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[LOGO]
NACo
VARIABLE
ACCOUNT
[LOGO]
ANNUAL REPORT
TO
PARTICIPANTS AND RETIRED PARTICIPANTS
DECEMBER 31, 1996
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
[LOGO]
APO-2278-K (12/96)
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[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
[PHOTO]
PRESIDENT'S MESSAGE
On behalf of Nationwide Life Insurance Company, we are pleased to bring you the
1996 annual report of the NACo Variable Account.
The U.S. economy is enjoying the rewards of a stable political system and a
globally competitive business sector. These good times will last, although not
all years will show the stellar performance of the last two years. 1997 may be
the year in which normalcy will return.
The economic expansion has lasted six years already, and all resources are more
or less fully employed. The job market in particular is showing some strains,
and wages are rising a bit faster than before. Also, the competitive pressures
from abroad are increasing due to a sharp rise in the exchange value of our
currency. Business will be hard pressed under those conditions to continue
showing above-average profit increases. For the economy as a whole, inflation
has hit the low point in this business cycle and will slowly but surely be a
more important variable for monetary policy.
In the last few years, and especially in 1996, our economy expanded faster than
the natural rate of growth. This cannot continue without creating bottlenecks
that in turn induce price increases. Either the economy will slow under its own
weight or the Federal Reserve will have to step in. Some indicators point to a
softening of business activity. But whether this is enough will be a close
call.
Again, the long-term trend is very positive for the U.S., its business
activity, and its financial markets. However, 1997 might turn out to have some
more surprises than anticipated right now.
/s/ JOSEPH J. GASPER
2
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Contents
HOW TO READ THE ANNUAL REPORT ........................................................... 4
Explanation on how to read and understand
the various financial reports
FUND PERFORMANCES ........................................................................ 5
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY ............................. 7
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY ............................................................... 13
NOTES TO FINANCIAL STATEMENTS ............................................................ 14
SCHEDULES OF CHANGES IN UNIT VALUE ....................................................... 17
INDEPENDENT AUDITORS' REPORT ............................................................. 23
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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-eight mutual funds from sixteen mutual fund houses.
The Annual Report has three major financial sections.
Statement of Assets, Liabilities and Contract Owners' Equity
This statement, beginning on page 7, 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, 1996. 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 9.
Statements of Operations and Changes in Contract Owners' Equity
These statements, found on page 13, show the activity in the Account for the
periods stated herein.
The Investment activity section shows the changes in unrealized gain (loss) of
the mutual funds in the Account, realized gain (loss) as shares of the funds
are bought (sold), mortality, expense and administration charges which are
assessed through the daily unit value calculations, and dividends and capital
gains earnings from the underlying mutual funds.
The Equity transactions section illustrates the receipt of purchase payments by
the Account as new contracts are sold, existing contract owners deposit
additional funds; and deductions from the Account when money is withdrawn,
contracts are canceled, annuity benefits are paid, and annual contract
maintenance charges and contingent deferred sales charges are assessed.
Net change in contract owners' equity equals Investment activity plus Equity
transactions.
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 17, 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 14, will also help explain and clarify the
various statements and schedules.
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FUND PERFORMANCES
AVERAGE ANNUAL TOTAL RETURN: NON-STANDARDIZED++
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
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YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
1996 1995 1/1/94 - 1/1/92 - 1/1/87 -
FUNDS+ 12/31/96 12/31/96 12/31/96
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AGGRESSIVE GROWTH FUNDS
American Century: Twentieth Century Growth Fund 13.92% 19.21% 9.84% 5.24% 12.75%
American Century: Twentieth Century Ultra Fund 12.77% 36.38% 13.66% 12.19% 19.02%
Mass. Investors Growth Stock Fund 21.67% 27.13% 12.64% 11.31% 13.11%
Putnam Voyager Fund 11.73% 38.83% 15.56% 14.49% 16.42%
GROWTH FUNDS
Dreyfus Third Century Fund 23.15% 34.53% 14.95% 9.84% 12.45%
Fidelity Contrafund 20.78% 35.00% 16.89% 17.14% 19.14%
Fidelity Magellan(R) Fund 10.63% 35.53% 13.40% 13.80% 15.13%
Fidelity OTC Portfolio 22.56% 36.92% 17.38% 14.62% 15.89%
MFS(R) Growth Opportunities Fund* 20.71% 33.22% 15.15% 13.39% 11.79%
Nationwide(R) Growth Fund* 15.59% 27.49% 13.99% 11.45% 11.51%
Putnam Investors Fund 20.25% 36.25% 16.25% 14.41% 13.34%
Seligman Growth Fund, Inc. 19.99% 27.26% 13.30% 11.07% 12.33%
GROWTH AND INCOME FUNDS
Evergreen Total Return Fund* 11.82% 22.70% 8.34% 9.17% 7.66%
Fidelity Equity-Income Fund 19.87% 30.57% 15.83% 16.23% 12.40%
Fidelity Puritan(R) Fund 14.06% 20.32% 11.44% 13.75% 11.46%
Investment Company of America(R)** 18.22% 29.40% 14.92% 12.20% 12.89%
Nationwide(R) Fund 22.75% 28.76% 16.34% 11.18% 12.92%
Neuberger & Berman Guardian Fund 16.76% 30.87% 15.05% 15.23% 14.37%
INCOME FUNDS
Bond Fund of America(SM), Inc.** 5.69% 17.13% 5.21% 7.75% 7.96%
Fidelity Capital & Income Fund* 10.34% 15.63% 6.43% 13.60% 9.53%
MAS Funds-- Fixed Income Portfolio 6.34% 17.91% 5.51% 7.34% 8.26%
MFS(R) High Income Fund 11.48% 16.04% 7.66% 11.34% 8.37%
INDEX
SEI Index Funds S&P 500 Index Portfolio 21.46% 36.05% 18.24% 13.85% 13.75%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) 14.89% 10.34% 7.61% 10.59% 10.13%
Templeton Foreign Fund 16.88% 10.11% 8.56% 11.43% 13.22%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund 2.59% 12.49% 3.89% 4.67% 6.19%
MONEY MARKET FUND
Nationwide(R) Money Market Fund 3.98% 4.51% 3.75% 3.01% 4.55%
U.S. TREASURY MONEY MARKET FUND
AIM STIT-- Treasury Portfolio 4.40% 4.94% 4.17% 3.50% 4.99%
S&P 500 *** 21.79% 36.27% 18.54% 14.12% 14.19%
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* 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 Director Advisors
Inc.
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FUND PERFORMANCES
AVERAGE ANNUAL TOTAL RETURN: STANDARDIZED
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
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YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
1996 1995 1/1/94 - 1/1/92 - 1/1/87 -
FUNDS+ 12/31/96 12/31/96 12/31/96
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AGGRESSIVE GROWTH FUNDS
American Century: Twentieth Century Growth Fund 9.92% 15.21% 8.72% 4.58% 12.61%
American Century: Twentieth Century Ultra Fund 8.77% 32.38% 12.62% 11.68% 18.93%
Mass. Investors Growth Stock Fund 17.67% 23.13% 11.58% 10.78% 12.98%
Putnam Voyager Fund 7.87% 34.83% 14.56% 14.02% 16.32%
GROWTH FUNDS
Dreyfus Third Century Fund 19.15% 30.53% 13.93% 9.29% 12.31%
Fidelity Contrafund 16.78% 31.00% 15.90% 16.71% 19.05%
Fidelity Magellan(R) Fund 6.63% 31.53% 12.35% 13.32% 15.02%
Fidelity OTC Portfolio 18.56% 32.92% 16.41% 14.15% 15.78%
MFS(R) Growth Opportunities Fund* 16.71% 29.22% 14.13% 12.90% 11.64%
Nationwide(R) Growth Fund* 11.59% 23.49% 12.96% 10.93% 11.36%
Putnam Investors Fund 16.25% 32.25% 15.26% 13.94% 13.21%
Seligman Growth Fund, Inc. 15.99% 23.26% 12.25% 10.54% 12.19%
GROWTH AND INCOME FUNDS
Evergreen Total Return Fund* 7.82% 18.70% 7.20% 8.60% 7.45%
Fidelity Equity-Income Fund 15.87% 26.57% 14.83% 15.79% 12.26%
Fidelity Puritan(R) Fund 10.06% 16.32% 10.35% 13.26% 11.31%
Investment Company of America(R)** 14.22% 25.40% 13.90% 11.69% 12.75%
Nationwide(R) Fund 18.75% 24.76% 15.35% 10.65% 12.79%
Neuberger & Berman Fund Guardian Fund 12.76% 26.87% 14.03% 14.78% 14.25%
INCOME FUNDS
Bond Fund of America, Inc.(SM)** 1.69% 13.13% 3.99% 7.15% 7.76%
Fidelity Capital & Income Fund* 6.34% 11.63% 5.24% 13.11% 9.35%
MAS Funds-- Fixed Income Portfolio 2.34% 13.91% 4.29% 6.73% 8.06%
MFS(R) High Income Fund 7.48% 12.04% 6.49% 10.81% 8.17%
INDEX FUND
SEI Index Funds S & P 500 Index Portfolio 17.46% 32.05% 17.28% 13.37% 13.63%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) 10.89% 6.34% 6.45% 10.05% 9.96%
Templeton Foreign Fund 12.88% 6.11% 7.42% 10.91% 13.09%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund -1.41% 8.49% 2.64% 3.99% 5.95%
MONEY MARKET FUND
Nationwide(R) Money Market Fund -0.02% 0.51% 2.49% 2.29% 4.28%
U.S. TREASURY MONEY MARKET FUND
AIM STIT-- Treasury Portfolio 0.40% 0.94% 2.92% 2.79% 4.73%
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</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 deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
6
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NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
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Assets:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
6,884,285 shares (cost $149,244,925) $ 150,628,164
American Century: Twentieth Century Ultra Fund (ACTCUltra)
5,327,372 shares (cost $130,695,514) 149,645,871
The Bond Fund of America(SM), Inc. (BdFdAm)
1,016,897 shares (cost $13,653,782) 13,982,334
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
3,432,673 shares (cost $28,247,122) 30,276,176
The Evergreen Total Return Fund - Class Y (EvTotRet)
207,231 shares (cost $4,106,475) 4,420,233
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
332,140 shares (cost $3,485,635) 3,484,151
Fidelity Capital & Income Fund (FidCapInc)
318,077 shares (cost $2,547,163) 2,977,198
Fidelity Contrafund (FidContr)
4,600,210 shares (cost $162,640,226) 193,898,837
Fidelity Equity-Income Fund (FidEqInc)
5,905,088 shares (cost $186,061,700) 252,914,905
Fidelity Magellan(R) Fund (FidMgln)
1,190,655 shares (cost $90,914,716) 96,026,302
Fidelity OTC Portfolio (FidOTC)
431,672 shares (cost $14,049,990) 14,120,007
Fidelity Puritan Fund(R) (FidPurtn)
1,252,442 shares (cost $20,462,880) 21,592,100
The Investment Company of America(R) (InvCoAm)
1,969,367 shares (cost $39,841,359) 47,717,762
MAS Funds - Fixed Income Portfolio (MASFIP)
132,728 shares (cost $1,559,552) 1,559,558
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,055,763 shares (cost $11,743,867) 13,693,244
MFS(R) High Income Fund - Class A (MFSHiInc)
2,069,385 shares (cost $10,676,281) 11,050,514
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,125,406 shares (cost $12,499,820) 11,231,548
Nationwide(R) Fund (NWFund)
2,200,968 shares (cost $36,736,098) 44,459,563
Nationwide(R) Growth Fund (NWGroFd)
541,095 shares (cost $6,019,590) 7,196,565
Nationwide(R) Money Market Fund (NWMyMkt)
50,966,370 shares (cost $50,966,370) 50,966,370
</TABLE>
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<TABLE>
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Neuberger & Berman Guardian Fund (NBGuard)
854,897 shares (cost $20,470,193) 21,911,015
Putnam Investors Fund - Class A (PutInvFd)
3,887,509 shares (cost $33,442,764) 35,803,961
Putnam Voyager Fund - Class A (PutVoyFd)
8,507,880 shares (cost $119,387,857) 137,147,025
SEI Index Funds -- S&P 500 Index Portfolio (SEI500lx)
448,612 shares (cost $10,117,146) 10,582,747
Seligman Growth Fund, Inc. -- Class A (SelGroFd)
1,441,764 shares (cost $7,877,364) 8,434,321
Short-Term Investments Trust -- Treasury Portfolio - Institutional Class (AIMTreas) 2,686,768 shares
(cost $2,686,768) 2,686,768
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk) 1,842,391 shares
(cost $23,980,568) 25,424,994
Templeton Foreign Fund - Class I (TemForFd)
3,185,558 shares (cost $30,332,897) 33,002,383
---------------
Total investments 1,396,834,616
Accounts receivable 9,992,675
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Total assets 1,406,827,291
Accounts payable 293,646
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Contract owners' equity $ 1,406,533,645
===============
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Contract owners' equity represented by:
<TABLE>
<CAPTION>
TIER I UNITS UNIT VALUE
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American Century: Twentieth Century Growth Fund 15,929,074 $ 4.562802 $ 72,681,211
American Century: Twentieth Century Ultra Fund 51,280,940 1.424846 73,067,442
The Bond Fund of America(SM), Inc. 3,393,296 2.155739 7,315,061
The Dreyfus Third Century Fund, Inc. 5,449,596 2.756438 15,021,473
The Evergreen Total Return Fund - Class Y 1,070,229 1.947502 2,084,273
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 1,296,431 1.226751 1,590,398
Fidelity Capital & Income Fund 294,263 4.096488 1,205,445
Fidelity Contrafund 63,488,282 1.588961 100,880,404
Fidelity Equity-Income Fund 21,843,280 5.359692 117,073,253
Fidelity Magellan(R) Fund 35,450,214 1.439440 51,028,456
Fidelity OTC Portfolio 4,002,730 1.680710 6,727,428
Fidelity Puritan(R) Fund 8,701,486 1.317344 11,462,850
The Investment Company of America(R) 14,871,400 1.771097 26,338,692
MAS Funds - Fixed Income Portfolio 554,865 1.229760 682,351
MFS(R) Growth Opportunities Fund - Class A 1,022,657 7.380232 7,547,446
MFS(R) High Income Fund - Class A 1,009,326 5.518160 5,569,622
Massachusetts Investors Growth Stock Fund - Class A 491,538 10.880822 5,348,337
Nationwide(R) Fund 1,456,965 14.964379 21,802,576
Nationwide(R) Growth Fund 1,157,824 3.083008 3,569,581
Nationwide(R) Money Market Fund 6,821,937 2.884848 19,680,251
Neuberger & Berman Guardian Fund 6,973,153 1.460410 10,183,662
Putnam Investors Fund - Class A 1,545,059 13.594501 21,004,306
Putnam Voyager Fund - Class A 22,936,312 3.074879 70,526,384
SEI Index Funds - S & P 500 Index Portfolio 4,129,102 1.139331 4,704,414
Seligman Growth Fund, Inc. - Class A. 381,977 10.720312 4,094,913
Short-Term Investments Trust -- Treasury Portfolio --
Institutional Class 1,151,812 1.168909 1,346,363
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 9,304,599 1.178559 10,966,019
Templeton Foreign Fund - Class I 13,461,397 1.215580 16,363,405
========== ========= -------------
Sub-Total Tier I $ 689,866,016
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</TABLE>
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Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER II UNITS UNIT VALUE
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<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 6,416,724 $ 4.564331 $ 29,288,052
American Century: Twentieth Century Ultra Fund 17,364,360 1.425323 24,749,822
The Bond Fund of America(SM), Inc. 1,041,402 2.156482 2,245,765
The Dreyfus Third Century Fund, Inc. 1,806,885 2.757360 4,982,232
The Evergreen Total Return Fund - Class Y 267,437 1.948154 521,008
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 431,282 1.227166 529,255
Fidelity Capital & Income Fund 76,382 4.097872 313,004
Fidelity Contrafund 22,719,185 1.589493 36,111,986
Fidelity Equity-Income Fund 7,437,534 5.361485 39,876,227
Fidelity Magellan(R) Fund 12,036,679 1.439922 17,331,879
Fidelity OTC Portfolio 1,269,335 1.681272 2,134,097
Fidelity Puritan(R) Fund 3,037,801 1.317785 4,003,169
The Investment Company of America(R) 5,329,249 1.771690 9,441,777
MAS Funds - Fixed Income Portfolio 236,446 1.230172 290,869
MFS(R) Growth Opportunities Fund - Class A 323,628 7.382705 2,389,250
MFS(R) High Income Fund - Class A 244,640 5.520025 1,350,419
Massachusetts Investors Growth Stock Fund - Class A 155,643 10.884466 1,694,091
Nationwide(R) Fund 557,908 14.969386 8,351,540
Nationwide(R) Growth Fund 507,782 3.084040 1,566,020
Nationwide(R) Money Market Fund 2,854,818 2.885823 8,238,499
Neuberger & Berman Guardian Fund 2,513,725 1.460899 3,672,298
Putnam Investors Fund - Class A 371,840 13.599051 5,056,671
Putnam Voyager Fund - Class A 7,518,991 3.075909 23,127,732
SEI Index Funds - S & P 500 Index Portfolio 1,547,081 1.139711 1,763,225
Seligman Growth Fund, Inc. - Class A. 90,771 10.723901 973,419
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 201,261 1.169304 235,335
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 3,705,323 1.178953 4,368,402
Templeton Foreign Fund - Class I 5,803,820 1.215987 7,057,370
========== ========= -------------
Sub-Total Tier II $ 241,663,413
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</TABLE>
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Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER III UNITS UNIT VALUE
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<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 3,952,718 $ 4.567388 $ 18,053,597
American Century: Twentieth Century Ultra Fund 11,724,488 1.426278 16,722,379
The Bond Fund of America(SM), Inc. 737,276 2.157968 1,591,018
The Dreyfus Third Century Fund, Inc. 1,075,140 2.759207 2,966,534
The Evergreen Total Return Fund - Class Y 303,775 1.949458 592,197
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 184,497 1.227995 226,561
Fidelity Capital & Income Fund 203,017 4.100640 832,500
Fidelity Contrafund 13,966,075 1.590557 22,213,838
Fidelity Equity-Income Fund 6,668,170 5.365074 35,775,225
Fidelity Magellan(R) Fund 6,812,829 1.440886 9,816,510
Fidelity OTC Portfolio 886,668 1.682398 1,491,728
Fidelity Puritan(R) Fund 1,390,626 1.318667 1,833,773
The Investment Company of America(R) 2,306,070 1.772876 4,088,376
MAS Funds - Fixed Income Portfolio 116,525 1.230995 143,442
MFS(R) Growth Opportunities Fund - Class A 330,931 7.387651 2,444,803
MFS(R) High Income Fund - Class A 252,930 5.523753 1,397,123
Massachusetts Investors Growth Stock Fund - Class A 136,164 10.891758 1,483,065
Nationwide(R) Fund 289,479 14.979404 4,336,223
Nationwide(R) Growth Fund 133,215 3.086105 411,115
Nationwide(R) Money Market Fund 1,754,115 2.887772 5,065,484
Neuberger & Berman Guardian Fund 1,655,042 1.461877 2,419,468
Putnam Investors Fund - Class A 239,486 13.608156 3,258,963
Putnam Voyager Fund - Class A 4,941,310 3.077970 15,209,204
SEI Index Funds - S & P 500 Index Portfolio 1,023,459 1.140471 1,167,225
Seligman Growth Fund, Inc. - Class A. 107,031 10.731082 1,148,558
Short-Term Investments Trust -- Treasury Portfolio -
Institutional Class 394,386 1.170093 461,468
T. Rowe Price International Funds, Inc.--
International Stock Fund(R) 2,213,126 1.179742 2,610,918
Templeton Foreign Fund - Class I 2,314,772 1.216800 2,816,615
========== ========= -------------
Sub-Total Tier III $ 160,577,910
-------------
</TABLE>
11
<PAGE> 12
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER IV UNITS UNIT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 6,694,438 $ 4.570448 $ 30,596,581
American Century: Twentieth Century Ultra Fund 24,600,287 1.427234 35,110,366
The Bond Fund of America(SM), Inc. 1,310,545 2.159454 2,830,062
The Dreyfus Third Century Fund, Inc. 2,645,579 2.761054 7,304,586
The Evergreen Total Return Fund - Class Y 626,778 1.950763 1,222,695
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 925,850 1.228823 1,137,706
Fidelity Capital & Income Fund 152,550 4.103407 625,975
Fidelity Contrafund 26,974,645 1.591621 42,933,411
Fidelity Equity-Income Fund 11,209,254 5.368665 60,178,730
Fidelity Magellan(R) Fund 12,376,864 1.441850 17,845,581
Fidelity OTC Portfolio 2,239,000 1.683525 3,769,412
Fidelity Puritan(R) Fund 3,250,797 1.319550 4,289,589
The Investment Company of America(R) 4,423,281 1.774063 7,847,179
MAS Funds - Fixed Income Portfolio 359,528 1.231819 442,873
MFS(R) Growth Opportunities Fund - Class A 399,976 7.392601 2,956,863
MFS(R) High Income Fund - Class A 494,287 5.527479 2,732,161
Massachusetts Investors Growth Stock Fund - Class A 248,216 10.899055 2,705,320
Nationwide(R) Fund 664,951 14.989429 9,967,236
Nationwide(R) Growth Fund 534,141 3.088171 1,649,519
Nationwide(R) Money Market Fund 6,170,419 2.889720 17,830,783
Neuberger & Berman Guardian Fund 3,851,735 1.462856 5,634,534
Putnam Investors Fund - Class A 476,103 13.617267 6,483,222
Putnam Voyager Fund - Class A 9,182,389 3.080033 28,282,061
SEI Index Funds - S & P 500 Index Portfolio 2,582,625 1.141231 2,947,372
Seligman Growth Fund, Inc - Class A. 206,422 10.738267 2,216,615
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 549,456 1.170883 643,349
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 6,337,264 1.180532 7,481,343
Templeton Foreign Fund - Class I 5,552,808 1.217615 6,761,182
========== ========= ---------------
Sub-Total Tier IV $ 314,426,306
---------------
Total Contract Owners' Equity $ 1,406,533,645
===============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE> 13
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C>
Reinvested capital gains and dividends $ 96,665,994 73,174,649 49,662,440
Mortality and expense charges (note 2) (6,124,188) (4,061,186) (2,923,770)
Administration charge-Tier I (note 2) (2,597,055) (3,655,067) (2,631,393)
Administration charge-Tier II (note 2) (836,073) -- --
Administration charge-Tier III (note 2) (432,408) -- --
Administration charge-Tier IV (note 2) (589,120) -- --
-------------- ----------- ------------
Net investment activity 86,087,150 65,458,396 44,107,277
-------------- ----------- ------------
Proceeds from mutual fund shares sold 129,158,279 94,814,984 109,813,731
Cost of mutual fund shares sold (119,175,064) (90,332,356) (103,752,916)
-------------- ----------- ------------
Realized gain (loss) on investments 9,983,215 4,482,628 6,060,815
Change in unrealized gain (loss) on investments 79,007,949 121,289,385 (63,425,619)
-------------- ----------- ------------
Net gain (loss) on investments 88,991,164 125,772,013 (57,364,804)
-------------- ----------- ------------
Net increase (decrease) in contract owners'
equity resulting from operations 175,078,314 191,230,409 (13,257,527)
-------------- ----------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 318,492,785 211,743,850 172,770,344
Redemptions (71,502,064) (59,225,086) (50,702,236)
Contingent deferred sales charges (note 2) (62) -- --
Adjustments to maintain reserves (127,448) 130,249 (9,107)
-------------- ----------- ------------
Net equity transactions 246,863,211 152,649,013 122,059,001
-------------- ----------- ------------
Net change in contract owners' equity 421,941,525 343,879,422 108,801,474
Contract owners' equity beginning of period 984,592,120 640,712,698 531,911,224
-------------- ----------- ------------
Contract owners' equity end of period $1,406,533,645 984,592,120 640,712,698
============== =========== ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE> 14
- --------------------------------------------------------------------------------
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
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
NACoVA. The primary distribution for the contracts is through an affiliated
sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts (the Contract) 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:
American Century: Twentieth Century Growth Fund (ACTCGro)
(formerly Twentieth Century Investors, Inc. - Growth Investors)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
(formerly Twentieth Century Investors, Inc. - Ultra Investors)
The Bond Fund of America(SM), Inc. (BdFdAm) (only available for
certain contracts issued beginning January 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 (FidCapInc) (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(R) 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)
SEI Index Funds - S & P 500 Index Portfolio (SEI500Ix)
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)
All of the above funds were being utilized as of December 31, 1996.
14
<PAGE> 15
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' purchase
payments pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. The cost of investments sold is
determined on the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(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 contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
(2) EXPENSES
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 charges are deducted by the Company: a mortality risk
charge, an expense risk charge and an administration charge which are assessed
through the daily unit value calculation. The morality risk charge and the
expense risk charge are equal to an annual rate of 0.10% and 0.40%
respectively; and the administration charge prior to May 1, 1996 was 0.45%.
Beginning May 1, 1996, the administration charge is based upon the aggregate
balance of assets held under the Contract by each Member County, as follows:
<TABLE>
<CAPTION>
Expense Administration
Tier Assets (Millions) Charge
<S> <C> <C>
I Up to $10 .45%
II Over $10 to $25 .40%
III Over $25 to $50 .30%
IV Over $50 .20%
</TABLE>
The administration charge is determined using the December 31 asset balance and
is effective at the next expense tier on the following May 1.
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.
15
<PAGE> 16
(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:
o Beginning unit value - Jan. 1
o 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.)
o Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
o 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.)
o Ending unit value - Dec. 31
o Percentage increase (decrease) in unit value.
- --------------------------------------------------------------------------------
16
<PAGE> 17
SCHEDULE I
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET FEDUSGVT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. $4.005400 1.263551 2.039710 2.238323 1.741651 1.195751
Reinvested capital gains
and dividends .087806 .080915 .153233 .380918 .097028 .064355
Unrealized gain (loss) .510359 .093199 (.017387) .160989 .126113 (.021930)
Contract charges (.040763) (.012819) (.019817) (.023792) (.017290) (.011425)
Ending unit value - Dec. 31 $4.562802 1.424846 2.155739 2.756438 1.947502 1.226751
Percentage increase (decrease)
in unit value*(a) 14% 13% 6% 23% 12% 3%
================================================================================================================
1995
Beginning unit value - Jan. 1 $3.359891 .926489 1.741422 1.663803 1.419467 1.062969
Reinvested capital gains
and dividends .555289 .059786 .148075 .156545 .092352 .070177
Unrealized gain (loss) .127077 .287821 .168396 .436477 .244789 .073378
Contract charges (.036857) (.010545) (.018183) (.018502) (.014957) (.010773)
Ending unit value - Dec. 31 $4.005400 1.263551 2.039710 2.238323 1.741651 1.195751
Percentage increase (decrease)
in unit value*(a) 19% 36% 17% 35% 23% 12%
================================================================================================================
1994
Beginning unit value - Jan. 1 $3.443124 .970411 1.850918 1.814915 1.531292 1.094086
Reinvested capital gains
and dividends .495592 .029006 .138760 .233019 .106153 .053776
Unrealized gain (loss) (.549338) (.064074) (.231366) (.367765) (.204194) (.074693)
Contract charges (.032487) (.008854) (.016890) (.016366) (.013784) (.010200)
Ending unit value - Dec. 31 $3.359891 .926489 1.741422 1.663803 1.419467 1.062969
Percentage increase (decrease)
in unit value*(a) (2)% (5)% (6)% (8)% (7)% (3)%
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDCAPINC FIDCONTR FIDEQINC FIDMGIN FIDOTC
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 3.712491 1.315600 4.471070 1.301185 1.371346
Reinvested capital gains
and dividends .331771 .135279 .342426 .212013 .204072
Unrealized gain (loss) .089597 .151718 .592510 (.060982) .119575
Contract charges (.037371) (.013636) (.046314) (.012776) (.014283)
Ending unit value - Dec. 31 4.096488 1.588961 5.359692 1.439440 1.680710
Percentage increase (decrease)
in unit value*(a) 10% 21% 20% 11% 23%
=================================================================================================================
1995
Beginning unit value - Jan. 1 3.210584 .974545 3.424310 .960039 1.001544
Reinvested capital gains
and dividends .338236 .102679 .262606 .075533 .078671
Unrealized gain (loss) .197671 .249364 .821416 .276728 .302706
Contract charges (.034000) (.010988) (.037262) (.011115) (.011575)
Ending unit value - Dec. 31 3.712491 1.315600 4.471070 1.301185 1.371346
Percentage increase (decrease)
in unit value*(a) 16% 35% 31% 36% 37%
=================================================================================================================
1994
Beginning unit value - Jan. 1 3.397953 .994981 3.448520 .987051 1.000000
Reinvested capital gains
and dividends .285090 .007092 .333965 .038465 .008959
Unrealized gain (loss) (.440620) (.018188) (.325363) (.056248) (.004289)
Contract charges (.031839) (.009340) (.032812) (.009229) (.003126)
Ending unit value - Dec. 31 3.210584 .974545 3.424310 .960039 1.001544
Percentage increase (decrease)
in unit value*(a) (6)% (2)% (1)% (3)% 0%(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 being utilized for the entire year
indicated.
17
<PAGE> 18
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
FIDPURTN INVCOAM MASFIP MFSGROPP MFSHIINC
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $1.154955 1.498194 1.156444 6.114190 4.949752
Reinvested capital gains
and dividends .149398 .106623 .087565 .796398 .454249
Unrealized gain (loss) .024641 .181689 (.003056) .534047 .164181
Contract charges (.011650) (.015409) (.011193) (.064403) (.050022)
Ending unit value - Dec. 31 $1.317344 1.771097 1.229760 7.380232 5.518160
Percentage increase (decrease)
in unit value*(a) 14% 18% 6% 21% 11%
=====================================================================================================
1995
Beginning unit value - Jan. 1 $ .959935 1.157835 .980782 4.589533 4.265493
Reinvested capital gains
and dividends .060993 .093079 .073523 .768242 .403605
Unrealized gain (loss) .144010 .259870 .112302 .807886 .325361
Contract charges (.009983) (.012590) (.010163) (.051471) (.044707)
Ending unit value - Dec. 31 $1.154955 1.498194 1.156444 6.114190 4.949752
Percentage increase (decrease)
in unit value*(a) 20% 29% 18% 33% 16%
=====================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 1.167040 1.000000 4.834037 4.422523
Reinvested capital gains
and dividends .059967 .067770 .029902 .376509 .374437
Unrealized gain (loss) (.096987) (.065957) (.046046) (.576664) (.490350)
Contract charges (.003045) (.011018) (.003074) (.044349) (.041117)
Ending unit value - Dec. 31 $ .959935 1.157835 .980782 4.589533 4.265493
Percentage increase (decrease)
in unit value*(a) (4)%(b) (1)% (2)%(b) (5)% (4)%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSGRSTK NWFUND NWGROFD NWMYMKT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 8.942612 12.191058 2.667201 2.774433
Reinvested capital gains
and dividends 2.580988 1.119203 .234869 .137555
Unrealized gain (loss) (.547864) 1.782082 .208017 .000000
Contract charges (.094914) (.127964) (.027079) (.027140)
Ending unit value - Dec. 31 10.880822 14.964379 3.083008 2.884848
Percentage increase (decrease)
in unit value*(a) 22% 23% 16% 4%
==========================================================================================
1995
Beginning unit value - Jan. 1 7.034148 9.468045 2.092009 2.654661
Reinvested capital gains
and dividends 1.177905 .820350 .282003 .145674
Unrealized gain (loss) .807395 2.003431 .316217 .000000
Contract charges (.076836) (.100768) (.023028) (.025902)
Ending unit value - Dec. 31 8.942612 12.191058 2.667201 2.774433
Percentage increase (decrease)
in unit value*(a) 27% 29% 27% 5%
==========================================================================================
1994
Beginning unit value - Jan. 1 7.613442 9.502760 2.081399 2.583387
Reinvested capital gains
and dividends .717173 .927943 .079372 .096188
Unrealized gain (loss) (1.229319) (.873192) (.049054) .000000
Contract charges (.067148) (.089466) (.019708) (.024914)
Ending unit value - Dec. 31 7.034148 9.468045 2.092009 2.654661
Percentage increase (decrease)
in unit value*(a) (8)% 0% 1% 3%
==========================================================================================
</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 being utilized for the entire year
indicated.
18
<PAGE> 19
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NBGUARD PUTINVFD PUTVOYFD SEI500IX
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $1.250781 11.305164 2.752130 1.000000
Reinvested capital gains
and dividends .081755 1.592658 .194543 .026831
Unrealized gain (loss) .140476 .815178 .156646 .119166
Contract charges (.012602) (.118499) (.028440) (.006666)
Ending unit value - Dec. 31 $1.460410 13.594501 3.074879 1.139331
Percentage increase (decrease)
in unit value*(a) 17% 20% 12% 14%(b)
================================================================================================
1995
Beginning unit value - Jan. 1 $ .955773 8.297318 1.982311 **
Reinvested capital gains
and dividends .054385 1.391197 .146629
Unrealized gain (loss) .251433 1.710170 .645332
Contract charges (.010810) (.093521) (.022142)
Ending unit value - Dec. 31 $1.250781 11.305164 2.752130
Percentage increase (decrease)
in unit value*(a) 31% 36% 39%
================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 8.652501 1.992379 **
Reinvested capital gains
and dividends .019568 .771381 .083642
Unrealized gain (loss) (.060786) (1.046752) (.075428)
Contract charges (.003009) (.079812) (.018282)
Ending unit value - Dec. 31 $ .955773 8.297318 1.982311
Percentage increase (decrease)
in unit value*(a) (4)%(b) (4)% (1)%
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SELGROFD AIMTREAS TRINTSTK TEMFORFD
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .806272 .060169 .031576 .050902
Unrealized gain (loss) 1.073420 .000000 .131644 .135281
Contract charges (.093989) (.010890) (.010515) (.010657)
Ending unit value - Dec. 31 10.720312 1.168909 1.178559 1.215580
Percentage increase (decrease)
in unit value*(a) 20% 4% 15% 17%
==========================================================================================================
1995
Beginning unit value - Jan. 1 7.020585 1.066889 .929695 .944596
Reinvested capital gains
and dividends .931537 .063099 .030917 .065652
Unrealized gain (loss) 1.057625 .000000 .074337 .039222
Contract charges (.075138) (.010358) (.009095) (.009416)
Ending unit value - Dec. 31 8.934609 1.119630 1.025854 1.040054
Percentage increase (decrease)
in unit value*(a) 27% 5% 10% 10%
==========================================================================================================
1994
Beginning unit value - Jan. 1 7.370495 1.034183 1.000000 1.000000
Reinvested capital gains
and dividends .708203 .042627 .057013 .067522
Unrealized gain (loss) (.990524) .000000 (.124310) (.119861)
Contract charges (.067589) (.009921) (.003008) (.003065)
Ending unit value - Dec. 31 7.020585 1.066889 .929695 .944596
Percentage increase (decrease)
in unit value*(a) (5)% 3% (7)%(b) (6)%(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 being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
19
<PAGE> 20
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER II
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087834 .080940 .153274 .381035 .097041
Unrealized gain (loss) .510412 .093189 (.017408) .160941 .126149
Contract charges (.039315) (.012357) (.019094) (.022939) (.016687)
Ending unit value - Dec. 31 $4.564331 1.425323 2.156482 2.757360 1.948154
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212017 .204118 .149424 .106652 .087582
Unrealized gain (loss) (.060958) .119571 .024643 .181690 (.003070)
Contract charges (.012322) (.013763) (.011237) (.014846) (.010784)
Ending unit value - Dec. 31 $1.439922 1.681272 1.317785 1.771690 1.230172
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 6%
=====================================================================================================
NWGROFD NWMYMKT NBGUARD PUTINVFD PUTVOYFD
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752130
Reinvested capital gains
and dividends .234942 .137569 .081779 1.593150 .194604
Unrealized gain (loss) .208009 .000000 .140490 .814965 .156592
Contract charges (.026112) (.026179) (.012151) (.114228) (.027417)
Ending unit value - Dec. 31 $3.084040 2.885823 1.460899 13.599051 3.075909
Percentage increase (decrease)
in unit value* 16% 4% 17% 20% 12%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064282 .331792 .135300 .342492
Unrealized gain (loss) (.021804) .089634 .151738 .592577
Contract charges (.011063) (.036045) (.013145) (.044654)
Ending unit value - Dec. 31 1.227166 4.097872 1.589493 5.361485
Percentage increase (decrease)
in unit value* 3% 10% 21% 20%
===============================================================================================
MFSGROPP MFSHILNC MFSGRSTK NWFUND
- -----------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .796653 .454286 2.581814 1.119531
Unrealized gain (loss) .533950 .164222 (.548474) 1.782165
Contract charges (.062088) (.048235) (.091486) (.123368)
Ending unit value - Dec. 31 7.382705 5.520025 10.884466 14.969386
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
===============================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSTK TEMFORFD
- --------------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026838 .806490 .060222 .031586 .050915
Unrealized gain (loss) .119195 1.073413 .000000 .131635 .135292
Contract charges (.006322) (.090611) (.010548) (.010122) (.010274)
Ending unit value - Dec. 31 1.139711 10.723901 1.169304 1.178953 1.215987
Percentage increase (decrease)
in unit value* 14% 20% 4% 15% 17%
==============================================================================================================
</TABLE>
- ------------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
20
<PAGE> 21
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER III
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087890 .080992 .153287 .381270 .097072
Unrealized gain (loss) .510493 .093175 (.017364) .160833 .126189
Contract charges (.036395) (.011440) (.017665) (.021219) (.015454)
Ending unit value - Dec. 31 $4.567388 1.426278 2.157968 2.759207 1.949458
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- ----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212025 .204210 .149474 .106708 .087615
Unrealized gain (loss) (.060908) .119575 .024644 .181715 (.003065)
Contract charges (.011416) (.012733) (.010406) (.013741) (.009999)
Ending unit value - Dec. 31 $1.440886 1.682398 1.318667 1.772876 1.230995
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 6%
=====================================================================================================
NWGROFD NWMYMKT NBGUARD PUTINVFD PUTVOYFD
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752130
Reinvested capital gains
and dividends .235085 .137590 .081828 1.594134 .194729
Unrealized gain (loss) .207994 .000000 .140516 .814558 .156502
Contract charges (.024175) (.024251) (.011248) (.105700) (.025391)
Ending unit value - Dec. 31 $3.086105 2.887772 1.461877 13.608156 3.077970
Percentage increase (decrease)
in unit value* 16% 4% 17% 20% 12%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064289 .331849 .135343 .342626
Unrealized gain (loss) (.021782) .089680 .151789 .592722
Contract charges (.010263) (.033380) (.012175) (.041344)
Ending unit value - Dec. 31 1.227995 4.100640 1.590557 5.365074
Percentage increase (decrease)
in unit value* 3% 10% 21% 20%
=========================================================================================
MFSGROPP MFSHIINC MFSGRSTK NWFUND
- -----------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .797163 .454402 2.583466 1.120188
Unrealized gain (loss) .533743 .164251 (.549708) 1.782324
Contract charges (.057445) (.044652) (.084612) (.114166)
Ending unit value - Dec. 31 7.387651 5.523753 10.891758 14.979404
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
=========================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSTK TEMFORFD
- ------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026850 .806926 .060222 .031607 .050940
Unrealized gain (loss) .119236 1.073386 .000000 .131656 .135312
Contract charges (.005615) (.083839) (.009759) (.009375) (.009506)
Ending unit value - Dec. 31 1.140471 10.731082 1.170093 1.179742 1.216800
Percentage increase (decrease)
in unit value* 14% 20% 5% 15% 17%
=====================================================================================================
</TABLE>
- -----------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
21
<PAGE> 22
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER IV
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087945 .081043 .153338 .381504 .097103
Unrealized gain (loss) .510579 .093156 (.017364) .160732 .126228
Contract charges (.033476) (.010516) (.016230) (.019505) (.014219)
Ending unit value - Dec. 31 $4.570448 1.427234 2.159454 2.761054 1.950763
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212032 .204302 .149526 .106765 .087649
Unrealized gain (loss) (.060864) .119570 .024632 .181750 (.003055)
Contract charges (.010503) (.011693) (.009563) (.012646) (.009219)
Ending unit value - Dec. 31 $1.441850 1.683525 1.319550 1.774063 1.231819
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 7%
=====================================================================================================
NWGROFD NWMYMKL MBGUARD PUTINVFD PULVOYFD
- ------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752190
Reinvested capital gains
and dividends .235228 .137615 .081878 1.595118 .194853
Unrealized gain (loss) .207994 .000000 .140555 .814144 .156384
Contract charges (.022252) (.022328) (.010358) (.097159) (.023334)
Ending unit value - Dec. 31 $3.088171 2.889720 1.462856 13.617267 3.080033
Percentage increase (decrease) 16% 4% 17% 20% 12%
in unit value*
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064301 .331908 .135385 .342759
Unrealized gain (loss) (.021787) .089714 .151823 .592856
Contract charges (.009442) (.030706) (.011187) (.038020)
Ending unit value - Dec. 31 1.228823 4.103407 1.591621 5.368665
Percentage increase (decrease)
in unit value* 3% 11% 21% 20%
==========================================================================================
MFSGROPP MFSHIINC MFSGRSTK NWFUND
- ------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .797673 .454488 2.585118 1.120845
Unrealized gain (loss) .533536 .164320 (.550938) 1.782490
Contract charges (.052798) (.041081) (.077737) (.104964)
Ending unit value - Dec. 31 7.392601 5.527479 10.899055 14.989429
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
==========================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSIK TEMFORFD
- --------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026663 .807363 .060226 .031627 .050965
Unrealized gain (loss) .119289 1.073355 .000000 .131676 .135346
Contract charges (.004921) (.077060) (.008973) (.008625) (.008750)
Ending unit value - Dec. 31 1.141231 10.738267 1.170883 1.180532 1.217615
Percentage increase (decrease)
in unit value* 14% 20% 5% 15% 17%
========================================================================================================
</TABLE>
- ---------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
See Note 3.
22
<PAGE> 23
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of NACo Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of NACo Variable Account as of December 31, 1996, and
the related statements of operations and changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended. These financial statements and schedules of changes in unit
value are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules of changes in
unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of NACo Variable Account as of December 31, 1996, and the results of
its operations and its changes in contract owners' equity and the schedules of
changes in unit value for each of the years in the three year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
- --------------------------------------------------------------------------------
23
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA o COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
