<PAGE> 1
[MULTI-FLEX LOGO]
- -------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NATIONWIDE(R) [NATIONWIDE INSURANCE LOGO]
MULTI-FLEX
VARIABLE ACCOUNT
<PAGE> 2
[NATIONWIDE LIFE INSURANCE COMPANY LETTERHEAD]
[JOSEPH J. GASPER PHOTO]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 1998
annual report of the Nationwide Multi-Flex Variable Account.
Equity markets again defied the odds in 1998 to tally a fourth straight year of
double-digit gains, as measured by the major indices. This surprise came
following the breathtaking correction during the third quarter that gave us a
broad double-digit retreat. Fixed income investments also provided respectable
returns in 1998, supported by the continued low inflationary environment and
favorable Federal Reserve actions.
The performance of the American economy continues strong into 1999. However, we
believe the persisting slump in Asia and recent difficulties in Latin America
will inevitably take their toll and dampen growth in the United States. This
moderation, we think, will be healthy for our economy and get us back to a more
sustainable growth level. We look for interest rates to continue within the
range of the recent past, and we expect inflation to remain subdued. Moreover,
we remain optimistic about long-term prospects for U.S. business activity;
holders of financial assets should continue to profit from the anticipated
favorable investment climate.
We are pleased you have chosen our Company to provide the investment products
and services to help you meet your retirement savings and financial planning
goals.
/s/ Joseph J. Gasper
---------------------------
Joseph J. Gasper, President
February 16, 1999
3
<PAGE> 3
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
AIM VI -- Capital Appreciation Fund (AIMCapAp)
35,801 shares (cost $824,260) ............................ $ 902,180
AIM VI -- International Equity Fund (AIMIntEq)
7,078 shares (cost $141,544) ............................. 138,867
American Century VP -- American Century
VP Advantage (ACVPAdv)
1,521,309 shares (cost $8,871,864) ....................... 10,557,883
American Century VP -- American Century
VP Capital Appreciation (ACVPCapAp)
2,706,430 shares (cost $26,986,527) ...................... 24,412,001
American Century VP -- American Century
VP Income & Growth (ACVPIncGr)
655,206 shares (cost $3,929,447) ......................... 4,442,295
The Dreyfus Socially Responsible Growth Fund, Inc.
(DrySRGro)
1,231,609 shares (cost $29,684,353) ...................... 38,278,394
Dreyfus Stock Index Fund (DryStkIx)
2,846,471 shares (cost $64,611,510) ...................... 92,567,233
Dreyfus VIF -- Capital Appreciation Portfolio (DryCapAp)
161,441 shares (cost $5,323,592) ......................... 5,829,639
Dreyfus VIF -- Quality Bond Portfolio (DryQualBd)
590,148 shares (cost $6,872,826) ......................... 6,786,701
Dreyfus VIF -- Small Cap Portfolio (DrySmCap)
1,358,914 shares (cost $71,085,983) ...................... 73,259,081
Fidelity VIP -- Equity-Income Portfolio (FidVIPEI)
5,816,138 shares (cost $112,082,448) ..................... 147,846,236
Fidelity VIP -- High Income Portfolio (FidVIPHI)
2,186,201 shares (cost $26,831,321) ..................... 25,206,895
Janus AS -- Janus Aspen International Growth
Portfolio (JanASIntGr)
176,546 shares (cost $3,757,661) ......................... 3,755,142
Nationwide SAT -- Capital Appreciation Fund (NSATCapAp)
2,347,644 shares (cost $36,660,018) ...................... 62,423,858
Nationwide SAT -- Government Bond Fund (NSATGvtBd)
9,184,632 shares (cost $102,920,860) ..................... 107,368,353
Nationwide SAT -- High Income Bond Fund (NSATHIncBd)
28,946 shares (cost $286,837) ............................ 290,622
</TABLE>
4
<PAGE> 4
<TABLE>
<S> <C>
Nationwide SAT -- Money Market Fund (NSATMyMkt)
38,784,037 shares (cost $38,784,037) ..................... 38,784,037
Nationwide SAT -- Total Return Fund (NSATTotRe)
27,821,663 shares (cost $318,169,401) .................... 511,918,605
Neuberger & Berman AMT -- Balanced Portfolio (NBAMTBal)
2,762,700 shares (cost $42,351,459) ...................... 45,142,521
Strong Opportunity Fund II, Inc. (StOpp2)
1,075,487 shares (cost $21,481,784) ...................... 23,359,584
Templeton VPS -- Templeton International Fund --
Class I (TemIntFd)
1,717,540 shares (cost $31,351,488) ...................... 35,535,906
--------------
Total investments ..................................... 1,258,806,033
Accounts receivable .......................................... 6,371
--------------
Total assets .......................................... 1,258,812,404
Accounts payable ............................................... 94,948
--------------
Contract owners' equity (note 4) ...............................$1,258,717,456
==============
</TABLE>
See accompanying notes to financial statements.
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5
<PAGE> 5
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNER'S EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL AIMCAPAP AIMINTEQ ACVPADV
----------------------- -------------- ------------ ----------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................... $ 20,842,641 22,670,838 1,303 5 1,210 1 216,901 158,735
Mortality, expense and administration
charges (note 2)..................... (16,314,807) (14,230,283) (6,208) (12) (891) (2) (124,133) (128,515)
-------------- ------------- ------- ------ --------- --- ---------- ----------
Net investment activity.............. 4,527,834 8,440,555 (4,905) (7) 319 (1) 92,768 30,220
-------------- ------------- ------- ------ --------- --- ---------- ----------
Proceeds from mutual fund shares sold.. 270,437,065 93,597,620 43,627 -- 25,294 -- 1,825,984 1,974,464
Cost of mutual fund shares sold........ (162,114,095) (74,653,108) (39,795) -- (24,275) -- (1,514,576) (1,635,650)
-------------- ------------- ------- ------ --------- --- ---------- ----------
Realized gain (loss) on investments.. 108,322,970 18,944,512 3,832 -- 1,019 -- 311,408 338,814
Change in unrealized gain (loss)
on investments....................... (2,435,061) 143,730,354 77,316 603 (2,795) 118 252,847 195,541
-------------- ------------- ------- ------ --------- --- ---------- ----------
Net gain (loss) on investments....... 105,887,909 162,674,866 81,148 603 (1,776) 118 564,255 534,355
-------------- ------------- ------- ------ --------- --- ---------- ----------
Reinvested capital gains............... 45,381,013 36,308,617 23,090 66 -- 4 816,147 548,350
-------------- ------------- ------- ------ --------- --- ---------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations......................... 155,796,756 207,424,038 99,333 662 (1,457) 121 1,473,170 1,112,925
-------------- ------------- ------- ------ --------- --- ---------- ----------
Equity transactions:
Purchase payments received from
contract owners...................... 171,010,136 173,043,544 454,482 6,451 46,314 5,619 572,977 764,476
Transfers between funds................ -- -- 374,739 18,462 93,540 120 (351,854) (1,266,044)
Redemptions............................ (285,564,514) (97,519,435) (51,115) -- (5,180) -- (1,112,420) (944,093)
Annuity benefits....................... (113,703) (99,001) -- -- -- -- (23) (7)
Annual contract maintenance charge
(note 2)............................. (1,959,464) (1,743,035) (633) (2) (171) -- (15,231) (16,700)
Contingent deferred sales charges
(note 2)............................. (944,022) (824,723) (200) -- (39) -- (13,255) (14,965)
Adjustments to maintain reserves....... 5,561 22,836 3 (3) (4) (1) 77 12
-------------- ------------- ------- ------ --------- --- ---------- -----------
Net equity transactions.............. (117,566,006) 72,880,186 777,276 24,908 134,460 5,738 (919,729) (1,477,321)
-------------- ------------- ------- ------ --------- --- ---------- ----------
Net change in contract owners' equity.... 38,230,750 280,304,224 876,609 25,570 133,003 5,859 553,441 (364,366)
Contract owners' equity beginning
of period.............................. 1,220,486,706 940,182,482 25,570 -- 5,859 -- 10,004,517 10,368,913
-------------- ------------- ------- ------ --------- --- ---------- ----------
Contract owners' equity end of period.... $1,258,717,456 1,220,486,706 902,179 25,570 138,862 5,859 10,557,958 10,004,517
============== ============= ======= ====== ========= === ========== ==========
</TABLE>
6
<PAGE> 6
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ACVPCapAp ACVPIncGr DrySRGro Drystklx
---------------- ----------------- ----------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends.............$ -- -- 22,466 -- 59,690 75,046 990,158 633,022
Mortality, expense
and administration
charges (note 2)............... (347,914) (488,542) (28,528) (77) (377,408) (179,325) (955,725) (504,354)
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Net investment activity........ (347,914) (488,542) (6,062) (77) (317,718) (104,279) 34,433 128,668
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Proceeds form mutual
fund shares sold................ 7,431,160 11,459,625 247,808 557 863,412 421,736 1,666,853 707,521
Cost of mutual fund
shares sold..................... (7,063,514) (9,640,042) (230,017) (538) (500,142) (251,714) (804,459) (457,827)
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Realized gain (loss)
on investments................ 367,646 1,819,583 17,791 19 363,270 170,022 862,394 249,694
Change in unrealized
gain (loss) on investments..... (2,548,105) (3,909,793) 511,807 1,041 5,900,793 2,221,298 16,211,739 7,644,619
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Net gain (loss) on
investments.................. (2,180,459) (2,090,210) 529,598 1,060 6,264,063 2,391,320 17,074,133 7,894,313
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Reinvested capital gains........ 1,515,406 818,434 2,123 -- 1,386,849 585,969 182,250 1,507,200
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Net increase (decrease) in
contract owners'
equity resulting
from operations........... (1,012,967) (1,760,318) 525,659 983 7,333,194 2,873,010 17,290,816 9,530,181
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Equity transactions:
Purchase payments received from
contract owners................. 2,220,641 3,208,021 1,844,875 22,410 10,576,613 8,956,132 19,460,169 15,881,608
Transfers between funds.......... (5,465,509) (9,312,700) 2,112,196 193,474 1,465,431 2,728,693 7,196,900 9,231,643
Redemptions...................... (3,562,186) (4,504,076) (254,487) -- (1,776,381) (588,429) (5,731,400) (1,971,994)
Annuity benefits................. (190) (7) -- -- -- -- (2,559) --
Annual contract maintenance
charge (note 2)................. (50,076) (72,900) (2,425) (17) (83,289) (41,768) (145,678) (80,253)
Contingent deferred sales
charges (note 2)................ (49,503) (78,351) (342) -- (18,094) (8,178) (62,149) (22,485)
Adjustment to maintain reserves.. 513 (174) 259 9 428 (21) 2,514 1,530
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Net equity transactions..... (6,906,310)(10,760,187) 3,700,076 215,876 10,164,708 11,046,429 20,717,797 23,040,049
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Net change in contract
owners' equity.................. (7,919,277)(12,520,505) 4,225,735 216,859 17,497,902 13,919,439 38,008,613 32,570,230
Contract owners' equity
beginning of period ............ 32,331,863 44,852,368 216,859 -- 20,780,931 6,861,492 54,561,165 21,990,935
----------- ---------- ---------- ------- ----------- ----------- ----------- ----------
Contract owners' equity
end of period................... $24,412,586 32,331,863 4,442,594 216,859 38,278,833 20,780,931 92,569,778 54,561,165
=========== ========== ========== ======= =========== =========== =========== ==========
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
DryCapAp DryQualBd DrySmCap FidVIPEI
------------------ -------------------- ---------------------- ------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------- ------ --------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................ $ 29,273 205 336,884 214,911 252 66,440 1,767,643 1,376,653
Mortality, expense and
administration charges (note 2) .. (28,062) (16) (76,197) (43,572) (883,862) (618,547) (1,811,344) (1,336,938)
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Net investment activity ........... 1,211 189 260,687 171,339 (883,610) (552,107) (43,701) 39,715
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Proceeds from mutual fund shares
sold .............................. 232,731 -- 794,218 376,870 2,151,154 577,816 6,079,485 1,484,034
Cost of mutual fund shares sold ..... (209,881) -- (762,578) (380,850) (1,434,829) (353,809) (3,887,729) (998,925)
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Realized gain (loss) on
investments ..................... 22,850 -- 31,640 (3,980) 716,325 224,007 2,191,756 485,109
Change in unrealized gain (loss)
on investments .................... 506,293 (245) (184,062) 83,709 (4,434,714) 3,539,427 4,573,114 15,867,413
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Net gain (loss) on investments .... 529,143 (245) (152,422) 79,729 (3,718,389) 3,763,434 6,764,870 16,352,522
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Reinvested capital gains ............ 186 17 103,635 29,382 1,336,663 3,506,010 6,290,729 6,921,505
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ..... 530,540 (39) 211,900 280,450 (3,265,336) 6,717,337 13,011,898 23,313,742
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ................... 2,080,221 11,423 2,019,788 2,268,714 23,152,760 24,803,583 23,845,625 25,054,542
Transfers between funds ............. 3,450,453 21,796 517,074 (54,361) (3,926,582) 2,005,819 279,782 4,912,332
Redemptions ......................... (261,044) -- (643,999) (90,499) (5,065,492) (3,029,006) (13,156,692) (7,187,817)
Annuity benefits .................... -- -- -- -- -- -- (1,823) (998)
Annual contract maintenance
charge (note 2) ................... (2,389) (4) (14,669) (10,521) (220,760) (190,393) (238,894) (217,473)
Contingent deferred sales
charges (note 2) .................. (1,172) -- (7,839) (1,276) (64,756) (31,745) (141,165) (84,502)
Adjustments to maintain reserves .... (137) 5 113 96 (511) (50) 409 1,072
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Net equity transactions ......... 5,265,932 33,220 1,870,468 2,112,153 13,874,659 23,558,208 10,587,242 22,477,156
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Net change in contract owners' equity . 5,796,472 33,181 2,082,368 2,392,603 10,609,323 30,275,545 23,599,140 45,790,898
Contract owners' equity beginning
of period ........................... 33,181 -- 4,704,446 2,311,843 62,649,484 32,373,939 124,247,535 78,456,637
---------- ------ --------- --------- ---------- ---------- ----------- -----------
Contract owners' equity end of period . $5,829,653 33,181 6,786,814 4,704,446 73,258,807 62,649,484 147,846,675 124,247,535
========== ====== ========= ========= ========== ========== =========== ===========
</TABLE>
8
<PAGE> 8
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
FidVIPHI JanASIntGr NSATCapAp NSATGvtBd
----------------------- ----------------- ----------------------- ------------------------
1998 1997 1998 1997 1998 1997 1998 1997
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Investment activity:
Reinvested dividends............... $ 1,423,227 662,094 22,540 33 520,711 621,889 5,973,305 7,524,704
Mortality, expense and
administration charges (note 2).. (303,847) (177,447) (22,121) (22) (871,653) (771,115) (1,492,699) (1,616,047)
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Net investment activity.......... 1,119,380 484,647 419 11 (350,942) (149,226) 4,480,606 5,908,657
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Proceeds from mutual fund shares
sold............................. 487,817 328,986 260,312 -- 27,191,128 4,734,284 30,298,498 19,995,640
Cost of mutual fund shares sold.... (433,912) (284,239) (262,817) -- (12,328,964) (2,574,052) (29,393,218) (20,441,064)
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Realized gain (loss) on
investments.................... 53,905 44,747 (2,505) -- 14,862,164 2,160,232 905,280 (445,424)
Change in unrealized gain (loss) on
investments...................... (3,585,376) 1,402,718 (2,299) (219) (11,772) 12,931,948 2,221,884 4,216,681
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Net gain (loss) on investments... (3,531,471) 1,447,465 (4,804) (219) 14,850,392 15,092,180 3,127,164 3,773,257
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Reinvested capital gains........... 904,342 81,832 3,054 -- 1,743,763 1,431,110 515,384 --
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations...... (1,507,749) 2,013,944 (1,331) (208) 16,243,213 16,374,064 8,123,154 9,681,914
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners.................. 8,511,396 7,922,442 1,682,674 4,995 4,344,587 3,933,159 6,311,434 6,432,559
Transfers between funds............ 506,824 1,346,162 2,201,050 26,016 1,551,729 3,829,604 2,143,077 (8,165,800)
Redemptions........................ (1,543,731) (594,910) (155,078) -- (27,248,088) (4,705,611) (31,796,007) (14,959,843)
Annuity benefits................... -- -- -- -- (5,545) (4,444) (18,715) (18,506)
Annual contract maintenance charge
(note 2)......................... (62,035) (42,994) (2,187) -- (69,163) (61,538) (143,045) (159,430)
Contingent deferred sales charges
(note 2)......................... (17,150) (7,262) (787) -- (37,866) (36,519) (91,476) (128,121)
Adjustments to maintain reserves... (47) 44 12 (1) 829 1,147 (2,276) 2,917
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Net equity transactions.......... 7,395,257 8,623,482 3,725,684 31,010 (21,463,517) 2,955,798 (23,597,008) (16,996,224)
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Net change in contract owners'
equity............................. 5,887,508 10,637,426 3,724,353 30,802 (5,220,304) 19,329,862 (15,473,854) (7,314,310)
Contract owners' equity beginning of
period............................. 19,319,305 8,681,879 30,802 -- 67,645,086 48,315,224 122,839,668 130,153,978
----------- ---------- --------- ------ ----------- ---------- ----------- -----------
Contract owners' equity end of
period............................. $25,206,813 19,319,305 3,755,155 30,802 62,424,782 67,645,086 107,365,814 122,839,668
=========== ========== ========= ====== =========== ========== =========== ===========
</TABLE>
(Continued)
9
<PAGE> 9
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NSATHIncBd NSATMyMkt NSATTotRe NBAMTBal
---------------- ----------------- ----------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............ $ 12,442 30 2,073,211 2,286,364 5,590,811 7,841,110 1,016,529 704,341
Mortality, expense and
administration charges
(note 2)........................ (2,277) (4) (527,889) (583,593) (7,193,698) (6,817,098) (569,585) (534,476)
--------- ----- ----------- ----------- ----------- ----------- ---------- ---------
Net investment activity....... 10,165 26 1,545,322 1,702,771 (1,602,887) 1,024,012 446,944 169,865
--------- ----- ----------- ----------- ----------- ----------- ---------- ----------
Proceeds from mutual fund shares
sold........................... 232,973 -- 27,802,187 22,275,683 155,161,671 24,399,427 4,701,654 4,206,979
Cost of mutual fund shares
sold........................... (238,033) -- (27,802,187) (22,275,683) (68,662,100) (11,146,678) (4,516,095) (3,740,040)
--------- ----- ----------- ----------- ----------- ----------- ---------- -----------
Realized gain (loss)
on investments................ (5,060) -- -- -- 86,499,571 13,252,549 185,559 466,939
Change in unrealized
gain (loss) on investments.... 3,767 18 -- -- (18,444,180) 92,265,314 (3,399,106) 4,192,554
--------- ----- ----------- ----------- ----------- ----------- ---------- ----------
Net gain (loss) on
investments.................. (1,293) 18 -- -- 68,055,391 105,517,863 (3,213,547) 4,659,493
--------- ----- ----------- ----------- ----------- ----------- ---------- ----------
Reinvested capital gains........ -- -- -- -- 19,993,831 18,191,970 7,139,906 1,807,809
-------- ----- ----------- ----------- ----------- ----------- ---------- ---------
Net increase (decrease) in
contract owners' equity
resulting from operations.... 8,872 44 1,545,322 1,702,771 86,446,335 124,733,845 4,373,303 6,637,167
--------- ----- ----------- ----------- ---------- ----------- ---------- ----------
Equity transactions:
Purchase payments received from
contract owners................. 231,833 70 9,331,757 16,515,995 32,910,520 35,235,957 4,215,700 3,791,197
Transfers between funds.......... 61,586 2,734 (720,419) (13,814,402) (7,086,137) 7,251,400 (1,509,657) (2,569,977)
Redemptions...................... (14,158) -- (13,718,112) (8,106,654) (170,647,039) (45,327,124) (4,853,908) (3,117,346)
Annuity benefits................. -- -- (4,505) (4,656) (80,283) (70,375) (60) (8)
Annual contract maintenance
charge (note 2)................. (230) -- (53,369) (59,936) (657,048) (623,664) (65,141) (67,133)
Contingent deferred sales
charges (note 2)................ (128) -- (61,733) (47,539) (272,491) (290,852) (61,893) (53,200)
Adjustment to maintain reserves.. (8) -- 3,489 (112) 37 17,772 72 402
--------- ----- ----------- ----------- ----------- ----------- ---------- -----------
Net equity transactions...... 278,895 2,804 (5,222,892) (5,517,304) (145,832,441) (3,806,886) (2,274,887) (2,016,065)
--------- ----- ---------- ----------- ----------- ----------- ---------- -----------
Net change in contract owners'
equity......................... 287,767 2,848 (3,677,570) (3,814,533) (59,386,106) 120,926,959 2,098,416 4,621,102
Contract owners' equity
beginning of period............. 2,848 -- 42,366,073 46,180,606 571,309,010 450,382,051 43,044,453 38,423,351
--------- ----- ----------- ----------- ----------- ----------- ---------- -----------
Contract owners' equity end of
period.......................... $ 290,615 2,848 38,688,503 42,366,073 511,922,904 571,309,010 45,142,869 43,044,453
========== ===== ========== =========== =========== =========== ========== ==========
</TABLE>
10
<PAGE> 10
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
StOpp2 TemIntFd
------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends..................... $ 52,459 38,347 731,626 466,908
Mortality, expense and administration
charges (note 2)...................... (248,876) (128,404) (441,890) (302,177)
----------- ---------- ---------- ----------
Net investment activity............... (196,417) (90,057) 289,736 164,731
----------- ---------- ---------- ----------
Proceeds from mutual fund shares sold.... 569,604 82,371 2,369,495 571,627
Cost of mutual fund shares sold.......... (457,623) (69,365) (1,547,351) (402,432)
----------- ---------- ---------- ----------
Realized gain (loss) on investments... 111,981 13,006 822,144 169,195
Change in unrealized gain (loss) on
investments............................ 46,665 1,422,166 (128,877) 1,653,443
----------- ---------- ---------- ----------
Net gain (loss) on investments........ 158,646 1,435,172 693,267 1,822,638
----------- ---------- ---------- ----------
Reinvested capital gains................. 2,115,597 691,280 1,308,058 187,679
----------- ---------- ---------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations....................... 2,077,826 2,036,395 2,291,061 2,175,048
----------- ---------- ---------- ----------
Equity transactions:
Purchase payments received from
contract owners....................... 7,498,780 6,100,729 9,696,990 12,123,462
Transfers between funds................. 495,807 1,528,491 (3,390,030) 2,086,538
Redemptions............................. (1,150,570) (534,715) (2,817,427) (1,857,318)
Annuity benefits........................ - - - -
Annual contract maintenance charge
(note 2).............................. (51,449) (34,063) (81,582) (64,246)
Contingent deferred sales charges
(note 2).............................. (10,724) (7,263) (31,260) (12,465)
Adjustments to maintain reserves........ 83 (368) (294) (1,440)
----------- ---------- ---------- ----------
Net equity transactions.............. 6,781,927 7,052,811 3,376,397 12,274,531
----------- ---------- ---------- ----------
Net change in contract owners' equity..... 8,859,753 9,089,206 5,667,458 14,449,579
Contract owners' equity beginning of
period.................................. 14,499,894 5,410,688 29,868,157 15,418,578
----------- ---------- ---------- ----------
Contract owners' equity end of period..... $23,359,647 14,499,894 35,535,615 29,868,157
=========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 11
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(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);
American Century VP -- American Century VP Advantage (ACVPAdv)*
American Century VP -- American Century VP Capital Appreciation
(ACVPCapAP)*
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)*
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT -- Capital Appreciation Fund (NSATCapAp)
(not available to contracts established under NEA Valuebuilder)
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)
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<PAGE> 12
Portfolio of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT -- Balanced Portfolio (NBAMTBal)*
Strong Opportunity Fund II, Inc. (StOpp2)*
Portfolio of the Templeton Variable Products Series Fund
(Templeton VPS);
Templeton VPS -- Templeton International Fund -- Class I (TemIntFd)*
At December 31, 1998, 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.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds may
be similar to, and may in fact be modeled after, publicly traded mutual
funds, the underlying mutual funds are not otherwise directly related to
any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding
underlying mutual funds may differ substantially.
(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, 1998. 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.
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<PAGE> 13
The following contract charges are deducted by the Company: (a) an annual
contract maintenance charge of up to $30, dependent upon contract type and
issue date, 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; for NEA Valuebuilder Annuity
contracts issued before November 3, 1997, or in states which have not
approved the applicable contract modifications, a mortality and expense risk
charge and an administrative charge assessed through the daily unit value
calculation equal to an annual rate of 1.25% and .05%, respectively; for NEA
Valuebuilder Annuity contracts issued on or after the later of November 3,
1997, or the date on which state insurance authorities approve corresponding
contract modifications, an actuarial risk charge assessed through the daily
unit value calculation equal to an annual rate of 1.30%. 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.
*This fund is only available for contracts issued to Plans established under the
NEA Valuebuilder Annuity.
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<PAGE> 14
(4) Components of Contract owners' equity
The following is a summary of contract owners' equity at December 31, 1998,
for each series, in both the accumulation and payout phases.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
Contracts in accumulation phase: Units Unit Value Annual Return*
----- ---------- -------------------------
<S> <C> <C> <C> <C>
AIM VI -- Capital Appreciation Fund:
Tax qualified.......................... 75,146 $11.184821 $ 840,495 18%
Non-tax qualified...................... 5,515 11.184821 61,684 18%
AIM VI -- International Equity Fund:
Tax qualified......................... 11,832 11.300603 133,709 14%
Non-tax qualified..................... 456 11.300603 5,153 14%
American Century VP -- American Century
VP Advantage:
Tax qualified......................... 398,890 18.104123 7,221,554 16%
Non-tax qualified..................... 156,743 18.104123 2,837,695 16%
Initial Funding By Depositor.......... 25,000 19.938436 498,461 17%
American Century VP -- American Century
VP Capital Appreciation:
Tax qualified......................... 1,194,132 14.321327 17,101,555 (3)%
Non-tax qualified..................... 509,808 14.321327 7,301,127 (3)%
American Century VP -- American Century
VP Income & Growth:
Tax qualified......................... 319,965 13.027526 4,168,352 25%
Non-tax qualified..................... 21,051 13.027526 274,242 25%
The Dsryfus Socially Responsible
Growth Fund, Inc.:
Tax qualified......................... 1,409,837 25.825425 36,409,640 28%
Non-tax qualified..................... 72,378 25.825425 1,869,193 28%
Dreyfus Stock Index Fund:
Tax qualified......................... 2,822,344 27.730490 78,264,982 27%
Non-tax qualified..................... 515,394 27.730490 14,292,128 27%
Dreyfus VIF -- Capital Appreciation
Portfolio:
Tax qualified......................... 410,871 13.166473 5,409,722 29%
Non-tax qualified..................... 31,894 13.166473 419,931 29%
Dreyfus VIF -- Quality Bond Portfolio:
Tax qualified......................... 529,887 12.008318 6,363,052 4%
Non-tax qualified..................... 35,289 12.008318 423,762 4%
Dreyfus VIF -- Small Cap Portfolio:
Tax qualified......................... 4,221,501 16.742421 70,678,147 (5)%
Non-tax qualified..................... 154,139 16.742421 2,580,660 (5)%
Fidelity VIP -- Equity-Income Portfolio:
Tax qualified......................... 5,377,059 22.645632 121,766,899 10%
Non-tax qualified..................... 1,151,378 22.645632 26,073,682 10%
Fidelity VIP -- High Income Portfolio:
Tax qualified......................... 1,649,380 14.538235 23,979,074 (6)%
Non-tax qualified..................... 84,449 14.538235 1,227,739 (6)%
Janus AS -- Janus Aspen
International Growth Portfolio:
Tax qualified......................... 313,231 11.516019 3,607,174 16%
Non-tax qualified..................... 12,850 11.516019 147,981 16%
</TABLE>
(Continued)
15
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT -- Capital Appreciation Fund:
Tax qualified................................ 1,478,599 30.616503 45,269,531 28%
Non-tax qualified............................ 558,311 30.616503 17,093,530 28%
Nationwide SAT -- Government Bond Fund:
Tax qualified................................ 2,177,680 35.013105 76,247,338 7%
Non-tax qualified............................ 885,231 35.026017 31,006,116 7%
Nationwide SAT -- High Income Bond Fund:
Tax qualified................................ 26,163 10.658111 278,848 4%
Non-tax qualified............................ 1,104 10.658111 11,767 4%
Nationwide SAT -- Money Market Fund:
Tax qualified................................ 1,325,652 21.944976 29,091,401 4%
Non-tax qualified............................ 401,628 23.843612 9,576,262 4%
Nationwide SAT -- Total Return Fund:
Tax qualified................................ 4,128,211 92.558757 382,102,079 17%
Non-tax qualified............................ 1,438,302 89.896489 129,298,300 17%
Neuberger & Berman AMT -- Balanced Portfolio:
Tax qualified................................ 1,672,034 20.316082 33,969,180 11%
Non-tax qualified............................ 549,897 20.316082 11,171,753 11%
Strong Opportunity Fund II, Inc.:
Tax qualified................................ 1,309,839 16.920120 22,162,633 12%
Non-tax qualified............................ 70,745 16.920120 1,197,014 12%
Templeton VPS -- Templeton International Fund:
Tax qualified................................ 2,030,341 16.833378 34,177,498 8%
Non-tax qualified............................ 80,680 16.833378 1,358,117 8%
========= =========
Reserves for annuity contracts in payout phase:
Tax qualified................................ 460,852
Non-tax qualified............................ 287,444
--------------
$1,258,717,456
==============
</TABLE>
* The annual return does not include contract charges satisfied by surrendering
units.
16
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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, 1998, 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, 1998, 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, 1998, 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 LLP
Columbus, Ohio
February 5, 1999
- ----------------------------------------------------------------------------
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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
