<PAGE> 1
[NACo LOGO]
NACo
VARIABLE
ACCOUNT
Annual Report
to
Participants and Retired Participants
December 31, 1995
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
[NATIONWIDE LOGO]
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[NATIONWIDE LOGO]
[photo of Peter F. Frenzer, President]
PRESIDENT'S MESSAGE
Nationwide Life Insurance Company is pleased to bring you the 1995 annual
report of the NACo Variable Account.
Both equity and fixed income investments turned in a stellar performance during
1995. The major market indices ended the year fully one-third or more higher
than their levels at the beginning of the year. These results equate directly
to the returns enjoyed by our variable annuity participants and contract owners.
Low interest rates and modest inflation should provide a continued favorable
environment for stocks and fixed income investments during 1996. Slowing levels
of economic activity and uncertainty about corporate profits may, however,
dampen a repeat of the strong 1995 market performance. The diverse offering of
investment options within your contract should enable you to take advantage of
changing market conditions.
The year 1995 was a record-setting sales year for our variable investment
products. For this we thank you, our valued customer, for your confidence in the
Nationwide Insurance Enterprise and in our products. Please do not hesitate to
let us know how we can better serve your financial planning and retirement
needs.
/s/ Peter F. Frenzer
Peter F. Frenzer, President
2
<PAGE> 3
Contents
<TABLE>
<S> <C>
HOW TO READ THE ANNUAL REPORT........................................ 5
Explanation on how to read and understand
the various financial reports
FUND PERFORMANCES.................................................... 6
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY......... 8
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY........................................... 11
NOTES TO FINANCIAL STATEMENTS........................................ 12
SCHEDULES OF CHANGES IN UNIT VALUE................................... 15
INDEPENDENT AUDITORS' REPORT......................................... 19
</TABLE>
3
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[THIS PAGE LEFT BLANK INTENTIONALLY]
4
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HOW TO READ THE ANNUAL REPORT
This Annual Report is sent to all customers who own a Nationwide annuity with
all or some of the funds in the NACo Variable Account (the Account). The Account
is a separate account trust which offers investment options in twenty-seven
mutual funds from fifteen mutual fund houses.
The Annual Report has three major financial sections.
Statement of Assets, Liabilities and Contract Owners' Equity
This statement, beginning on page 8, lists all the funds in the Account, the
number of shares owned, the amount paid for the shares (i.e., cost) and their
market value on December 31, 1995. The funds are presented in alphabetical
order. The market value of the assets change as the underlying mutual fund
shares change in value. As contract owners make exchanges between the funds, the
number of shares in each fund increases and decreases. When money is deposited
(withdrawn) by contract owners, shares of the mutual funds are bought (sold) by
the Account. The total market value of the funds is equal to the Total
investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares or reinvested dividend shares added to the contract owners'
accounts, but not yet added to Total investments. Total investments plus
Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 10.
Statements of Operations and Changes in Contract Owners' Equity
These statements, found on page 11, show the activity in the Account from
January 1 to December 31, 1995, 1994 and 1993.
The Investment activity section shows the changes in unrealized gain or loss of
the mutual funds in the Account, realized gain or loss as shares of the funds
are bought and sold, and dividends and capital gains earnings from the
underlying mutual funds.
The Equity transactions section illustrates the purchase payments received by
the Account as new contracts are sold, existing contract owners deposit
additional funds, money is withdrawn, contracts are canceled and annuity
benefits are paid.
Expenses are the charges associated with the contract. Note 2 on page 13
outlines these charges.
Net change in contract owners' equity equals Investment activity plus Equity
transactions minus Expenses.
The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
Schedules of Changes in Unit Value
As a contract owner, you invest in the mutual funds offered in your annuity
contract. However, you do not buy shares of the mutual fund. Instead, the
Account buys shares of the fund and you in turn purchase units of the Account.
The number of units you own will not change unless you contribute to or
withdraw money from your account. The value of your contract can change based
on the value of the units you own. For example, if you purchase 100 units at
$10 per unit, the value of your contract is $1,000. If the value of the units
increases to $12 per unit, your contract value increases to $1,200. Therefore,
to determine the value of your account, multiply the number of units of each
fund you own by the fund's unit value.
The Schedules of Changes in Unit Value, beginning on page 15, show you the unit
value at the beginning of the period and at the end of the period. The
percentage increase (decrease) in unit value shows how it changed in value. This
is computed by subtracting the beginning unit value from the ending unit value
and dividing the difference by the beginning unit value. This can be used as a
measure of the performance of the funds over the three annual periods reported.
As you review the following pages of the Annual Report, the Notes to Financial
Statements, beginning on page 12, will also help explain and clarify the various
statements and schedules.
5
<PAGE> 6
FUND PERFORMANCES
AVERAGE ANNUAL TOTAL RETURN: NON-STANDARDIZED++
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
FUNDS+ 1994 1995 1/1/93-12/31/95 1/1/91-12/31/95 1/1/86-12/31/95
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH FUNDS
Fidelity OTC Portfolio -3.62% 36.92% 12.38% 19.02% 14.68%
Mass. Investors Growth Stock Fund -7.61% 27.13% 10.02% 15.49% 12.12%
Putnam Voyager Fund -0.51% 38.83% 17.45% 21.26% 17.15%
Twentieth Century Growth Investors -2.42% 19.21% 6.14% 13.67% 13.15%
Twentieth Century Ultra Investors -4.53% 36.38% 16.25% 23.82% 18.63%
GROWTH FUNDS
Dreyfus Third Century Fund -8.33% 34.53% 8.74% 12.18% 10.52%
Fidelity Contrafund -2.05% 35.00% 16.73% 22.89% 18.27%
Fidelity Magellan(R) Fund -2.74% 35.53% 17.63% 19.24% 15.65%
MFS(R) Growth Opportunities Fund* -5.06% 33.22% 13.33% 13.49% 10.21%
Nationwide(R) Growth Fund* 0.51% 27.49% 12.22% 14.93% 11.71%
Putnam Investors Fund -4.10% 36.25% 15.12% 15.73% 12.80%
Seligman Growth Fund -4.75% 27.26% 8.53% 14.14% 11.89%
GROWTH AND INCOME FUNDS
Evergreen Total Return Fund* -7.30% 22.70% 8.36% 11.06% 8.35%
Fidelity Equity-Income Fund -0.70% 30.57% 15.93% 17.80% 12.03%
Fidelity Puritan Fund 0.84% 20.32% 13.47% 15.59% 11.99%
Investment Company of America** -0.79% 29.40% 12.38% 13.65% 13.11%
Nationwide(R) Fund -0.37% 28.76% 10.71% 12.28% 12.33%
Neuberger & Berman Guardian Fund -0.34% 30.87% 13.91% 18.25% 13.77%
INCOME FUNDS
Bond Fund of America** -5.92% 17.13% 7.60% 10.50% 8.79%
Fidelity Capital & Income Fund* -5.51% 15.63% 10.57% 17.13% 10.15%
MAS Funds Fixed Income Portfolio -6.33% 17.91% 7.63% 10.02% 9.15%
MFS(R) High Income Fund -3.55% 16.04% 9.80% 17.75% 8.21%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) -1.69% 10.34% 14.62% 10.57% 13.83%
Templeton Foreign Fund -0.58% 10.11% 14.06% 10.86% 14.22%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund -2.84% 12.49% 5.05% 6.60% 7.02%
MONEY MARKET FUND
Nationwide(R) Money Market Fund 2.76% 4.51% 2.95% 3.14% 4.69%
U.S. TREASURY MONEY MARKET FUND
AIM STIT Treasury Portfolio 3.16% 4.94% 3.42% 3.65% 5.12%
S & P 500 *** 0.36% 37.58% 14.24% 15.48% 13.79%
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
*** The S & P 500 is a stock market index which assumes investment in the 500
largest available stocks. This unmanaged index is normally used as a
comparison or benchmark against equity mutual funds.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able to
maintain a stable net asset value of $1 per share.
++ SEC and NASD regulations require that any reporting of product performance
be accompanied by standardized data and the disclosures are on the
following page. Please review this information and a product prospectus
before investing.
Note: The above illustration represents past performance based on a $1,000
hypothetical Investment and reflects the deduction of an actuarial risk fee
which is equivalent to 0.95% on an annualized basis. The results shown represent
past performance and should not be considered a representation of performance
or investor experience of the funds in the future. Investment returns and
principal are not guaranteed under these variable options. The unit values at
the time of redemption may be worth more or less than their original cost.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
Sources: National Financial Services
Computer Directions Advisors, Inc.
6
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AVERAGE ANNUAL TOTAL RETURN: STANDARDIZED
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
FUNDS+ 1994 1995 1/1/93-12/31/95 1/1/91-12/31/95 1/1/86-12/31/95
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH FUNDS
Fidelity OTC Portfolio -7.47% 32.92% 11.31% 18.62% 14.56%
Mass. Investors Growth Stock Fund -11.30% 23.13% 8.91% 15.04% 11.98%
Putnam Voyager Fund -4.49% 34.83% 16.47% 20.89% 17.05%
Twentieth Century Growth Investors -6.32% 15.21% 4.94% 13.19% 13.02%
Twentieth Century Ultra Investors -8.35% 32.38% 15.26% 23.48% 18.55%
GROWTH FUNDS
Dreyfus Third Century Fund -11.99% 30.53% 7.60% 11.67% 10.35%
Fidelity Contrafund -5.97% 31.00% 15.74% 22.53% 18.18%
Fidelity Magellan(R) Fund -6.63% 31.53% 16.66% 18.84% 15.54%
MFS(R) Growth Opportunities Fund* -8.86% 29.22% 12.29% 13.01% 10.04%
Nationwide(R) Growth Fund* -3.49% 23.49% 11.15% 14.47% 11.57%
Putnam Investors Fund -7.94% 32.25% 14.10% 15.28% 12.67%
Seligman Growth Fund -8.56% 23.26% 7.38% 13.67% 11.74%
GROWTH AND INCOME FUNDS
Evergreen Total Return Fund* -11.01% 18.70% 7.21% 10.52% 8.15%
Fidelity Equity-Income Fund -4.67% 26.57% 14.93% 17.38% 11.88%
Fidelity Puritan Fund -3.16% 16.32% 12.42% 15.14% 11.84%
Investment Company of America** -4.76% 25.40% 11.32% 13.16% 12.98%
Nationwide(R) Fund -4.35% 24.76% 9.61% 11.78% 12.19%
Neuberger & Berman Guardian Fund -4.32% 26.87% 12.87% 17.83% 13.64%
INCOME FUNDS
Bond Fund of America** -9.68% 13.13% 6.44% 9.96% 8.60%
Fidelity Capital & Income Fund* -9.29% 11.63% 9.47% 16.70% 9.99%
MAS Funds Fixed Income Portfolio -10.08% 13.91% 6.47% 9.47% 8.97%
MFS(R) High Income Fund -7.41% 12.04% 8.68% 17.33% 8.01%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) -5.63% 6.34% 13.60% 10.03% 13.71%
Templeton Foreign Fund -4.56% 6.11% 13.02% 10.32% 14.09%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund -6.73% 8.49% 3.83% 5.97% 6.80%
MONEY MARKET FUND
Nationwide(R) Money Market Fund -1.24% 0.51% 1.68% 2.42% 4.42%
U.S. TREASURY MONEY MARKET FUND
AIM STIT Treasury Portfolio -0.84% 0.94% 2.16% 2.95% 4.86%
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able to
maintain a stable net asset value of $1 per share.
Note: The above illustration represents past fund performance based on a $1,000
hypothetical Investment. The performance figures reflect the deduction of a
0.95% annual asset fee and the maximum contingent deferred sales charge that
would apply only in the event that this Variable Annuity contract is terminated
by your employer.
Investment principal and investment returns are not guaranteed under these
variable options. Unit values at the time of redemption may be worth more or
less than their original cost. The results shown above should not be considered
a representation of performance or investor experience of the funds in the
future.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local representative. Please read
the prospectus(es) carefully before investing or sending money.
7
<PAGE> 8
NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
The Bond Fund of America(SM), Inc. (BdFdAm)
966,726 shares (cost $13,210,009) ......................................................... $ 13,418,163
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
2,554,050 shares (cost $20,068,031) ....................................................... 21,045,369
The Evergreen Total Return Fund - Class Y (EvTotRet)
230,460 shares (cost $4,576,110) .......................................................... 4,590,762
Federated U.S. Government Securities Fund: 2-5 Years -Institutional Shares (FedUSGvt)
262,206 shares (cost $2,729,803) .......................................................... 2,802,984
Fidelity Capital & Income Fund (FidCapIn)
331,847 shares (cost $2,576,964) .......................................................... 3,039,718
Fidelity Contrafund (FidContr)
2,992,441 shares (cost $99,264,483) ....................................................... 113,772,601
Fidelity Equity-Income Fund (FidEqInc)
4,843,463 shares (cost $142,151,275) ...................................................... 183,712,549
Fidelity Magellan(R) Fund (FidMgln)
964,729 shares (cost $72,728,212).......................................................... 82,947,379
Fidelity OTC Portfolio (FidOTC)
163,266 shares (cost $5,074,525) .......................................................... 4,951,862
Fidelity Puritan Fund (FidPurtn)
772,356 shares (cost $12,178,275) ......................................................... 13,137,773
The Investment Company of America(R) (InvCoAm)
1,468,962 shares (cost $28,004,047) ....................................................... 31,744,268
MAS Funds - Fixed Income Portfolio (MASFIP)
45,283 shares (cost $534,869) ............................................................. 533,884
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
987,782 shares (cost $10,841,194) ......................................................... 11,794,119
MFS(R) High Income Fund - Class A (MFSHiInc)
1,814,362 shares (cost $9,333,551) ........................................................ 9,398,396
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
737,796 shares (cost $8,261,283) .......................................................... 7,842,774
Nationwide(R) Fund (NWFund)
1,907,625 shares (cost $30,186,873) ....................................................... 33,593,274
Nationwide(R) Growth Fund (NWGroFd)
521,177 shares (cost $5,600,082) .......................................................... 6,426,114
Nationwide(R) Money Market Fund (NWMyMkt)
43,083,744 shares (cost $43,083,744) ...................................................... 43,083,744
Neuberger & Berman Guardian Fund (NBGuard)
431,214 shares (cost $9,920,957) .......................................................... 9,930,869
Putnam Investors Fund - Class A (PutInvFd)
2,968,148 shares (cost $24,804,430) ....................................................... 25,555,752
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C>
Putnam Voyager Fund - Class A (PutVoyFd)
4,909,187 shares (cost $58,941,231) ............................................. 74,865,100
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,055,610 shares (cost $5,643,080) .............................................. 5,510,283
Short-Term Investments Trust -Treasury Portfolio - Institutional Class (AIMTreas)
1,707,142 shares (cost $1,707,142) .............................................. 1,707,142
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
873,375 shares (cost $10,159,948) ............................................... 10,681,375
Templeton Foreign Fund - Class I (TemForFd)
1,848,460 shares (cost $17,201,870) ............................................. 16,968,860
Twentieth Century Investors, Inc. - Growth Investors (TCGroInv)
7,717,862 shares (cost $164,229,994) ............................................ 149,649,339
Twentieth Century Investors, Inc. - Ultra Investors (TCUltra)
3,842,555 shares (cost $86,573,461) ............................................. 100,329,109
------------
Total investments ............................................................ 983,033,562
Accounts receivable ............................................................... 1,759,794
------------
Total assets ................................................................. 984,793,356
Accounts payable .................................................................. 201,236
------------
Contract owners' equity ........................................................... $984,592,120
============
</TABLE>
9
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<TABLE>
<CAPTION>
Units Unit Value
---------- --------
Contract owners' equity represented by:
<S> <C> <C> <C>
The Bond Fund of America(SM), Inc...................... 6,578,720 $2.039710 $13,418,681
The Dreyfus Third Century Fund, Inc.................... 9,402,637 2.238323 21,046,139
The Evergreen Total Return Fund - Class Y.............. 2,635,928 1.741651 4,590,867
Federated U.S. Government Securities Fund: 2-5 Years-
Institutional Shares................................. 2,344,091 1.195751 2,802,949
Fidelity Capital & Income Fund......................... 818,785 3.712491 3,039,732
Fidelity Contrafund.................................... 86,483,728 1.315600 113,777,993
Fidelity Equity-Income Fund............................ 41,090,717 4.471070 183,719,472
Fidelity Magellan(R) Fund.............................. 63,751,788 1.301185 82,952,870
Fidelity OTC Portfolio................................. 3,611,136 1.371346 4,952,117
Fidelity Puritan Fund.................................. 11,375,851 1.154955 13,138,596
The Investment Company of America(R)................... 21,189,283 1.498194 31,745,657
MAS Funds - Fixed Income Portfolio..................... 461,663 1.156444 533,887
MFS(R) Growth Opportunities Fund - Class A............. 2,209,754 6.114190 13,510,856
MFS(R) High Income Fund - Class A...................... 1,898,625 4.949752 9,397,723
Massachusetts Investors Growth Stock Fund - Class A.... 877,034 8.942612 7,842,975
Nationwide(R) Fund..................................... 2,755,666 12.191058 33,594,484
Nationwide(R) Growth Fund.............................. 2,409,384 2.667201 6,426,311
Nationwide(R) Money Market Fund........................ 15,458,252 2.774433 42,887,884
Neuberger & Berman Guardian Fund....................... 7,940,457 1.250781 9,931,773
Putnam Investors Fund - Class A........................ 2,260,621 11.305164 25,556,691
Putnam Voyager Fund - Class A.......................... 27,203,903 2.752130 74,868,678
Seligman Growth Fund, Inc. - Class A................... 616,776 8.934609 5,510,652
Short-Term Investments Trust -Treasury Portfolio -
Institutional Class.................................. 1,524,715 1.119630 1,707,117
T. Rowe Price International Funds, Inc. -
International Stock Fund(R).......................... 10,412,582 1.025854 10,681,789
Templeton Foreign Fund - Class I....................... 16,316,118 1.040054 16,969,644
Twentieth Century Investors, Inc. - Growth Investors... 37,362,979 4.005400 149,653,676
Twentieth Century Investors, Inc. - Ultra Investors.... 79,405,506 1.263551 100,332,907
========== ======== ============
$984,592,120
============
</TABLE>
See accompanying notes to financial statements.
10
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NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ -----------
<S> <C> <C> <C>
Investment activity:
Reinvested capital gains and dividends ................ $ 73,174,649 49,662,440 38,723,891
------------- ------------ -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ..... 94,814,984 109,813,731 74,574,481
Cost of mutual fund shares sold ..................... (90,332,356) (103,752,916) (65,493,558)
------------- ------------ -----------
Realized gain (loss) on investments ................. 4,482,628 6,060,815 9,080,923
Change in unrealized gain (loss) on investments ..... 121,289,385 (63,425,619) (2,630,142)
------------- ------------ -----------
Net gain (loss) on investments .................... 125,772,013 (57,364,804) 6,450,781
------------- ------------ -----------
Net investment activity ........................ 198,946,662 (7,702,364) 45,174,672
------------- ------------ -----------
Equity transactions:
Purchase payments received from contract owners ....... 211,743,850 172,770,344 125,959,842
Redemptions ........................................... (59,225,086) (50,702,236) (36,871,944)
Adjustments to maintain reserves ...................... 130,249 (9,107) 39,775
------------- ------------ -----------
Net equity transactions ......................... 152,649,013 122,059,001 89,127,673
------------- ------------ -----------
Expenses: Contract charges (note 2)...................... (7,716,253) (5,555,163) (4,339,264)
------------- ------------ -----------
Net change in contract owners' equity ................... 343,879,422 108,801,474 129,963,081
Contract owners' equity beginning of period ............. 640,712,698 531,911,224 401,948,143
------------- ------------ -----------
Contract owners' equity end of period ................... $ 984,592,120 640,712,698 531,911,224
============= ============ ===========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
The NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the Company) on
September 7, 1988, and has been registered as a unit investment trust under the
Investment Company Act of 1940. The NACoVA was introduced for exclusive use by
Member Counties for deferred compensation Plans adopted under the National
Association of Counties (NACo) Program.
The Company offers group flexible fund retirement contracts through the
Account. The primary distribution for the contracts is through an affiliated
sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts are offered for purchase in
connection with deferred compensation Plans adopted by Member Counties under the
NACo Program. Participants in the contracts may invest in any of the following
fund sub-accounts:
The Bond Fund of America(SM), Inc. (BdFdAm) (only available for certain
contracts issued beginning July 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
The Evergreen Total Return Fund - Class Y (EvTotRet) (not available for
contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares (FedUSGvt) (formerly Federated Intermediate Government Trust)
Fidelity Capital & Income Fund (FidCapIn) (not available for contracts
issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan Fund (FidPurtn)
The Investment Company of America(R) (InvCoAm) (only available for certain
contracts issued beginning July 1, 1994)
MAS Funds-Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund -- Class A (MFSGrOpp) (not available for
contracts issued on or after October 1, 1993)
MFS(R) High Income Fund -- Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund -- Class A (MFSGrStk)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated investment
advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an affiliated
investment advisor) (not available for contracts issued on or after
October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
Seligman Growth Fund, Inc. -- Class A (SelGroFd)
Short-Term Investments Trust - Treasury Portfolio - Institutional Class
(AIMTreas)
T. Rowe Price International Funds, Inc. - International Stock Fund(R)
(TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
Twentieth Century Investors, Inc. - Growth Investors (TCGroInv)
Twentieth Century Investors, Inc. - Ultra Investors (TCUltra)
All of the above funds were being utilized as of December 31, 1995.
The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain expenses (see note 2).
The accompanying financial statements include only contract owners'
12
<PAGE> 13
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing net
asset value per share at December 31, 1995. The cost of investments sold is
determined on the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the NACoVA 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 assets in this account are held pursuant to contracts with
entities which are exempt from federal income tax. Because of this exemption, no
taxes need be provided for investment income or realized and unrealized capital
gains. Annuity payouts and withdrawal payments are taxable as wages when
received by the participants.
(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 contigent 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
No deduction for a sales charge is made from the purchase payments for
these contracts. However, if an owner terminates the contract and directs the
Company to withdraw all or part of the contract value held in the Account for
less than sixteen (16) years, the Company will, with certain exceptions, assess
a contingent deferred sales charge by deducting an amount from each participants
account. This charge will be equal to not more than 4% in the first year,
declining to 1% in the fifteenth year, of the lesser of all purchase payments
made on behalf of a participant prior to the date of withdrawal, or the amount
withdrawn. No sales charges are deducted on redemptions used to purchase units
in the fixed investment options of the Company. Sales charges may be reduced or
eliminated upon negotiated conversion of the contracts to other investment
programs offered by the Company or its affiliates.
The following administrative charges are deducted by the Company: 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
0.10%, 0.40% and 0.45%, respectively.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various investment
options for each participant's account. The number of transfers allowed, and any
administrative charges associated therewith, are subject to negotiation between
the contract owner and the Company.
13
<PAGE> 14
(3) Schedule I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented in the
following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to capital
gains and dividend distributions from the underlying mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration charge
discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
14
<PAGE> 15
SCHEDULE I
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
BdFdAm Dry3dCen EvTotRet FedUSGvt FidCapIn FidContr FidEqInc FidMgln FidOTC
--------- -------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $1.741422 1.663803 1.419467 1.062969 3.210584 .974545 3.424310 .960039 1.001544
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .148075 .156545 .092352 .070177 .338236 .102679 .262606 .075533 .078671
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .168396 .436477 .244789 .073378 .197671 .249364 .821416 .276728 .302706
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.018183) (.018502) (.014957) (.010773) (.034000) (.010988) (.037262) (.011115) (.011575)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $2.039710 2.238323 1.741651 1.195751 3.712491 1.315600 4.471070 1.301185 1.371346
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 35% 23% 12% 16% 35% 31% 36% 37%
===================================================================================================================================
1994
Beginning unit value - Jan. 1 $1.850918 1.814915 1.531292 1.094086 3.397953 .994981 3.448520 .987051 1.000000
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .138760 .233019 .106153 .053776 .285090 .007092 .333965 .038465 .008959
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.231366) (.367765) (.204194) (.074693) (.440620) (.018188) (.325363) (.056248) (.004289)
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.016890) (.016366) (.013784) (.010200) (.031839) (.009340) (.032812) (.009229) (.003126)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.741422 1.663803 1.419467 1.062969 3.210584 .974545 3.424310 .960039 1.001544
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)% (8)% (7)% (3)% (6)% (2)% (1)% (3)% 0%(b)
===================================================================================================================================
1993
Beginning unit value - Jan. 1 $1.637181 1.740666 1.368966 1.031362 2.746533 1.000000 2.869860 1.000000 **
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .178726 .132238 .165734 .047079 .275431 .064787 .126727 .056812
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .052059 (.041442) .010622 .025861 .406133 (.067472) .482324 (.067438)
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.017048) (.016547) (.014030) (.010216) (.030144) (.002334) (.030391) (.002323)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.850918 1.814915 1.531292 1.094086 3.397953 .994981 3.448520 .987051
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 13% 4% 12% 6% 24% (1)%(b) 20% (1)%(b)
===================================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available.
15
<PAGE> 16
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
FidPurtn InvCoAm MASFIP MFSGrOpp MFSHiInc MFSGrStk
--------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $ .959935 1.157835 .980782 4.589533 4.265493 7.034148
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .060993 .093079 .073523 .768242 .403605 1.177905
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .144010 .259870 .112302 .807886 .325361 .807395
- ----------------------------------------------------------------------------------------------------
Contract charges (.009983) (.012590) (.010163) (.051471) (.044707) (.076836)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.154955 1.498194 1.156444 6.114190 4.949752 8.942612
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 20% 29% 18% 33% 16% 27%
====================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 1.167040 1.000000 4.834037 4.422523 7.613442
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .059967 .067770 .029902 .376509 .374437 .717173
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.096987) (.065957) (.046046) (.576664) (.490350) (1.229319)
- ----------------------------------------------------------------------------------------------------
Contract charges (.003045) (.011018) (.003074) (.044349) (.041117) (.067148)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ .959935 1.157835 .980782 4.589533 4.265493 7.034148
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (4)%(b) (1)% (2)%(b) (5)% (4)% (8)%
====================================================================================================
1993
Beginning unit value - Jan. 1 * * $1.055548 * * 4.200054 3.739642 6.714892
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .072592 .528137 .354624 1.133243
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .049402 .148725 .367761 (.168690)
- ----------------------------------------------------------------------------------------------------
Contract charges (.010502) (.042879) (.039504) (.066003)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.167040 4.834037 4.422523 7.613442
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 11% 15% 18% 13%
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWFund NWGroFd NWMyMkt
--------- -------- --------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 9.468045 2.092009 2.654661
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .820350 .282003 .145674
- -------------------------------------------------------------------
Unrealized gain (loss) 2.003431 .316217 .000000
- -------------------------------------------------------------------
Contract charges (.100768) (.023028) (.025902)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 12.191058 2.667201 2.774433
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 29% 27% 5%
===================================================================
1994
Beginning unit value - Jan. 1 9.502760 2.081399 2.583387
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .927943 .079372 .096188
- -------------------------------------------------------------------
Unrealized gain (loss) (.873192) (.049054) .000000
- -------------------------------------------------------------------
Contract charges (.089466) (.019708) (.024914)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 9.468045 2.092009 2.654661
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% 1% 3%
===================================================================
1993
Beginning unit value - Jan. 1 8.985447 1.887524 2.542721
- -------------------------------------------------------------------
Reinvested capital
gains and dividends .679906 .073989 .065160
- -------------------------------------------------------------------
Unrealized gain (loss) (.077647) .138601 .000000
- -------------------------------------------------------------------
Contract charges (.084946) (.018715) (.024494)
- -------------------------------------------------------------------
Ending unit value - Dec. 31 9.502760 2.081399 2.583387
- -------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 6% 10% 2%
===================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available.
16
<PAGE> 17
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NBGuard PutInvFd PutVoyFd SelGroFd AIMTreas TRIntStk
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $ .955773 8.297318 1.982311 7.020585 1.066889 .929695
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .054385 1.391197 .146629 .931537 .063099 .030917
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .251433 1.710170 .645332 1.057625 .000000 .074337
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.010810) (.093521) (.022142) (.075138) (.010358) (.009095)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $1.250781 11.305164 2.752130 8.934609 1.119630 1.025854
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit
value* (a) 31% 36% 39% 27% 5% 10%
=======================================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 8.652501 1.992379 7.370495 1.034183 1.000000
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .019568 .771381 .083642 .708203 .042627 .057013
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.060786) (1.046752) (.075428) (.990524) .000000 (.124310)
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.003009) (.079812) (.018282) (.067589) (.009921) (.003008)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ .955773 8.297318 1.982311 7.020585 1.066889 .929695
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (4)%(b) (4)% (1)% (5)% 3% (7)%(b)
=======================================================================================================================
1993
Beginning unit value - Jan. 1 * * $7.410567 1.698751 6.989639 1.012172 * *
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends 1.260334 .072965 1.309602 .031750
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .057997 .237532 (.863222) .000000
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.076397) (.016869) (.065524) (.009739)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $8.652501 1.992379 7.370495 1.034183
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 17% 5% 2%
=======================================================================================================================
<CAPTION>
TemForFd TCGroInv TCUltra
-------- -------- -------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 .944596 3.359891 .926489
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .065652 .555289 .059786
- -----------------------------------------------------------------------
Unrealized gain (loss) .039222 .127077 .287821
- -----------------------------------------------------------------------
Contract charges (.009416) (.036857) (.010545)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 1.040054 4.005400 1.263551
- -----------------------------------------------------------------------
Percentage increase (decrease) in unit
value* (a) 10% 19% 36%
=======================================================================
1994
Beginning unit value - Jan. 1 1.000000 3.443124 .970411
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .067522 .498592 .029006
- -----------------------------------------------------------------------
Unrealized gain (loss) (.119861) (.549338) (.064074)
- -----------------------------------------------------------------------
Contract charges (.003065) (.032487) (.008854)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 .944596 3.359891 .926489
- -----------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)%(b) (2)% (5)%
=======================================================================
1993
Beginning unit value - Jan. 1 * * 3.350122 1.000000
- -----------------------------------------------------------------------
Reinvested capital
gains and dividends .384659 .000000
- -----------------------------------------------------------------------
Unrealized gain (loss) (.260224) (.027302)
- -----------------------------------------------------------------------
Contract charges (.031433) (.002287)
- -----------------------------------------------------------------------
Ending unit value - Dec. 31 3.443124 .970411
- -----------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% (3)%(b)
=======================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available.
See note 3.
17
<PAGE> 18
[THIS PAGE LEFT BLANK INTENTIONALLY]
18
<PAGE> 19
Independent Auditors' Report
The Board of Directors and Contract Owners of
NACo Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of NACo Variable Account as of December 31, 1995, and
the related statements of operations and changes in contract owners' equity
and schedules of changes in unit value for each of the years in the three year
period then ended. These financial statements and schedules of changes in unit
value are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules of changes in
unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in
unit value referred to above present fairly, in all material respects, the
financial position of NACo Variable Account as of December 31, 1995, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
19
<PAGE> 20
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
