 1% 1% 9% 9% 5%
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TCIAdv TCIGro TemIntFd TCIAdv+
1995 ------ ------ -------- -------
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 11.312248 12.711014 9.913613 11.822996
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .409891 .014626 .112246 .431938
- ------------------------------------------------------------------------------
Unrealized gain (loss) 1.472626 3.917671 1.440756 1.547921
- ------------------------------------------------------------------------------
Contract charges (.159302) (.195465) (.137412) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.035463 16.447846 11.329203 13.802855
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 15% 29% 14% 17%
==============================================================================
1994
Beginning unit value - Jan. 1 11.343435 13.030369 10.000000 11.701906
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .297949 .001393 .000000 .309969
- ------------------------------------------------------------------------------
Unrealized gain (loss) (.181282) (.154144) .001766 (.188879)
- ------------------------------------------------------------------------------
Contract charges (.147854) (.166604) (.088153) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.312248 12.711014 9.913613 11.822996
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0% (2)% (1)%(b) 1%
==============================================================================
1993
Beginning unit value - Jan. 1 10.757355 11.967533 ** 10.953160
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .224725 .032511 .230690
- ------------------------------------------------------------------------------
Unrealized gain (loss) .506277 1.193545 .518056
- ------------------------------------------------------------------------------
Contract charges (.144922) (.163220) .000000
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.343435 13.030369 11.701906
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 5% 9% 7%
==============================================================================
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not utilized or was not available.
+For Depositor, see note 1a.
See note 3.
29
<PAGE> 30
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide Multi-Flex Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Multi-Flex Variable Account as of December
31, 1995, 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 included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and 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 Nationwide Multi-Flex Variable Account as of December 31, 1995, 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 6, 1996
- --------------------------------------------------------------------------------
30
<PAGE> 31
This report is for the information of contract owners with funds in the
Nationwide Multi-Flex Variable Account. It may also be used, from time to time,
as sales literature, but only when accompanied or preceded by the current
prospectus, which contains complete information about the contracts which invest
in the separate account, and their fees, charges and expenses. If this report is
used as sales literature after March 31, 1996, it must be accompanied by the
fund performance report reflecting performances for the most recently completed
calendar quarter. Prospective investors should read the prospectus carefully
before investing.
31
<PAGE> 32
NATIONWIDE LIFE INSURANCE COMPANY Bulk Rate
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 U.S. Postage
P A I D
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
