<PAGE> 1
[NATIONWIDE(R) MULTI-FLEX(R) ANNUITY LOGO]
ANNUAL REPORT
DECEMBER 31, 1997
NATIONWIDE(R) [NATIONWIDE INSURANCE LOGO]
MULTI-FLEX Nationwide is on your side
VARIABLE ACCOUNT Columbus, Ohio
<PAGE> 2
[NATIONWIDE INSURANCE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the
1997 annual report of the Nationwide Multi-Flex Variable Account.
Equity markets ended a volatile season to record the third straight
year of gains topping the 20 percent mark. Additionally, returns on
fixed income investments were buoyed by declining inflation, steady
Federal Reserve policy and the positive outlook for lower budget
deficits.
The U.S. economy continues to be strong into 1998. However, there is
still much uncertainty about what effect the Southeast Asian crisis
will have on our economy during this year. The obvious result, we
believe, will be a slowing of economic growth due to reduced
exports, restrained pricing flexibility and lower corporate profits.
We expect the Federal Reserve will continue to stay on the sidelines
as the Southeast Asian economic turmoil plays out. At the same time,
low inflation and low interest rates should continue to provide a
healthy environment for financial assets.
We are committed to our customers as our most valuable asset. Our
commitment to you is to continue to add value to our products and
services to help you achieve your financial planning and retirement
goals. As always, we welcome and encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
3
<PAGE> 3
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
AIM VI - Capital Appreciation Fund (AIMCapAp)
1,176 shares (cost $24,970) $ 25,574
AIM VI - International Equity Fund (AIMIntEq)
342 shares (cost $5,736) 5,854
American Century VP - American Century VP Advantage (ACVPAdv)
1,515,831 shares (cost $8,571,312) 10,004,485
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
3,340,132 shares (cost $32,358,628) 32,332,478
American Century VP - American Century VP Income & Growth (ACVPIncGr)
40,232 shares (cost $215,810) 216,851
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
832,225 shares (cost $18,087,400) 20,780,648
Dreyfus Stock Index Fund (DryStkIx)
2,118,846 shares (cost $42,816,299) 54,560,283
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
1,189 shares (cost $33,421) 33,176
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
401,049 shares (cost $4,606,369) 4,704,307
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
1,096,414 shares (cost $56,041,300) 62,649,112
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
5,117,230 shares (cost $93,055,663) 124,246,336
Fidelity VIP - High Income Portfolio (FidVIPHI)
1,422,624 shares (cost $17,358,279) 19,319,228
Janus AS - Janus Aspen International Growth Portfolio (JanASIntGr)
1,667 shares (cost $31,017) 30,798
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
3,189,257 shares (cost $41,868,525) 67,644,137
Nationwide SAT - Government Bond Fund (NSATGvtBd)
10,794,099 shares (cost $120,611,240) 122,836,848
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
280 shares (cost $2,821) 2,839
</TABLE>
4
<PAGE> 4
<TABLE>
<S> <C>
Nationwide SAT - Money Market Fund (NSATMyMkt)
42,381,871 shares (cost $42,381,871) 42,381,871
Nationwide SAT - Total Return Fund (NSATTotRe)
34,877,449 shares (cost $359,099,234) 571,292,619
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
2,418,213 shares (cost $36,854,018) 43,044,185
Strong Opportunity Fund II, Inc. (StOpp2)
668,192 shares (cost $12,668,641) 14,499,776
Templeton VPS - Templeton International Fund (TemIntFd)
1,480,080 shares (cost $25,554,716) 29,868,011
---------------
Total investments 1,220,479,416
Accounts receivable 23,711
---------------
Total assets 1,220,503,127
ACCOUNTS PAYABLE 16,421
---------------
CONTRACT OWNERS' EQUITY (NOTE 4) $ 1,220,486,706
===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 5
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL AIMCapAp
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 22,670,838 21,119,041 5 -
Mortality, expense and administration
charges (note 2) .................................. (14,230,283) (11,142,442) (12) -
--------------- -------------- -------------- --------------
Net investment activity ........................... 8,440,555 9,976,599 (7) -
--------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 93,597,620 74,149,404 - -
Cost of mutual fund shares sold ..................... (74,653,108) (63,374,669) - -
--------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 18,944,512 10,774,735 - -
Change in unrealized gain (loss) on investments ..... 143,730,354 53,497,947 603 -
--------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 162,674,866 64,272,682 603 -
--------------- -------------- -------------- --------------
Reinvested capital gains ............................ 36,308,617 32,886,488 66 -
--------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 207,424,038 107,135,769 662 -
--------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 173,043,544 133,336,058 6,451 -
Transfers between funds ............................. - - 18,462 -
Redemptions ......................................... (97,519,435) (74,091,271) - -
Annuity benefits .................................... (99,001) (88,867) - -
Annual contract maintenance charge (note 2) ......... (1,743,035) (1,406,646) (2) -
Contingent deferred sales charges (note 2) .......... (824,723) (829,238) - -
Adjustments to maintain reserves .................... 22,836 38,880 (3) -
-------------- -------------- -------------- --------------
Net equity transactions ......................... 72,880,186 56,958,916 24,908 -
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 280,304,224 164,094,685 25,570 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 940,182,482 776,087,797 - -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $1,220,486,706 940,182,482 25,570 -
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AIMIntEq ACVPAdv
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ 1 - 158,735 239,211
Mortality, expense and administration
charges (note 2) .................................. (2) - (128,515) (127,401)
------------- -------------- -------------- --------------
Net investment activity ........................... (1) - 30,220 111,810
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... - - 1,974,464 818,375
Cost of mutual fund shares sold ..................... - - (1,635,650) (703,197)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... - - 338,814 115,178
Change in unrealized gain (loss) on investments ..... 118 - 195,541 75,872
------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 118 - 534,355 191,050
------------- -------------- -------------- --------------
Reinvested capital gains ............................ 4 - 548,350 463,336
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 121 - 1,112,925 766,196
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 5,619 - 764,476 855,091
Transfers between funds ............................. 120 - (1,266,044) (503,780)
Redemptions ......................................... - - (944,093) (494,204)
Annuity benefits .................................... - - (7) -
Annual contract maintenance charge (note 2) ......... - - (16,700) (17,911)
Contingent deferred sales charges (note 2) .......... - - (14,965) (11,016)
Adjustments to maintain reserves .................... (1) - 12 472
------------- -------------- -------------- --------------
Net equity transactions ......................... 5,738 - (1,477,321) (171,348)
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 5,859 - (364,396) 594,848
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... - - 10,368,913 9,774,065
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... 5,859 - 10,004,517 10,368,913
============= ============== ============== ==============
</TABLE>
6
<PAGE> 6
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACVPCapAp ACVPIncGr
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ - - - -
Mortality, expense and administration
charges (note 2) .................................. (488,542) (636,076) (77) -
-------------- -------------- -------------- --------------
Net investment activity ........................... (488,542) (636,076) (77) -
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 11,459,625 4,150,694 557 -
Cost of mutual fund shares sold ..................... (9,640,042) (2,959,651) (538) -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 1,819,583 1,191,043 19 -
Change in unrealized gain (loss) on investments ..... (3,909,793) (8,723,996) 1,041 -
-------------- -------------- -------------- --------------
Net gain (loss) on investments .................... (2,090,210) (7,532,953) 1,060 -
-------------- -------------- -------------- --------------
Reinvested capital gains ............................ 818,434 5,470,200 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. (1,760,318) (2,698,829) 983 -
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 3,208,021 5,651,967 22,410 -
Transfers between funds ............................. (9,312,700) (3,186,737) 193,474 -
Redemptions ......................................... (4,504,076) (3,161,270) - -
Annuity benefits .................................... (7) - - -
Annual contract maintenance charge (note 2) ......... (72,900) (91,978) (17) -
Contingent deferred sales charges (note 2) .......... (78,351) (81,116) - -
Adjustments to maintain reserves .................... (174) 2,592 9 -
-------------- -------------- -------------- --------------
Net equity transactions ......................... (10,760,187) (866,542) 215,876 -
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... (12,520,505) (3,565,371) 216,859 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 44,852,368 48,417,739 - -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 32,331,863 44,852,368 216,859 -
=============== ============= ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DrySRGro DryStkix
---------------------------- ------------------------------
1997 1996 1997 1996
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ 75,046 14,833 633,022 329,372
Mortality, expense and administration
charges (note 2) .................................. (179,325) (46,207) (504,354) (197,346)
------------- -------------- -------------- --------------
Net investment activity ........................... (104,279) (31,374) 128,668 132,026
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 421,736 125,914 707,521 225,077
Cost of mutual fund shares sold ..................... (251,714) (90,420) (457,827) (174,914)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 170,022 35,494 249,694 50,163
Change in unrealized gain (loss) on investments ..... 2,221,298 359,594 7,644,619 2,404,759
------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 2,391,320 395,088 7,894,313 2,454,922
------------- -------------- -------------- --------------
Reinvested capital gains ............................ 585,969 265,581 1,507,200 339,241
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 2,873,010 629,295 9,530,181 2,926,189
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 8,956,132 3,838,392 15,881,608 7,214,548
Transfers between funds ............................. 2,728,693 1,182,521 9,231,643 3,028,873
Redemptions ......................................... (588,429) (138,371) (1,971,994) (793,292)
Annuity benefits .................................... - - - -
Annual contract maintenance charge (note 2) ......... (41,768) (13,276) (80,253) (33,672)
Contingent deferred sales charges (note 2) .......... (8,178) (2,093) (22,485) (16,134)
Adjustments to maintain reserves .................... (21) 647 1,530 1,162
------------- -------------- -------------- --------------
Net equity transactions ......................... 11,046,429 4,867,820 23,040,049 9,401,485
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 13,919,439 5,497,115 32,570,230 12,327,674
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 6,861,492 1,364,377 21,990,935 9,663,261
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... 20,780,931 6,861,492 54,561,165 21,990,935
============= ============== ============== ==============
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
DryCapAp DryQualBd
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 205 - 214,911 68,688
Mortality, expense and administration
charges (note 2) .................................. (16) - (43,572) (14,429)
-------------- -------------- -------------- --------------
Net investment activity ........................... 189 - 171,339 54,259
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... - - 376,870 104,785
Cost of mutual fund shares sold ..................... - - (380,850) (108,407)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... - - (3,980) (3,622)
Change in unrealized gain (loss) on investments ..... (245) - 83,709 14,065
-------------- -------------- -------------- --------------
Net gain (loss) on investments .................... (245) - 79,729 10,443
-------------- -------------- -------------- --------------
Reinvested capital gains ............................ 17 - 29,382 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. (39) - 280,450 64,702
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 11,423 - 2,268,714 1,746,654
Transfers between funds ............................. 21,796 - (54,361) 412,493
Redemptions ......................................... - - (90,499) (13,748)
Annuity benefits .................................... - - - -
Annual contract maintenance charge (note 2) ......... (4) - (10,521) (1,238)
Contingent deferred sales charges (note 2) .......... - - (1,276) (121)
Adjustments to maintain reserves .................... 5 - 96 (17)
-------------- -------------- -------------- --------------
Net equity transactions ......................... 33,220 - 2,112,153 2,144,023
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 33,181 - 2,392,603 2,208,725
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... - - 2,311,843 103,118
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 33,181 - 4,704,446 2,311,843
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DrySmCap FidVIPEI
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ 66,440 60,127 1,376,653 81,351
Mortality, expense and administration
charges (note 2) .................................. (618,547) (260,455) (1,336,938) (843,539)
------------- -------------- -------------- --------------
Net investment activity ........................... (552,107) (200,328) 39,715 (762,188)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 577,816 114,434 1,484,034 674,379
Cost of mutual fund shares sold ..................... (353,809) (78,010) (998,925) (519,060)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 224,007 36,424 485,109 155,319
Change in unrealized gain (loss) on investments ..... 3,539,427 1,994,080 15,867,413 6,196,919
------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 3,763,434 2,030,504 16,352,522 6,352,238
------------- -------------- -------------- --------------
Reinvested capital gains ............................ 3,506,010 917,183 6,921,505 2,332,075
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 6,717,337 2,747,359 23,313,742 7,922,125
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 24,803,583 16,810,842 25,054,542 19,827,675
Transfers between funds ............................. 2,005,819 3,403,166 4,912,332 3,672,891
Redemptions ......................................... (3,029,006) (656,196) (7,187,817) (3,324,003)
Annuity benefits .................................... - - (998) -
Annual contract maintenance charge (note 2) ......... (190,393) (86,630) (217,473) (140,866)
Contingent deferred sales charges (note 2) .......... (31,745) (10,126) (84,502) (71,790)
Adjustments to maintain reserves .................... (50) 1,337 1,072 3,240
------------- -------------- -------------- --------------
Net equity transactions ......................... 23,558,208 19,462,393 22,477,156 19,967,147
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 30,275,545 22,209,752 45,790,898 27,889,272
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 32,373,939 10,164,187 78,456,637 50,567,365
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... 62,649,484 32,373,939 124,247,535 78,456,637
============= ============== ============== ==============
</TABLE>
8
<PAGE> 8
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPHI JanASIntgr
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 662,094 228,296 33 -
Mortality, expense and administration
charges (note 2) .................................. (177,447) (69,808) (22) -
-------------- -------------- -------------- --------------
Net investment activity ........................... 484,647 158,488 11 -
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 328,986 150,976 - -
Cost of mutual fund shares sold ..................... (284,239) (135,558) - -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 44,747 15,418 - -
Change in unrealized gain (loss) on investments ..... 1,402,718 392,462 (219) -
-------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 1,447,465 407,880 (219) -
-------------- -------------- -------------- --------------
Reinvested capital gains ............................ 81,832 44,667 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 2,013,944 611,035 (208) -
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 7,922,442 4,579,733 4,995 -
Transfers between funds ............................. 1,346,162 1,035,603 26,016 -
Redemptions ......................................... (594,910) (137,260) - -
Annuity benefits .................................... - - - -
Annual contract maintenance charge (note 2) ......... (42,994) (20,338) - -
Contingent deferred sales charges (note 2) .......... (7,262) (1,771) - -
Adjustments to maintain reserves .................... 44 137 (1) -
-------------- -------------- -------------- --------------
Net equity transactions ......................... 8,623,482 5,456,104 31,010 -
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 10,637,426 6,067,139 30,802 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 8,681,879 2,614,740 - -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 19,319,305 8,681,879 30,802 -
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NSATCapAp NSATGvtBd
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ 621,889 605,147 7,524,704 8,323,251
Mortality, expense and administration
charges (note 2) .................................. (771,115) (547,337) (1,616,047) (1,778,825)
------------- -------------- -------------- --------------
Net investment activity ........................... (149,226) 57,810 5,908,657 6,544,426
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 4,734,284 4,849,353 19,995,640 19,548,741
Cost of mutual fund shares sold ..................... (2,574,052) (3,368,161) (20,441,064) (19,797,914)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 2,160,232 1,481,192 (445,424) (249,173)
Change in unrealized gain (loss) on investments ..... 12,931,948 6,345,678 4,218,681 (3,789,649)
------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 15,092,180 7,826,870 3,773,257 (4,038,822)
------------- -------------- -------------- --------------
Reinvested capital gains ............................ 1,431,110 1,385,825 - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 16,374,064 9,270,505 9,681,914 2,505,604
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 3,933,159 3,652,787 6,432,559 7,028,459
Transfers between funds ............................. 3,829,604 4,408,321 (8,165,800) (8,764,388)
Redemptions ......................................... (4,705,611) (4,363,953) (14,959,843) (14,629,983)
Annuity benefits .................................... (4,444) (3,562) (18,506) (18,802)
Annual contract maintenance charge (note 2) ......... (61,538) (56,195) (159,430) (188,842)
Contingent deferred sales charges (note 2) .......... (36,519) (39,686) (128,121) (164,770)
Adjustments to maintain reserves .................... 1,147 3,728 2,917 4,112
------------- -------------- -------------- --------------
Net equity transactions ......................... 2,955,798 3,601,440 (16,996,224) (16,734,214)
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 19,329,862 12,871,945 (7,314,310) (14,228,610)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 48,315,224 35,443,279 130,153,978 144,382,588
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... 67,645,086 48,315,224 122,839,668 130,153,978
============= ============== ============== ==============
</TABLE>
(Continued)
9
<PAGE> 9
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 and 1996
<TABLE>
<CAPTION>
NSATHIncBd NSATMyMkt
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 30 - 2,286,364 2,221,179
Mortality, expense and administration
charges (note 2) .................................. (4) - (583,593) (586,368)
-------------- -------------- -------------- --------------
Net investment activity ........................... 26 - 1,702,771 1,634,811
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... - - 22,275,683 16,825,670
Cost of mutual fund shares sold ..................... - - (22,275,683) (16,825,670)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... - - - -
Change in unrealized gain (loss) on investments ..... 18 - - -
-------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 18 - - -
-------------- -------------- -------------- --------------
Reinvested capital gains ............................ - - - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 44 - 1,702,771 1,634,811
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 70 - 16,515,995 12,586,742
Transfers between funds ............................. 2,734 - (13,814,402) (6,202,854)
Redemptions ......................................... - - (8,106,654) (7,615,191)
Annuity benefits .................................... - - (4,656) (5,312)
Annual contract maintenance charge (note 2) ......... - - (59,936) (67,312)
Contingent deferred sales charges (note 2) .......... - - (47,539) (59,147)
Adjustments to maintain reserves .................... - - (112) 1,445
-------------- -------------- -------------- --------------
Net equity transactions ......................... 2,804 - (5,517,304) (1,361,629)
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 2,848 - (3,814,533) 273,182
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... - - 46,180,606 45,907,424
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 2,848 - 42,366,073 46,180,606
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NSATTotRe NBAMTBaL
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ 7,841,110 7,984,819 704,341 838,838
Mortality, expense and administration
charges (note 2) .................................. (6,817,098) (5,386,397) (534,476) (489,489)
------------- -------------- -------------- --------------
Net investment activity ........................... 1,024,012 2,598,422 169,865 349,349
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 24,399,427 23,953,506 4,206,979 2,368,955
Cost of mutual fund shares sold ..................... (11,146,878) (16,293,604) (3,740,040) (2,120,743)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 13,252,549 7,659,902 466,939 248,212
Change in unrealized gain (loss) on investments ..... 92,265,314 48,966,019 4,192,554 (3,276,246)
------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 105,517,863 56,625,921 4,659,493 (3,028,034)
------------- -------------- -------------- --------------
Reinvested capital gains ............................ 18,191,970 16,952,052 1,807,809 4,664,756
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 124,733,845 76,176,395 6,637,167 1,986,071
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 35,235,957 34,517,904 3,791,197 4,763,121
Transfers between funds ............................. 7,251,400 1,127,420 (2,569,977) (1,712,251)
Redemptions ......................................... (45,327,124) (36,069,802) (3,117,346) (2,295,068)
Annuity benefits .................................... (70,375) (61,191) (8) -
Annual contract maintenance charge (note 2) ......... (623,664) (582,331) (67,133) (66,349)
Contingent deferred sales charges (note 2) .......... (290,852) (313,761) (53,200) (52,996)
Adjustments to maintain reserves .................... 17,772 18,381 402 956
------------- -------------- -------------- --------------
Net equity transactions ......................... (3,806,886) (1,363,380) (2,016,065) 637,413
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 120,926,959 74,813,015 4,621,102 2,623,484
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 450,382,051 375,569,036 38,423,351 35,799,867
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... 571,309,010 450,382,051 43,044,453 38,423,351
============= ============== ============== ==============
</TABLE>
10
<PAGE> 10
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 and 1996
<TABLE>
<CAPTION>
StOpp2 TemIntFd
------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 38,347 15,972 466,908 107,957
Mortality, expense and administration
charges (note 2) .................................. (128,404) (26,821) (302,177) (131,944)
-------------- -------------- -------------- --------------
Net investment activity ........................... (90,057) (10,849) 164,731 (23,987)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............... 82,371 73,157 571,627 165,388
Cost of mutual fund shares sold ..................... (69,365) (68,700) (402,432) (130,660)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............... 13,006 4,457 169,195 34,728
Change in unrealized gain (loss) on investments ..... 1,422,166 405,504 1,653,443 2,132,886
-------------- -------------- -------------- --------------
Net gain (loss) on investments .................... 1,435,172 409,961 1,822,638 2,167,614
-------------- -------------- -------------- --------------
Reinvested capital gains ............................ 691,280 20,084 187,679 31,488
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 2,036,395 419,196 2,175,048 2,175,115
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 6,100,729 3,778,181 12,123,462 6,483,962
Transfers between funds ............................. 1,528,491 1,095,893 2,086,538 1,002,829
Redemptions ......................................... (534,715) (44,718) (1,857,318) (354,212)
Annuity benefits .................................... - - - -
Annual contract maintenance charge (note 2) ......... (34,063) (2,768) (64,246) (36,940)
Contingent deferred sales charges (note 2) .......... (7,263) (572) (12,465) (4,139)
Adjustments to maintain reserves .................... (368) 142 (1,440) 546
-------------- -------------- -------------- --------------
Net equity transactions ......................... 7,052,811 4,826,158 12,274,531 7,092,046
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... 9,089,206 5,245,354 14,449,579 9,267,161
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 5,410,688 165,334 15,418,578 6,151,417
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 14,499,894 5,410,688 29,868,157 15,418,578
============== ============== ============== ==============
</TABLE>
11
<PAGE> 11
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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 American
Century VP - American Century VP 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:
Funds of the AIM Variable Insurance Funds, Inc. (AIM VI);
AIM VI - Capital Appreciation Fund (AIMCapAp)*
AIM VI - International Equity Fund (AIMIntEq)*
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Advantage (ACVPAdv)
(formerly TCI Portfolios - TCI Advantage)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
American Century VP - American Century VP Income & Growth
(ACVPIncGr)*
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)*
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)*
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 (FidVIPEI)
Fidelity VIP - High Income Portfolio (FidVIPHI)*
Portfolio of the Janus Aspen Series (Janus AS);
Janus AS - Janus Aspen International Growth Portfolio
(JanASIntGr)*
12
<PAGE> 12
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)*
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolio of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
Strong Opportunity Fund II, Inc. (StOpp2)*
(formerly Strong Special Fund II, Inc.)
Portfolio of the Templeton Variable Products Series Fund
(Templeton VPS);
Templeton VPS - Templeton International Fund (TemIntFd)*
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. 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.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
*This fund is only available for contracts issued to Plans established under the
NEA Valuebuilder Annuity.
13
<PAGE> 13
(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 contract 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.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
14
<PAGE> 14
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997,
for each series, in both the accumulation and payout phases.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
ANNUAL
Contracts in accumulation phase: UNITS UNIT VALUE RETURN
-------- --------- -------
<S> <C> <C> <C> <C>
AIM VI - Capital Appreciation Fund:
Tax qualified 2,066 $ 9.498576 $ 19,624 (5)%(a)
Non-tax qualified 626 9.498576 5,946 (5)%(a)
AIM VI - International Equity Fund:
Tax qualified 591 9.913890 5,859 (1)%(a)
American Century VP - American Century
VP Advantage:
Tax qualified 442,702 15.651770 6,929,070 11%
Non-tax qualified 169,301 15.651770 2,649,860 11%
Initial Funding by Depositor 25,000 17.013707 425,343 13%
American Century VP - American Century
VP Capital Appreciation:
Tax qualified 1,536,676 14.829811 22,788,615 (5)%
Non-tax qualified 643,504 14.829811 9,543,043 (5)%
American Century VP - American Century
VP Income & Growth:
Tax qualified 18,598 10.403924 193,492 4%(a)
Non-tax qualified 2,246 10.403924 23,367 4%(a)
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified 967,914 20.223412 19,574,524 27%
Non-tax qualified 59,654 20.223412 1,206,407 27%
Dreyfus Stock Index Fund:
Tax qualified 2,033,357 21.913276 44,557,513 31%
Non-tax qualified 456,511 21.913276 10,003,652 31%
Dreyfus VIF - Capital Appreciation Portfolio:
Tax qualified 2,752 10.244238 28,192 2%(a)
Non-tax qualified 487 10.244238 4,989 2%(a)
Dreyfus VIF - Quality Bond Portfolio:
Tax qualified 377,157 11.533218 4,349,834 8%
Non-tax qualified 30,747 11.533218 354,612 8%
Dreyfus VIF - Small Cap Portfolio:
Tax qualified 3,392,727 17.567589 59,602,034 15%
Non-tax qualified 173,470 17.567589 3,047,450 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified 4,809,504 20.553936 98,854,237 26%
Non-tax qualified 1,235,093 20.553936 25,386,022 26%
Fidelity VIP - High Income Portfolio:
Tax qualified 1,184,586 15.396163 18,238,079 16%
Non-tax qualified 70,227 15.396163 1,081,226 16%
Janus AS - Janus Aspen
International Growth Portfolio:
Tax qualified 978 9.952334 9,733 0%(a)
Non-tax qualified 2,117 9.952334 21,069 0%(a)
</TABLE>
15
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Capital Appreciation Fund:
Tax qualified 2,023,820 23.867569 48,303,663 33%
Non-tax qualified 808,136 23.867569 19,288,242 33%
Nationwide SAT - Government Bond Fund:
Tax qualified 2,630,778 32.572519 85,691,066 8%
Non-tax qualified 1,136,230 32.584532 37,023,523 8%
Nationwide SAT - High Income Bond Fund:
Tax qualified 279 10.206766 2,848 2%(a)
Nationwide SAT - Money Market Fund:
Tax qualified 1,487,528 21.120495 31,417,328 4%
Non-tax qualified 476,129 22.947799 10,926,113 4%
Nationwide SAT - Total Return Fund:
Tax qualified 5,163,514 79.422176 410,097,518 28%
Non-tax qualified 2,084,153 77.137765 160,766,904 28%
Neuberger & Berman AMT - Balanced Portfolio:
Tax qualified 1,725,578 18.349145 31,662,881 18%
Non-tax qualified 620,264 18.349145 11,381,314 18%
Strong Opportunity Fund II, Inc.:
Tax qualified 897,935 15.098205 13,557,207 24%
Non-tax qualified 62,437 15.098205 942,687 24%
Templeton VPS - Templeton International Fund:
Tax qualified 1,817,862 15.599596 28,357,913 12%
Non-tax qualified 96,813 15.599596 1,510,244 12%
======== ========
Reserves for annuity contracts in payout phase:
Tax qualified 383,997
Non-tax qualified 269,466
-----------
$ 1,220,486,706
===============
</TABLE>
(a) This investment option was not being utilized for the entire period.
16
<PAGE> 16
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Multi-Flex Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Multi-Flex Variable Account as of December
31, 1997, and the related statements of operations and changes in contract
owners' equity for each of the years in the two year period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 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, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Multi-Flex
Variable Account as of December 31, 1997, and the results of its operations and
its changes in contract owners' equity for each of the years in the two year
period then ended in conformity with generally accepted accounting principles.
[KPMG Peat Marwick LLP]
Columbus, Ohio
February 6, 1998
17
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19
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
