<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act Registration No. 33-33425
'40 Act Registration No. 811-5999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 15 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16 [X]
NACO VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information, and the Financial
Statements.
It is Proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on June 30, 1998, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
================================================================================
<PAGE> 2
NACO VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page............................................................ 3
Item 2. Definitions........................................................... 5
Item 3. Synopsis or Highlights................................................ 14
Item 4. Condensed Financial Information....................................... 15
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies............................................... 18
Item 6. Deductions and Expenses............................................... 19
Item 7. General Description of the Variable Annuity Contract.................. 22
Item 8. Annuity Period........................................................ 25
Item 9. Death Benefit......................................................... 26
Item 10. Purchases and Contract Value.......................................... 23
Item 11. Redemptions........................................................... 25
Item 12. Taxes................................................................. 30
Item 13. Legal Proceedings..................................................... 31
Item 14. Table of Contents of the Statement of Additional Information.......... 32
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page............................................................ 38
Item 16. Table of Contents..................................................... 38
Item 17. General Information and History....................................... 38
Item 18. Services.............................................................. 38
Item 19. Purchase of Securities Being Offered.................................. 38
Item 20. Underwriters.......................................................... 39
Item 21. Calculation of Performance............................................ 39
Item 22. Annuity Payments...................................................... 41
Item 23. Financial Statements.................................................. 42
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..................................... 89
Item 25. Directors and Officers of the Depositor............................... 91
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant...................................... 93
Item 27. Number of Contract Owners............................................. 103
Item 28. Indemnification....................................................... 103
Item 29. Principal Underwriters................................................ 103
Item 30. Location of Accounts and Records...................................... 105
Item 31. Management Services................................................... 105
Item 32. Undertakings.......................................................... 105
</TABLE>
<PAGE> 3
SUPPLEMENT DATED JUNE 30, 1998 TO
PROSPECTUS DATED MAY 1, 1998 FOR
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NACO VARIABLE ACCOUNT
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. THE FOLLOWING UNDERLYING MUTUAL FUND OPTIONS LOCATED ON PAGE 1 OF THE
PROSPECTUS CHANGED THEIR NAMES EFFECTIVE MAY 9, 1998:
Nationwide Fund - Class D
Nationwide Growth Fund - Class D
2. THE EXPENSE TABLE LOCATED ON PAGES 7 THROUGH 8 OF THE PROSPECTUS IS HEREBY
AMENDED TO INCLUDE THE FOLLOWING INFORMATION:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(After Expense Reimbursement)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
=============================================================
Total Underlying
Management Other 12b-1 Mutual Fund
Fees Expenses Fees Annual Expenses
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Fund - Class D 0.57% 0.15% 0.00% 0.72%
- ------------------------------------------------------------------------------------------------------
Nationwide Growth Fund - Class D 0.58% 0.20% 0.00% 0.78%
- ------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund 0.40% 0.20% 0.00% 0.60%
- ------------------------------------------------------------------------------------------------------
</TABLE>
On May 9, 1998, the assets of the Nationwide Fund, Nationwide Growth Fund, and
Nationwide Money Market Fund (the "Acquired Funds") were acquired by
corresponding funds in a new Ohio business trust in exchange for the assumption
of the stated liabilities of the Acquired Funds and a number of full and
fractional Class D shares of the applicable new fund (for the Nationwide Money
Market Fund, shares will be issued without class designation) (the
"Reorganization"). The Reorganization has previously been approved by
shareholders of the Acquired Funds. Prior to the time of the Reorganization, the
Total Underlying Mutual Fund Annual Expenses were 0.60% for the Nationwide Fund,
0.64% for the Nationwide Growth Fund, and 0.59% for the Nationwide Money Market
Fund.
1
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<PAGE> 4
3. THE "EXAMPLE" LOCATED AT PAGES 9 THROUGH 11 OF THE PROSPECTUS IS HEREBY
AMENDED TO INCLUDE THE FOLLOWING INFORMATION:
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Fund - Class D 68 104 144 253
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Growth Fund - Class D 68 106 147 260
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund 66 100 137 240
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you do not surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Fund - Class D 18 54 94 203
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Growth Fund - Class D 18 56 97 210
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you annuitize your Contract
at the end of the applicable time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Fund - Class D 18 54 94 203
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Growth Fund - Class D 18 56 97 210
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
2
4 of 132
<PAGE> 5
4. "APPENDIX A" LOCATED AT PAGES 27 THROUGH 32 OF THE PROSPECTUS IS HEREBY
AMENDED TO INCLUDE THE FOLLOWING INVESTMENT OBJECTIVE INFORMATION:
NATIONWIDE FUND - CLASS D (EFFECTIVE MAY 9, 1998)
The investment objective of the Fund is to seek total return through a flexible
combination of current income and capital appreciation. The Fund invests
primarily in common stocks, but also in convertible securities, other equity
securities, bonds and money market obligations. Nationwide Advisory Services,
Inc. serves as the Fund's investment adviser.
NATIONWIDE GROWTH FUND - CLASS D (EFFECTIVE MAY 9, 1998)
The investment objective of the Fund is to seek long term capital appreciation
by investing primarily in equity securities of companies of all sizes. Major
emphasis in the selection of securities is placed on companies which have
capable management, and are in fields where social and economic trends,
technological developments, and new processes or products indicate a potential
for greater-than-average growth.
NATIONWIDE MONEY MARKET FUND (EFFECTIVE MAY 9, 1998)
The investment objective of the Fund is to seek as high a level of current
income as is consistent with the preservation of capital and maintenance of
liquidity. The Fund invests in high-quality money market instruments maturing in
397 days or less. Nationwide Advisory Services, Inc. serves as the Fund's
investment adviser.
3
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<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P. O. Box 16766
One Nationwide Plaza
Columbus, Ohio 43216
1-800-545-4730, (T.T.Y. 1-800-848-0833)
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED BY THE NACO VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
The Group Flexible Fund Retirement Contracts (the "Contract" or "Contracts")
described in this prospectus are designed for use in connection with deferred
compensation Plans adopted by Member Counties under the NACo Program and the
Contracts may be issued either as Allocated Contracts or Unallocated Contracts.
Such Plans generally qualify for favorable tax treatment under Section 457 of
the Internal Revenue Code ("Code").
The assets of the Plans are part of the general assets of the Member County,
provided however that the Member County must hold all Plan assets for the
exclusive benefit of the Plan's Participants and Beneficiaries. Rights and
privileges under the Contracts may be exercised by the Member County to the
extent such rights are not specifically reserved in the Plan for Participants as
a group or as individuals. The Member County may not take any action
inconsistent with the rights of the Plan's Participants. The Participants have a
contractual claim against the Member County for the benefits promised by the
Plans. The Participants are generally not subject to tax until Distributions are
received from the Plan. Purchase Payments made at any time by or on behalf of
any Participant must be at least $20 per month.
Purchase Payments are allocated to the NACo Variable Account (the "Variable
Account"), a separate account of Nationwide Life Insurance Company (the
"Company"). The Variable Account is divided into Sub-Accounts, each of which
invests in shares of the underlying Mutual Funds described below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
American Century: Twentieth Century Ultra Nationwide Asset Allocation Trust (collectively
"Nationwide Professionally Managed Portfolios" or
"NPMP")
- -------------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. - NPMP - The Aggressive Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - - NPMP - The Conservative Portfolio
Institutional Shares - NPMP - The Moderate Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund - NPMP - The Moderately Aggressive Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio - NPMP - The Moderately Conservative Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund
- -------------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio Neuberger & Berman Guardian Fund, Inc.
- -------------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A Putnam Investors Fund - Class A
- -------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund Putnam Voyager Fund - Class A
- -------------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund SEI Index Funds - S&P 500 Index Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small Seligman Growth Fund, Inc. - Class A
Company Fund
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R)
- -------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
NOT AVAILABLE FOR NEW PLANS ESTABLISHED ON OR AFTER JUNE 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund
- -------------------------------------------------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1997
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
- -------------------------------------------------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER MAY 1, 1997
- -------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth Massachusetts Investors Growth Stock Fund - Class A
- -------------------------------------------------------------------------------------------------------------------------
MAY NOT BE AVAILABLE TO ALL CONTRACT OWNERS ON OR AFTER JULY 1, 1994
- -------------------------------------------------------------------------------------------------------------------------
The Bond Fund of America (SM), Inc. The Investment Company of America (R), Inc.
- -------------------------------------------------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1993
- -------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund (formerly "Evergreen Total Nationwide(R) Growth Fund
Return Fund")
- -------------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A (formerly "MFS(R) Capital Development Fund")
- -------------------------------------------------------------------------------------------------------------------------
NOT AVAILABLE FOR OWNERS WHOSE PREDECESSOR NATIOWIDE DC VARIABLE ACCOUNT
CONTRACT WAS ISSUED ON OR AFTER JANUARY 1, 1987
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund (formerly "Fidelity High Income Fund")
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
This prospectus provides you with the basic information you should know about
the Contracts issued by the Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
May 1, 1998 containing further information about the Contracts and the Variable
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling the number listed
above, or writing P.O. Box 16766, One Nationwide Plaza, Columbus, Ohio 43216.
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR CONTRACT FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED
ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SEC MAINTAINS A WEB SITE, www.sec.gov, THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION AS WELL AS MATERIAL INCORPORATED BY REFERENCE RELATING TO
THIS PROSPECTUS.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 30 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
<PAGE> 8
GLOSSARY OF TERMS
ACCUMULATION UNIT- A statistical index measuring the net investment results of
each Sub-Account. It is the unit of measurement used to determine Contract Value
and each Participant Account value.
ALLOCATED CONTRACT- A Contract where individual accounts are maintained by the
Company on behalf of each Participant.
ANNUITANT- The person upon whose continuation of life any annuity payment
involving life contingencies depends.
ANNUITIZATION- The date on which annuity payments commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence.
BENEFICIARY- The person named on the application to receive certain benefits
under the Contract upon the death of the designated Annuitant. The Beneficiary
can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The person named on the application to be the alternate
Beneficiary if the named Beneficiary is not living at the time of the death of
the designated Annuitant.
CONTRACT- The Group Flexible Fund Retirement Contract issued by the Company to
the Contract Owner under which the Company invests Purchase Payments made by the
Contract Owner and assists the Contract Owner in making Retirement Income
Payments at specified dates.
CONTRACT ANNIVERSARY- An anniversary of the date of issue of the Contract.
CONTRACT DATE- The date of issue shown on the Contract.
CONTRACT OWNER- The Member County to which the Contract is issued.
CONTRACT VALUE- The sum of the value of all Accumulation Units attributable to
the Contract plus any amount held under the Contract in the General Account.
CONTRACT YEAR- Each period starting with either: (1) the Contract Date; or (2) a
Contract Anniversary. The Contract Year ends immediately prior to the next
Contract Anniversary.
DISTRIBUTION- Any payment by the Company of part or all of the Contract Value.
DISTRIBUTION PERIOD - The period during which payments are distributed from a
Participant Account.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INITIAL TRANSFER - The initial amount transferred by the Contract Owner from an
investment product offered by a provider other than the Company. An Initial
Transfer will be the initial Purchase Payment under a Contract.
MEMBER COUNTY- A county which is a member of the National Association of
Counties ("NACo") or an entity approved by the President of NACo for
participation under the NACo Program.
NACO PROGRAM - The deferred compensation program established and administered
pursuant to Section 457 of the Code for the benefit of Member Counties.
NET ASSET VALUE- The worth of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
PARTICIPANT - An eligible employee, member, or other person who is entitled to
benefits under the Plan. Such persons are determined and reported to the Company
by the Contract Owner.
PARTICIPANT ACCOUNT - An account established by the Company for each Participant
in which all financial transactions occurring with respect to a Participant,
other than the purchase and payment of an annuity made from the Company's
General Account, are recorded.
<PAGE> 9
PARTICIPANT ACCOUNT MAINTENANCE CHARGE- The maximum Participant Account
Maintenance Charge is $50. This charge is subject to negotiation between the
Contract Owner and the Company.
PARTICIPANT ACCOUNT YEAR- For each Participant, the Participant Account Year is
each one year period starting with either the Participant Effective Date or a
Participant Anniversary.
PARTICIPANT ANNIVERSARY- An anniversary of the Participant Effective Date.
PARTICIPANT EFFECTIVE DATE- For each Participant, the Participant Effective Date
is the first date Accumulation Units are credited to the Participant's Account
on behalf of such Participant under the Contract.
PLAN- A Member County's Code Section 457 deferred compensation plan established
and administered under the auspices of the NACo Program. The Plan document is
referred to in the Contract schedule as the Plan. The assets of the Plan are
part of the general assets of the Member County, provided that the Member County
must hold all such Plan assets for the exclusive benefit of the Plan's
Participants and Beneficiaries. The Participants have a contractual claim
against the Member County for the benefits promised by the Plan.
PURCHASE PAYMENT- A deposit of new value into the Contract in order to provide
retirement income benefits.
RETIRED PARTICIPANT- A Participant for whom payments under an Optional
Retirement Income Form are being made.
RETIREMENT INCOME PAYMENTS- Periodic payments of the Participant Account made by
the Company to the Participant or to a designated Beneficiary during the
Distribution Period.
RETIREMENT COMMENCEMENT DATE- The date upon which Retirement Income Payments
commence.
SUB-ACCOUNT- A separate and distinct division of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units are separately maintained.
UNALLOCATED CONTRACT- A Contract under which a single account is maintained by
the Company on behalf of a Plan.
UNDERLYING MUTUAL FUND- A registered open-end management investment company
specified on the Contract application in which the assets of a Sub-Account will
be invested.
VALUATION DATE- Each day the New York Stock Exchange and the Home Office are
open for business or any other day during which there is a sufficient degree of
trading of the Variable Account's Underlying Mutual Fund shares that the current
Variable Account Contract Value might be materially affected.
VARIABLE ACCOUNT- NACo Variable Account, a segregated investment account
established by the Company in which amounts equivalent to the Company's
obligations under the Contract are held for all Participants, and for those
Participants during retirement who have annuitized.
VARIABLE ACCOUNT ANNUAL EXPENSE FEE- A charge made for various risks assumed by
the Company and for administration of the Variable Account. The maximum charge
cannot exceed an amount equal to 0.95% on an annual basis of the average net
assets.
<PAGE> 10
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS...............................................................................................3
SUMMARY OF CONTRACT EXPENSES....................................................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..........................................................................7
SYNOPSIS.......................................................................................................12
CONDENSED FINANCIAL INFORMATION................................................................................13
NATIONWIDE LIFE INSURANCE COMPANY..............................................................................16
NATIONWIDE ADVISORY SERVICES, INC..............................................................................16
THE VARIABLE ACCOUNT...........................................................................................16
Voting Rights.........................................................................................17
PERIODIC REPORTS...............................................................................................17
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS..................................................................17
Contingent Deferred Sales Charge......................................................................17
Participant Account Maintenance Charge................................................................18
Variable Account Annual Expense Fee...................................................................19
Premium Taxes and Other Expenses......................................................................19
Experience Credits....................................................................................19
DESCRIPTION OF THE CONTRACTS...................................................................................20
Purpose of the Contracts..............................................................................20
Modification of the Contract..........................................................................20
Contract Rights and Privileges and Assignments........................................................20
Exchange Privilege....................................................................................20
Suspension and Termination............................................................................21
Application of Purchase Payments......................................................................21
Additional Purchase Payment Prior to Commencement of Annuity Payments.................................22
Crediting Accumulation Units..........................................................................22
Variable Account Accumulation Unit Value..............................................................22
Allocation of Purchase Payments.......................................................................22
Valuation of an Account...............................................................................22
Redemption of Participant Accounts....................................................................23
DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD).......................................................23
Retirement Income Payments............................................................................23
Election of Income Form and Date......................................................................24
Allocation of Retirement Income.......................................................................24
Fixed Dollar Annuity..................................................................................24
Minimum Payment.......................................................................................24
Death Benefit Before Retirement.......................................................................24
Optional Retirement Income Forms......................................................................24
Death of Retired Participant..........................................................................25
Withdrawal............................................................................................25
Frequency of Payment..................................................................................25
Determination of Payments Under Options A1 and A2.....................................................25
Determination of Payments Under Options B1 and B2.....................................................25
Determination of Amount of Variable Monthly Payments for the First Year...............................25
Determination of Amount of Variable Monthly Payments for the Second
and Subsequent Years................................................................................26
Alternate Assumed Investment Rate.....................................................................26
GENERAL INFORMATION............................................................................................26
Substitution of Securities............................................................................26
Performance Advertising...............................................................................27
Contract Owner Inquiries..............................................................................28
Net Investment Factor.................................................................................28
Valuation of Assets...................................................................................28
Federal Tax Status....................................................................................28
Contracts Issued Under the New York Model Plan........................................................29
YEAR 2000 COMPLIANCE ISSUES....................................................................................29
LEGAL PROCEEDINGS..............................................................................................29
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................................30
APPENDIX.......................................................................................................31
</TABLE>
<PAGE> 11
SUMMARY OF CONTRACT EXPENSES
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge("CDSC")(1)...... 5%
(as a percentage of Purchase Payments)
MAXIMUM PARTICIPANT ACCOUNT MAINTENANCE CHARGE(2).............. $50
MAXIMUM VARIABLE ACCOUNT ANNUAL EXPENSE FEE(3)................. 0.95% per annum
(as a percentage of average net assets)
(1) For Contracts issued on or after the later of May 1, 1998 or the date on
which state insurance authorities approve contractual modifications, a CDSC
may be negotiated and assessed. The maximum CDSC percentage which may be
assessed is the lesser of:
(1) 5% of the total of all Purchase Payments received on behalf of the
surrendering Participant or the withdrawing Contract Owner prior to the
date of the request for surrender; or
(2) 5% of the amount surrendered.
For Contracts issued prior to May 1, 1998 or prior to the date on which
state insurance authorities approve contractual modifications, a maximum
CDSC of 4% may be negotiated and assessed. The CDSC will be imposed only
when applicable (see "Contingent Deferred Sales Charge").
(2) The Participant Account Maintenance Charge is subject to negotiation (see
"Participant Account Maintenance Charge").
(3) The Variable Account Annual Expense Fee is subject to negotiation (see
"Variable Account Annual Expense Fee"). The maximum fee does not include any
expenses or premium taxes which may be imposed by the state in which the
Contract is issued. The Variable Account Annual Expense Fee does not include
deductions for management fees and other expenses made by the Underlying
Mutual Funds (see "Underlying Mutual Fund Annual Expenses").
<PAGE> 12
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(After Expense Reimbursement)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
=============================================================
Total Underlying
Management Other 12b-1 Mutual Fund
Fees Expenses Fees Annual Expenses
======================================== -------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century 1.00% 0.00% 0.00% 1.00%
Growth
- ------------------------------------------------------------------------------------------------------
American Century: Twentieth Century 1.00% 0.00% 0.00% 1.00%
Ultra
- ------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 0.33% 0.10% 0.25% 0.68%
- ------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 0.75% 0.28% 0.00% 1.03%
- ------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 0.98% 0.29% 0.00% 1.27%
- ------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities: 0.39% 0.15% 0.00% 0.54%
2-5 Years - Institutional Shares
- ------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 0.59% 0.26% 0.00% 0.85%
- ------------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.48% 0.22% 0.00% 0.70%
- ------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.47% 0.23% 0.00% 0.70%
- ------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 0.45% 0.21% 0.00% 0.66%
- ------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 0.56% 0.29% 0.00% 0.85%
- ------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.45% 0.22% 0.00% 0.67%
- ------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 0.25% 0.08% 0.23% 0.56%
- ------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 0.37% 0.11% 0.00% 0.48%
- ------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock 0.30% 0.21% 0.21% 0.72%
Fund - Class A
- ------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund-Class A 0.42% 0.26% 0.16% 0.84%
- ------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 0.48% 0.28% 0.30% 1.06%
- ------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 0.50% 0.10% 0.00% 0.60%
- ------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 0.50% 0.14% 0.00% 0.64%
- ------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 0.45% 0.14% 0.00% 0.59%
- ------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - 1.00% 0.11% 0.00% 1.11%
Nationwide Small Company Fund
- ------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 0.50% 0.00% 0.00% 0.50%
- ------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 0.50% 0.00% 0.00% 0.50%
- ------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 0.50% 0.00% 0.00% 0.50%
- ------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive 0.50% 0.00% 0.00% 0.50%
Portfolio
- ------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative 0.50% 0.00% 0.00% 0.50%
Portfolio
- ------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, 0.70% 0.10% 0.00% 0.80%
Inc.
- ------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 0.56% 0.19% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------
Putnam Voyager Fund -Class A 0.49% 0.28% 0.25% 1.02%
- ------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index 0.19% 0.06% 0.00% 0.25%
Portfolio
- ------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 0.70% 0.23% 0.23% 1.16%
- ------------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury
Portfolio - Institutional Class 0.09% 0.00% 0.00% 0.09%
- ------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 0.67% 0.18% 0.00% 0.85%
- ------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 0.61% 0.22% 0.25% 1.08%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Underlying Mutual Fund expenses shown above are assessed at the
Underlying Mutual Fund level and are not direct charges against Variable
Account assets or Contract Value. These Underlying Mutual Fund expenses are
taken into consideration in computing each Underlying Mutual Fund's Net
Asset Value, which is the share price used to calculate the Variable
Account's unit value. There are no front-end load fees (sales charges) at
the Underlying Mutual Fund level.
<PAGE> 13
The following funds are subject to fee waivers or expense reimbursement
arrangements:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Federated U.S. Government Securities Fund: 2-5 Years Absent the waiver of fees by the Fund's investment
- - Institutional Shares advisor, Management Fees, Other Expenses, and Total
Portfolio Expenses would have been 0.40%, 0.40% and
0.80% of average net assets, respectively.
- ------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund Absent the waiver of fees by the Fund's investment
advisor, Management Fees, Other Expenses, and Total
Portfolio Expenses would have been 0.50%, 0.14% and
0.64%, of average net assets, respectively.
- ------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio Absent the waiver of fees by the Fund's investment
advisor, Management Fees, Other Expenses, and Total
Portfolio Expenses would have been 0.25%, 0.30% and
0.55%, of average net assets, respectively.
- ------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - Absent the waiver of fees by the Fund's investment
Institutional Class advisor, Management Fees, Other Expenses, and Total
Portfolio Expenses would have been 0.14%, 0.00% and
0.14%, of average net assets, respectively.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
<PAGE> 14
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
=====================================================================================================================
<S> <C> <C> <C> <C>
American Century: Twentieth Century Growth 70 113 159 284
- ---------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 70 113 159 284
- ---------------------------------------------------------------------------------------------------------------------
The Bond Fund of America (SM), Inc. 67 103 141 249
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 71 114 160 287
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 73 122 173 313
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 66 99 134 233
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 69 108 151 268
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 67 104 142 251
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 67 104 142 251
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 67 102 140 247
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 69 108 151 268
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 67 103 141 248
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 66 99 135 235
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 65 97 131 226
- ---------------------------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund 69 108 150 267
- ---------------------------------------------------------------------------------------------------------------------
MFS High Income Fund 71 115 162 291
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 68 104 144 253
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 66 100 137 240
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 67 102 139 244
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 66 100 137 239
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small Company 72 117 164 296
Fund
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 65 97 132 228
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 65 97 132 228
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 65 97 132 228
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 65 97 132 228
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 65 97 132 228
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 68 107 148 262
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 70 113 159 284
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 71 114 160 286
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 63 89 118 199
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 72 118 167 301
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 61 84 109 181
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 69 108 151 268
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 71 116 163 293
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE> 15
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you do not surrender your Contract
at the end of the applicable
time period
- ---------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
=====================================================================================================================
<S> <C> <C> <C> <C>
American Century: Twentieth Century Growth 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 23 72 123 263
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years- 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 17 54 92 201
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 54 92 201
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 17 52 90 197
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 17 53 91 198
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 49 85 185
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 176
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund- Class A 19 58 100 217
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 21 65 112 241
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 54 94 203
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 89 194
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 16 50 87 189
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small Company 22 67 114 246
Fund
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 18 57 98 212
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 21 64 110 236
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 22 68 117 251
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 59 131
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 21 66 113 243
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE> 16
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1,000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
----------------------------------------------------
If you annuitize your Contract
at the end of the applicable time period
=====================================================================================================================
<S> <C> <C> <C> <C>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ---------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 23 72 123 263
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 17 54 92 201
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 54 92 201
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 17 52 90 197
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 17 53 91 198
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 49 85 185
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 176
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund- Class A 19 58 100 217
- ---------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 21 65 112 241
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 54 94 203
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 89 194
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 16 50 87 189
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small Company 22 67 114 246
Fund
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 18 57 98 212
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 20 63 109 234
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 21 64 110 236
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 22 68 117 251
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 59 131
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 58 101 218
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 21 66 113 243
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of the Summary of Contract Expenses and Example is to assist the
Participant in understanding the various costs and expenses that a Participant
will bear directly or indirectly when investing in the Contract. The Tables
reflect expenses of the Variable Account as well as the Underlying Mutual Fund
investment options. For a more detailed explanation of these expenses, see
"Variable Account Charges, Purchase Payments, and Other Deductions."
<PAGE> 17
For more and complete information regarding expenses paid out of the assets of a
particular Underlying Mutual Fund, see the Underlying Mutual Fund's prospectus.
In addition to the expenses shown above, deductions for premium taxes may also
be applicable, depending upon the jurisdiction in which the Contract is sold
(see "Premium Taxes").
SYNOPSIS
The Contracts described in this prospectus are designed for use in connection
with deferred compensation Plans adopted by Member Counties under the NACo
Program. The Plans qualify for favorable tax treatment under Section 457 of the
Code. The Participants generally are not subject to federal income tax on
amounts deferred under such plans until Distributions are received from the
Plan. Purchase Payments made at any time by or on behalf of any Participant must
be at least $20 per month.
Purchase Payments under the Contracts are placed in the Variable Account. The
Variable Account is a unit investment trust with Sub-Accounts having distinct
unit values, each reflecting investment results of a different Underlying Mutual
Fund. Amounts equivalent to the obligations of the Company under each
Sub-Account will be invested in the specified Underlying Mutual Fund (see
"Appendix of Participating Funds").
The Company does not deduct a sales charge from Purchase Payments made for these
Contracts. However, if any part of the Contract is withdrawn, the Company will,
with certain exceptions, deduct from the Contract Value, a Contingent Deferred
Sales Charge ("CDSC") equal to not more than 5% of the lesser of the total of
all Purchase Payments made prior to the date of the request for surrender, or
the amount surrendered. This charge, when applicable, is imposed to permit the
Company to recover sales expenses which have been advanced by the Company (see
"Contingent Deferred Sales Charge").
Under certain Contracts, the Company may assess a Participant Account
Maintenance Charge. Under no circumstances will a Participant Account
Maintenance Charge be assessed unless the charge is specifically negotiated and
agreed upon by the Contract Owner and the Company. The maximum amount which may
be assessed is $50 (see "Participant Account Maintenance Charge").
A Variable Account Annual Expense Fee is assessed in connection with the
Company's contractual promise to accept various risks and for administration
expenses associated with the issuance of the Contracts. This fee is subject to
negotiation and may vary from one Plan to another reflecting the unique
characteristics of different Plans when considered as a whole. This charge is
calculated as a percentage of assets and is deducted on each Valuation Date from
amounts held in the Variable Account. The maximum fee which may be assessed by
the Company is 0.95% per annum of the average net assets (see "Variable Account
Annual Expense Fee"). In addition, the Underlying Mutual Funds make certain
deductions from their assets (see "Underlying Mutual Fund Annual Expenses").
The CDSC, Participant Account Maintenance Charge and Variable Account Expense
Fee, when negotiated, may be decreased upon notice to the Contract Owner (see
"Modification of the Contract").
Taxation of the Contracts will depend on the type of Contract issued (see
"Federal Tax Status"). Any applicable premium taxes will be charged against the
Contracts. If any premium taxes are payable at the time Purchase Payments are
made, the premium tax deduction will be made prior to allocation to any
Underlying Mutual Fund (see "Premium Taxes").
<PAGE> 18
CONDENSED FINANCIAL INFORMATION
The value of an Accumulation Unit is determined on the basis of changes in the
per share value of the Underlying Mutual Funds and the assessment of a Variable
Account Annual Expense Fee (for more information on the calculation of
Accumulation Unit values, see "Variable Account Accumulation Unit Value" and
"Net Investment Factor"). Please refer to Appendix B for information regarding
each class of Accumulation Units.
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the "Nationwide
Insurance Enterprise", with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company offers a complete line of life insurance, annuities and
retirement products. It is admitted to do business in all states, the District
of Columbia, the Virgin Islands, and Puerto Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on September 7, 1988
pursuant Ohio law. The Variable Account has been registered with the SEC as a
unit investment trust pursuant to the provisions of the Investment Company Act
of 1940 ("1940 Act"). Such registration does not involve supervision of the
management of the Variable Account or the Company by the SEC.
The net Purchase Payments applied to the Variable Account are invested in shares
of the Underlying Mutual Funds available under the terms of the Contract. The
Variable Account is divided into Sub-Accounts of Accumulation Units, each of
which represents a separate Underlying Mutual Fund (see "Appendix -
Participating Funds" for a description of the investment objective of each
Underlying Mutual Fund).
Each Sub-Account is administered and accounted for as a part of the separate
account, but the income, capital gains or losses of each Sub-Account are
credited to or charged against the assets held for that Sub-Account in
accordance with the terms of each Contract, without regard to other income,
capital gains or losses of any other Sub-Account, or arising out of any other
business the Company may conduct. The assets within each Sub-Account are not
chargeable with liabilities arising out of the business conducted by any other
Sub-Account, nor will the Variable Account as a whole be chargeable with
liabilities arising out of any other business the Company may conduct.
<PAGE> 19
VOTING RIGHTS
The Variable Account will be owner of record of all Underlying Mutual Fund
shares purchased by the respective account until such Underlying Mutual Fund
shares are sold, but all securities will be held for the benefit of the Contract
Owners. In accordance with its view of applicable law, the Company will vote the
shares of the Underlying Mutual Funds held in the Variable Account at regular
and special meetings of the shareholders. The shares will be voted in accordance
with instructions received from Contract Owners. The Company or its designee
will mail to each Contract Owner at its last known address all periodic reports
and proxy material of the applicable Underlying Mutual Fund, and a form with
which to give voting instructions. Any Underlying Mutual Fund shares as to which
no timely instructions are received will be voted by the Company in the same
proportion as the instructions received from all persons furnishing timely
instructions. A Contract Owner's voting rights may decrease with the
cancellation of Accumulation Units to make annuity payments.
PERIODIC REPORTS
The Company or its designee will, semi-annually, provide to each Participant, a
Statement of Assets, Liabilities and Contract Owners' Equity and a Statement of
Operations and Changes in Contract Owners' Equity of the Variable Account. Each
Participant and Retired Participant will also be informed, periodically, of the
number of Accumulation Units credited to his or her account, as well as the
total account value.
The current prospectus of the Variable Account will be made available to
Participants through the Contract Owner. The Contract Owner may, under the terms
of the Plan, have an obligation to furnish additional information to
Participants, such as a notice of any changes in the Plan or tax status of the
Plan and the financial condition of the Contract Owner as it relates to
obligations under the Plan.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
Charges associated with Contracts described in this prospectus may vary from one
Plan to another, depending on the nature of the Plan and the particular needs
and preferences of Contract Owners. Generally, all charges are negotiable; this
allows the Company and Contract Owners flexibility in "custom designing" a
charge structure that is consistent with the expectations and preferences of
Contract Owners, as well as the expenses (which will vary from Plan to Plan) and
profitability aims of the Company.
With respect to any existing Contract which may be re-negotiated, however, the
Company will not negotiate for, nor impose aggregate Contract charges greater
than those in effect prior to re-negotiation. In other words, charges under any
existing Contract which is re-negotiated may be lowered, but under no
circumstances will they be raised.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for a sales charge is made from the Purchase Payments for these
Contracts. However the CDSC, when it is applicable, will be used to cover
expenses relating to the sale of the Contracts, including compensation paid to
sales personnel, the costs of preparation of sales literature, and other
promotional activity. The Company attempts to recover its distribution costs
relating to the sale of the Contracts from a CDSC. Any shortfall will be borne
by the Company, which may indirectly include portions of the Variable Account
Annual Expense Fee, since the Company intends to generate a profit from this
fee.
If the Contract Owner terminates the Contract in accordance with the section
entitled "Suspension and Termination", and directs the Company to withdraw all
or part of the Contract Value, the Company will assess a CDSC against the amount
withdrawn by deducting an amount from each Participant's Account as indicated
below. For purposes of the CDSC, withdrawals under a Contract come first from
the Purchase Payments which have been on deposit under the Contract for the
longest time period.
<PAGE> 20
The following CDSC schedule applies to Contracts issued beginning July 1, 1985
and prior to the later of May 1, 1998 or the date on which insurance
authorities approve contractual modifications.
Number of Completed Years of
Participation
CDSC Percentage (Beginning July 1, 1985)
4% 1 through 12
3% 13
2% 14
1% 15
0% 16 and after
Years of participation credited toward the CDSC schedule as set forth above may
only be those earned beginning with the date of a Participant's first deferral
deposited in the Contract.
Notwithstanding the above, the CDSC will not apply to any withdrawals made on or
after January 1, 2001.
When a CDSC of less than 4% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced marketing
expenses.
No CDSC will be imposed on Contract Value that is paid under:
o any life income payment option;
o designated period payment options of 5 or more years for a
Participant who has a minimum of 5 Participant Account Years prior
to the time the benefit payments are to commence; and
o a one-sum or periodic payment payable because of a Participant's
death.
For Contracts issued on or after the later of May 1, 1998 or the date on which
state insurance authorities approve contractual modifications, a CDSC may be
negotiated and assessed. The maximum CDSC percentage which may be assessed is
the lesser of:
(1) 5% of the total of all Purchase Payments received on behalf of the
surrendering Participant or the withdrawing Contract Owner prior to the
date of the request for surrender; or
(2) 5% of the amount surrendered.
The cumulative sum of all such charges, per Participant, shall never exceed 5%
(or such lesser percentage, if applicable) of the total Purchase Payments made
on behalf of such Participant for the 16 years prior to the date the surrender
is requested.
When a CDSC of less than 5% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced marketing
expenses.
PARTICIPANT ACCOUNT MAINTENANCE CHARGE
A Participant Account Maintenance Charge, if assessed, will help the Company to
offset administrative expenses, and the charge will not exceed the Company's
actual administrative expenses under the Contracts.
The Company will not assess the Participant Account Maintenance Charge unless
the charge is negotiated and contractually agreed upon between the Contract
Owner and the Company. Generally, Contract Owners negotiating for a Participant
Account Maintenance Charge, or a higher Participant Account Maintenance Charge,
will do so with the expectation of having the Company lower other fees
associated with the Contract. Conversely, the absence of a Participant Account
Maintenance Charge may be expected to increase other charges. The maximum amount
which may be assessed is $50. If a Participant Account Maintenance Charge is
negotiated, the Company will assess each Participant Account the negotiated
amount at the beginning of each Participant Account Year for the preceding
Participant Account Year, during both the accumulation and annuity periods.
<PAGE> 21
The Company will assess the Participant Account Maintenance Charge on the date
(other than a Participant Anniversary) that amounts held in respect of a
Participant are fully withdrawn from the Variable Account. In such case, the
amount of the Participant Account Maintenance Charge will be 1/12 of the
applicable Participant Account Maintenance Charge, multiplied by the number of
whole or partial calendar months which have elapsed between the Participant
Anniversary (or the Participant Effective Date during the first Participant
Account Year) and the date of full withdrawal.
The Participant Account Maintenance Charge is made by canceling a number of
Accumulation Units at the beginning of each Participant Account Year during both
the accumulation and annuity periods, equal in value to the applicable
Participant Account Maintenance Charge. If a Participant Account includes more
than one Sub-Account, the deduction will be allocated among Sub-Accounts on the
basis of relative values at the time deduction is made.
For those Plans which provide this Contract and certain other investment options
(such as the Company's Group Fixed Fund Retirement Contract), the Participant
Account Maintenance Charge under this Contract may be reduced so that the total
of the Participant Account Maintenance Charges and any similar administrative
charges imposed under other investment options available under the Plan shall
not exceed the Participant Account Maintenance Charge assessed under this
Contract. In this event, such charge will be allocated among Sub-Accounts and
amounts held in such other investment options available under the Plan on the
basis of the relative values of the Participant's Accounts at the time the
deduction is made.
THE PARTICIPANT ACCOUNT MAINTENANCE CHARGE WILL NOT BE ASSESSED UNLESS
NEGOTIATED BETWEEN THE CONTRACT OWNER AND THE COMPANY.
VARIABLE ACCOUNT ANNUAL EXPENSE FEE ("VARIABLE ACCOUNT FEE")
Under the terms of the Contracts, the Company assumes various risks and incurs
administrative expenses associated with the issuance of the Contracts. For the
Company's contractual promise to accept these risks and expenses, the Contracts
provide for the deduction of a Variable Account Fee, which is calculated as a
percentage of assets and is deducted on each Valuation Date from amounts held in
the Variable Account. On an annual basis, the maximum Variable Account Fee is
0.95% of the average account value.
As with all other charges, this fee is subject to negotiation and may vary from
one Plan to another reflecting the unique characteristics of different Plans
when considered as a whole. In negotiating the amount of the fee, the Company
may consider factors which may reduce expenses incurred by the Company. These
factors might include, but are not limited to: (1) the size of the Plan; (2) the
number of eligible employees; (3) the number of Plan Participants; (4)
demographics of Plan Participants; (5) general economic conditions; (6) the
varying costs associated with the inclusion of Underlying Mutual Fund options;
(7) the type of Contract issued (for example, whether the Contract is issued as
an Allocated Contract or Unallocated Contract); (8) costs associated with
distribution of the Contract; and (9) any other factors which the Company deems
relevant.
PREMIUM TAXES AND OTHER EXPENSES
The Company will charge against Purchase Payments or the Contract Value the
amount of any premium taxes levied by a state or any other governmental entity
upon Purchase Payments received by the Company. Premium tax rates currently
range from 0% to 3.5% per annum. This range is subject to change. The method
used to recoup premium tax expenses will be determined by the Company at its
sole discretion and in compliance with state law.
There are deductions and expenses paid out of the assets of the Underlying
Mutual Funds (see "Underlying Mutual Fund Annual Expenses") that are more fully
described in the prospectus for the Underlying Mutual Funds.
EXPERIENCE CREDITS
The Contracts may either be participating or non-participating, depending on the
state of issue. A participating Contract provides the right to participate in
the distribution of surplus of the Company. In the event that the Participant
Account Maintenance Charge and the Variable Account Annual Expense Fee collected
under this Contract accrue to the Company in excess of an amount deemed
necessary at the sole discretion of the Company's Board of Directors, such
excess may be allocated to the Contract by purchasing additional Accumulation
Units and crediting such additional units to the Participant Accounts. There
have not been any such experience credits to date. The Company cannot offer any
assurance that there will be experience credits on participating Contracts in
the future. With respect to nonparticipating Contracts, there is no right to
participate in the distribution of surplus.
<PAGE> 22
DESCRIPTION OF THE CONTRACTS
PURPOSE OF THE CONTRACTS
The Contracts described in this prospectus are Group Flexible Fund Retirement
Contracts designed to fund Plans adopted by Member Counties under the NACo
Program established under Section 457 of the Code. A single group Contract is
issued to the Contract Owner, covering all present and future participating
employees. The Company will issue a certificate to the Contract Owner for
delivery to each Retired Participant or other person for whom an Optional
Retirement Income Form is purchased, setting forth in substance the benefits to
which such person is entitled. In addition, if any applicable law requires, the
Company will issue a descriptive certificate to the Contract Owner for delivery
to any such person required by law to receive such certificate, setting forth in
substance the benefits to which such person is entitled. For purposes of
determining benefits payable under the Plan, an individual accumulation account
is established for each Participant. The frequency of Purchase Payments is
normally monthly, but may be adjusted to fit the payroll practices of the
Contract Owner. Purchase Payments made at any time by or on behalf of any
Participant must be at least $20 per month.
The basic objectives of the Contracts are to provide each Participant with an
initial Retirement Income Payment, which will tend to reflect the changes which
have occurred in the cost of living during pre-retirement years (without the
necessity of increased Purchase Payments to keep pace with any increase in the
cost of living which might occur during those years), and to provide subsequent
Retirement Income Payments which will tend to vary with the cost of living
changes during his or her retired lifetime. The Company seeks to accomplish
these objectives by applying purchase rates contained in the Contract to the
amounts accumulated through investment in Underlying Mutual Funds.
Notwithstanding the foregoing, there is no assurance that these objectives will
be attained. Historically, the value of a diversified portfolio of common stocks
held for an extended period of time has tended to rise during periods of
inflation. There has, however, been no exact correlation, and for some periods,
the prices of securities have declined while the cost of living was rising.
MODIFICATION OF THE CONTRACT
The CDSC, Participant Account Maintenance Charge and Variable Account Annual
Expense Fee, when negotiated, may be decreased upon notice to the Contract
Owner.
Other than as set forth above, the Company reserves the right to change all
other provisions of the Contract by giving notice to the Contract Owner not less
than 90 days before the effective date of the change.
CONTRACT RIGHTS AND PRIVILEGES AND ASSIGNMENTS
The Contract belongs to the Contract Owner provided, however, that under Code
Section 457 Plans, the Contract Owner must hold the Contract for the exclusive
benefit of the Plan's Participants and Beneficiaries. All contractual rights and
privileges may be exercised by the Contract Owner, subject to any rights
specifically reserved in the Plan for Participants as a group or as individuals.
With respect to 457 Plans, the Contract Owner may not take any action
inconsistent with the rights of such 457 Plan's Participants. The Contract may
not be assigned.
EXCHANGE PRIVILEGE
The Company will permit the Contract Owner, or the Participant if the Plan so
provides, to exchange amounts among the Sub-Accounts as frequently as permitted
by the Plan, subject to the limits and rules set by each Underlying Mutual Fund.
For those Contracts where the Contract Owner has elected an exchange privilege,
there will be no charge for exchanges among the Sub-Accounts.
The Company will also permit the Participant to make exchanges among the
Sub-Accounts by telephone and the internet, if forms are executed by the
Contract Owner agreeing with certain restrictions applicable to these
privileges. Telephone exchange requests and internet exchange requests must be
received by the Company by the close of the New York Stock Exchange in order to
receive that day's closing Sub-Account price. If the Participant is unable to
execute an exchange request by telephone or internet (for example, during times
of unusual market activity), the Participant might consider placing the exchange
order by mail. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone and the internet are genuine. Such
procedures may include any or all of the following: requesting identifying
information, such as name, contract number, Social Security Number, and/or
personal identification number; tape recording all telephone transactions and
providing written confirmation thereof to the Contract Owner or Participant and
any agent of record at the last address of record; or other such procedures as
the Company may deem reasonable. Failure to follow reasonable procedures may
result
<PAGE> 23
in the Company's liability for any losses due to unauthorized or fraudulent
transfers. However, any losses incurred pursuant to actions taken by the Company
in reliance on telephone or internet instructions reasonably believed to be
genuine shall be borne by the Participant. The Company may withdraw the
telephone exchange privilege and the internet exchange privilege upon 30 days
written notice to Contract Owners and Participants.
On the date the Company receives an exchange request in good order, which
includes all of the information necessary for processing the request, the
Company will transfer the amount to be converted. Such transfers will be based
on the Accumulation Unit values of the affected Sub-Accounts if received at the
Home Office by the close of the New York Stock Exchange on a day on which the
New York Stock Exchange is open for business. If the exchange request is
received after the close of the New York Stock Exchange, the transfer will be
based on the next business day on which the New York Stock Exchange is open.
For those Plans funded by this Contract and Nationwide's Group Fixed Fund
Retirement Contract, the Contract Owner, or the Participant if the Plan so
provides, may exchange Accumulation Units between any Sub-Account and the Group
Fixed Fund Retirement Contract. Exchanges from the deposit fund to any
Sub-Account will be subject to the limitations of the Group Fixed Fund
Retirement Contract. Exchanges will be effective when received in good order at
the Home Office.
SUSPENSION AND TERMINATION
The Contract may be suspended at the option of the Company on written notice to
the Contract Owner if: (a) the Contract Owner has failed to remit to the Company
any Purchase Payment specified in the Plan; or (b) if the Company does not
accept an amendment to the Plan, filed with the Company by the Contract Owner,
which in the Company's opinion would adversely affect its financial experience
with respect to the Contract. The Contract Owner may suspend the Contract upon
90 days written notice to the Company. Suspension of the Contract will become
effective as of the ninety-first (91st) day following receipt of written notice
by the Company. Suspension of the Contract will mean only that no further
Purchase Payments will be accepted by the Company except by mutual consent, and
all other terms of the Contract will continue to apply. After suspension of the
Contract has become effective, the Contract Owner may, upon 30 days written
notice, terminate the Contract. Termination of the Contract will become
effective as of the 31st day following receipt of written notice by the Company.
Upon termination of the Contract, the Company will pay to the Contract Owner the
redemption value, subject to applicable charges, plus the balance of the annual
premiums transferred from the Variable Account to the General Account for
payment of variable Retirement Income Payments under retirement Options B1 and
B2 (see "Optional Retirement Income Forms"). Payment of redemption values may be
suspended when redemption of Underlying Mutual Fund shares are suspended as
provided in the section entitled "Redemption of Participant Accounts." Payment
of any amounts under this section will be subject to any applicable CDSC (see
"Contingent Deferred Sales Charge"). Upon such termination by the Contract
Owner, payment of Contract Values will be subject to any applicable CDSC.
APPLICATION OF PURCHASE PAYMENTS
The Company will receive Purchase Payments from the Contract Owner in accordance
with the requirements of the Plan. Net Purchase Payments received on behalf of
Participants will be applied by the Company to purchase Accumulation Units of
Sub-Accounts in accordance with the instructions of the Contract Owner. Purchase
Payments made at any time by or on behalf of each Participant must be at least
$20 per month. Payments must be no less than monthly, unless agreed to by the
Company.
An initial Purchase Payment will be priced not later than 2 business days after
receipt of an order to purchase, if the application of the Participant and all
information necessary for processing the purchase order are complete. The
Company may retain the Purchase Payment for up to 5 business days while
attempting to complete an incomplete application. If the application cannot be
made complete within 5 business days, the Participant will be informed of the
reasons for the delay and the Purchase Payment will be returned immediately
unless the Participant consents to the Company retaining the Purchase Payment
until the application is made complete. Upon completion of such incomplete
application, the Purchase Payment will be priced within 2 business days.
Purchase Payments will not be priced on days when the New York Stock Exchange is
not open for business.
When permissible under state insurance law, the Company may credit up to 8% of
an Initial Transfer into the Contract. This credit will reimburse the Contract
Owner for any exit penalty associated with an investment product offered by a
provider other than the Company. The Company will recover this credit by
reducing service agent and/or broker compensation or through the negotiation of
an increased Participant Account Maintenance Charge or Variable Account Annual
Expense Fee.
<PAGE> 24
ADDITIONAL PURCHASE PAYMENT PRIOR TO COMMENCEMENT OF ANNUITY PAYMENTS
The Contract Owner will have the right to make one additional Purchase Payment
in respect to a Participant for the purpose of increasing Retirement Income
Payments. Notice of such payment shall be given to the Company at the time the
notice to distribute is given, and such additional Purchase Payment must be made
no later than the last business day prior to the date upon which Retirement
Income Payments are to commence. Any such additional Purchase Payment will be
subject to any applicable premium taxes. The annuity rates provided under this
Contract at the time of issue will be applicable to the entire value, including
any such additional Purchase Payment of such account which does not exceed five
times the Purchase Payment allocated to such account prior to the date notice to
distribute is given. Any excess amount may be applied at annuity rates then
offered by the Company for contracts of the same type as this Contract.
CREDITING ACCUMULATION UNITS
When a Purchase Payment is received by the Company, the net Purchase Payment for
each Sub-Account is applied separately to provide Accumulation Units which are
credited to a Participant Account in accordance with the instructions of the
Contract Owner. The number of Accumulation Units (calculated daily) credited to
each Participant Account for each Sub-Account is determined by dividing the net
Purchase Payment allocated to that Sub-Account for that Participant by the value
of the Accumulation Unit for that Sub-Account next computed following receipt of
the Purchase Payment by the Company. The net Purchase Payment for each
Participant is the total Purchase Payment for that Participant less any taxes
then payable.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account was established at a
value equal to the accumulation unit value of the corresponding Sub-Account on
January 2, 1990. The Variable Account is a segregated investment account of the
Company in which Member Counties hold Contracts. The value of an Accumulation
Unit for each new Sub-Account added to the Variable Account after January 2,
1990, will be established at $1.00 as of the date Underlying Mutual Fund shares
are available for purchase for that Sub-Account. The value of Accumulation Units
for any Sub-Account for any subsequent business day is determined by multiplying
the value for the preceding business day by the net investment factor for that
Sub-Account for the period since that day (see the section entitled "Net
Investment Factor"). A business day is any day on which the New York Stock
Exchange is open for trading or any other day during which there is a sufficient
degree of trading of the Underlying Mutual Fund shares that the current Net
Asset Value of their Accumulation Units might be materially affected.
Accumulation Units are calculated on a daily basis.
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner or Participant must specify the proportion of the Purchase
Payments to be applied to provide benefits under any Sub-Account. The Company
will permit the Contract Owner, or the Participant if the Plan so permits, to
change the allocation percentages among Sub-Accounts for subsequent Purchase
Payments, provided that no change may be made which would result in an amount
less than 1% of the payment being allocated to any Sub-Account for any
Participant. The Company will permit such allocation changes as frequently as
permitted by the Plan. A change in allocation percentages will not affect
Accumulation Units of any Sub-Account resulting from Purchase Payments made
before the change.
VALUATION OF AN ACCOUNT
The sum of the value of all Accumulation Units credited to the Participant
Account is the Participant Account Value. Purchase Payments are allocated among
the Sub-Accounts in accordance with the instructions of the Contract Owner.
The value of a Participant Account on any day can be determined by multiplying
the total number of Accumulation Units credited to the account for each
Sub-Account by the current Accumulation Unit value for that Sub-Account in
respect of the Participant. Each Participant and the Contract Owner will be
advised periodically of the number of Accumulation Units credited to his or her
account for each Sub-Account, the current Accumulation Unit values, and the
total value of his or her account. Such reports to Participants are for
informational purposes only and should not be interpreted to mean that a
Participant has any rights with respect to his or her account beyond that
provided by the Contract Owner in accordance with the terms of the Plan.
<PAGE> 25
The Participant and Contract Owner should review the information in these
reports carefully. All errors or corrections must be reported to the Company
immediately to assure proper crediting to the Contract and appropriate
Sub-Accounts. The Company will assume all transactions are accurate unless the
Participant or the Contract Owner notifies the Company otherwise within 30 days
after receipt of the report.
The principal underwriter and distributor of the Contracts is Nationwide
Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio, 43215.
REDEMPTION OF PARTICIPANT ACCOUNTS
The Contract Owner's right to redeem Participant Accounts, either fully or
partially, will be governed by the terms of the Plan which the Contract is
issued to fund. It should be recognized that the value of the investment on
redemption can be more or less than its cost. All such payments will be made by
the Company to the Contract Owner. It is the Contract Owner's obligation to
distribute such payments to a Participant. The Company may undertake the
obligation on behalf of the Contract Owner to distribute such payments directly
to a Participant by agreement with the Contract Owner. To the extent permitted
by the Plan, a Participant Account may be redeemed fully or partially at any
time prior to the date Retirement Income Payments commence under either Option
B1 or B2. No partial redemption will directly affect future requirements to make
Purchase Payments for that Participant nor his or her retirement date. If the
Contract is terminated by the Contract Owner, all Participant Accounts in the
Variable Account will be redeemed to the extent permitted by the Plan, and such
Participant Accounts will be subject to any applicable CDSC. However, absent
Contract termination by the Contract Owner, the CDSC provision will not apply
and any full or partial redemptions made on behalf of a Participant will not be
subject to any CDSC (see "Contingent Deferred Sales Charge").
A request for a partial redemption of a Participant Account containing more than
one Sub-Account must specify the allocation of the partial redemption among the
Sub-Accounts. However, if no such direction is contained in the request for a
partial redemption, the Company may pro-rate the redemption among the applicable
Sub-Accounts. Upon receipt at the Home Office of a written request for a full or
partial redemption of a Participant Account, the Company will determine the
value of the number of Accumulation Units redeemed at the Accumulation Unit
value next computed following receipt of such written request by the Company.
Payment of any such amount will be made to the Contract Owner with reasonable
promptness, and in any event, within 7 days of the date the request is received
by the Company. Payment of redemption values may be suspended when redemption of
the Underlying Mutual Fund shares is suspended: (i) during any period in which
the New York Stock Exchange is closed; or (ii) in the event that the SEC may, by
order, direct for the protection of Contract Owners or Participants. Instead of
a lump sum Distribution of a full or partial redemption, the Contract Owner, or
Participant if permitted by the Plan, may elect to have that amount paid out in
installments under Option A1 or A2, subject to the minimums applicable to these
options.
DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD)
RETIREMENT INCOME PAYMENTS
The period during which a Participant Account is paid out in periodic
installments is known as the Distribution Period. Because periodic Distributions
will normally be made after the Participant retires, the Distribution Period is
also called the retirement period. All such periodic Distributions will be made
by the Company to the Contract Owner. It is the Contract Owner's obligation to
pay such amounts to a Participant. The Company may undertake the obligation on
behalf of the Contract Owner to pay such amounts directly to a Participant by
agreement with the Contract Owner. Retirement Income Payments under Options B1
and B2 are determined on the basis of: (i) the mortality tables specified in the
Contract; (ii) the adjusted age of the Retired Participant; (iii) the type of
Retirement Income Payment option(s) selected; and (iv) in the case of variable
payments, the investment performance of the specific Sub-Accounts elected. While
the Company may be obligated to make variable Retirement Income Payments under
the Contract, the amount of each such payment is not guaranteed. The dollar
amount of variable payments will reflect investment gains and losses, and
investment income of the Sub-Accounts on which they are based, but they will not
be affected by adverse mortality experience or by an increase in the Company's
expenses above the amount provided for in the Contracts.
<PAGE> 26
ELECTION OF INCOME FORM AND DATE
The Contracts provide for Retirement Income Payments to begin on the date and
under the retirement options elected in accordance with the Plan. At least one
month prior to a Participant's Retirement Commencement Date, the Contract Owner
may, by written election to the Home Office, elect any one of the retirement
income options described in this prospectus. The Plan may restrict changes in
election of retirement income options.
ALLOCATION OF RETIREMENT INCOME
Upon retirement, Accumulation Units in a Participant's Account may be used to
purchase a fixed dollar annuity for the Participant. For Participants electing
Options A1 or A2 as described in this prospectus, Accumulation Units in a
Participant's Account will be used to provide variable Retirement Income
Payments as described further in this prospectus.
FIXED DOLLAR ANNUITY
A fixed dollar annuity is an annuity with payments which are guaranteed as to
dollar amount during the retirement period. The first fixed dollar payment will
be determined by applying the value of the General Account Contract to the
applicable Annuity Table in accordance with the Optional Retirement Income Form
elected. This will be done at the retirement date. Fixed dollar annuity payments
after the first will not be less than the first fixed dollar annuity payment.
The availability of fixed dollar annuity Contracts under a particular Plan is
subject to the election of the Contract Owner.
MINIMUM PAYMENT
If the present value of the Participant's accrued benefit at the time of
retirement is less than $3,500, the Company will have the right to make a lump
sum Distribution to such Retired Participant.
DEATH BENEFIT BEFORE RETIREMENT
In the event a Participant dies before his or her retirement income commences, a
death benefit equal to the value of such Participant Account will be paid as
provided by the Plan upon: (1) the Company's receipt and verification of proof
of death; and (2) the Company's verification of Beneficiary designations. If the
Plan so provides, a Beneficiary may elect either to receive such value in a lump
sum or to apply it under any of the Optional Retirement Income Forms contained
in the Contract, subject to the minimums applicable to such optional forms.
Monthly payments due under such options may be fixed, variable, or a combination
of fixed and variable.
OPTIONAL RETIREMENT INCOME FORMS
The availability of the following Optional Retirement Income Forms is subject to
the election of the Contract Owner:
OPTION A1 - Payments for a Designated Period. Payments will be made monthly for
any specified number of years not to exceed 30 years. The amount of each
variable payment will be determined by multiplying (a) by (b), where: (a) is the
Accumulation Unit value for the date the payment is made; and (b) is the number
of Accumulation Units applied under this option divided by the number of
payments selected. Exchanges between the investment options are permitted
subject to limitations outlined in the Group Fixed Fund Retirement Contract. A
period certain payment period of less than 5 years for a Participant who has
less than a minimum of 5 Participant Account Years would result in imposition of
the applicable CDSC.
OPTION A2 - Payments of a Designated Amount. Payments will be made monthly in
equal installments (not less than $25 per month) until the amount applied,
adjusted each Valuation Date for investment results, is exhausted. The final
installment will be the sum remaining with the Company. Payments under this
option which result in a payment period of less than 5 years for a Participant
who has less than 5 Participant Account Years would result in imposition of the
applicable CDSC. Exchanges between the investment options are permitted subject
to limitations outlined in the Group Fixed Fund Retirement Contract.
OPTION B1 - Life Income with Payment Certain. Payments will be made monthly
during the lifetime of an individual with payments made for a period certain of
60, 120, 180, 240, 300 or 360 months, as elected. If the individual dies before
the end of the period certain, level payments will continue to the designated
Beneficiary during the remainder of the selected period certain.
<PAGE> 27
OPTION B2 - Joint and Survivor Life Income. Payments will be made monthly during
the joint lifetime of a Participant and a designated Beneficiary. Payments will
continue to be made as long as either is living. This option will permit the
choice of 100%, 75%, 66-2/3% or 50% of the original payment amount to be paid to
the Beneficiary. Payments will stop with the last payment due prior to the death
of the Beneficiary. If the Beneficiary predeceases the designated Annuitant,
then payments continue at 100% to the designated Annuitant.
OTHER FORMS AND BENEFIT PAYMENTS - With the consent of the Company, the amount
due upon Distribution may be applied on any other mutually agreeable basis.
Exchanges processed while Participants are receiving payments under Option A1
may change the number of Accumulation Units remaining. In this event, the
payment amount must be recalculated.
On the date on which Retirement Income Payments under Option B1 or B2 or any
other Retirement Income Payment measured by a life or lives commence in respect
of a Participant, all Accumulation Units (or the number thereof appropriate to
the election made) in any Sub-Account will be canceled.
DEATH OF RETIRED PARTICIPANT
If any Retired Participant dies while receiving payments, any death benefit
payable will be determined in accordance with the Retirement Income Form
elected. Calculation of the present value of any remaining payments certain for
purposes of making a lump sum payment will be based on the same assumed
investment rate used by the Company in determining the payments certain prior to
the death of the Retired Participant.
WITHDRAWAL
If permitted by the Plan, any amount remaining under Option A1 or A2 may be
withdrawn, or if that amount is at least $5,000, it may be applied under either
Option B1 or B2, subject to the minimum payment requirements described
previously. Unless prohibited by the Plan, a Beneficiary receiving payments
certain under Option B1 after the death of a Retired Participant may elect at
any time to receive the present value at the current dollar amount of the
remaining number of payments certain in a single payment, calculated on the
basis of the assumed investment rate used in computing the amount of the
previous payments.
FREQUENCY OF PAYMENT
At the election of the Retired Participant, and with the consent of the Contract
Owner, payments made under any option may be made annually, semi-annually, or
quarterly instead of monthly. Any change in frequency of payments must be on the
anniversary of the commencement of Retirement Income Payments.
DETERMINATION OF PAYMENTS UNDER OPTIONS A1 AND A2
Monthly payments under Options A1 and A2 will be determined in the manner set
forth in the description of the options. As each payment is made under either of
these options, a number of Accumulation Units equal in value to the payment will
be canceled.
DETERMINATION OF PAYMENTS UNDER OPTIONS B1 AND B2
Variable monthly payments under Options B1 and B2 will be determined annually
and will remain level throughout the year. Each year, as of the anniversary of
the commencement of Retirement Income Payments, a new variable monthly payment
will be determined and that new payment will remain level for that year. An
adjusted age is used to determine the amount of monthly payment for each year.
Such adjusted age may not be the same as the actual age of the Retired
Participant.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR FIRST YEAR
In determining the amount of Retirement Income Payments under Options B1 and B2,
the value held on behalf of a Participant is determined by multiplying the
number of Accumulation Units in each Sub-Account for that account by the
Accumulation Unit value for that Sub-Account on the last business day of the
second calendar week immediately preceding the date on which the first payment
is due.
The first year variable monthly payment for each Sub-Account is determined by
dividing the value of the Accumulation Units of that Sub-Account in the
Participant Account by the amount required to provide $1 per month (the purchase
rate).
<PAGE> 28
Once the first year's variable monthly payment amount has been determined for a
Participant, the Company will deduct the annual premium from the Participant
Account. This deduction is made by canceling a number of Accumulation Units in
the Participant Account equal in value to the annual premium. The allocation of
the annual premium between Sub-Accounts will be in such relationship as the
monthly payments from each Sub-Account have to each other.
The annual premium is calculated so that if there are no partial redemptions
(and therefore no Underlying Mutual Fund dividends have been taken in cash) the
payee will receive level annual payments if the net investment factor, on an
annual basis, is equal to the assumed investment rate plus an amount equal to
the annual administrative charge. Payments for subsequent years will be smaller
than, equal to, or greater than the payments received during the initial year,
depending on whether the actual net investment result on an annual basis of a
Sub-Account is smaller than, equal to, or greater than the assumed investment
rate.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR THE SECOND AND
SUBSEQUENT YEARS
As of the first anniversary of the commencement of Retirement Income Payments,
the second year variable monthly payment will be determined in exactly the same
manner as for the first year, using the purchase rates in the Contract for the
Retired Participant's age as then determined under the terms of the Contract. As
in the first year, an annual premium will be deducted and transferred to the
General Account from which the Company will make the Retirement Income Payment.
Subsequent annual determinations will be made in the same manner.
Upon the death of any Retired Participant, the Participant Account will be
reduced by the number of Accumulation Units not required to provide further
payments during the remainder of a period certain, if any, or to a contingent
Retired Participant. Any Accumulation Units so canceled will either remain in
the Variable Account or be transferred to the General Account, depending on the
Company's obligation.
ALTERNATE ASSUMED INVESTMENT RATE
The Contracts include purchase rates based on a 3.5% rate per annum. If not
prohibited by the laws and regulations of the states in which this Contract is
issued, a Contract Owner may elect on the Contract Date to have all variable
benefits payable for all Participants determined on an assumed investment rate
of 5% per annum. The assumed investment rate basis in the Contract is used
merely to determine each year's periodic payment from investment experience of
any of the Sub-Accounts. The choice of the assumed investment rate affects the
pattern of Retirement Income Payments. A higher assumed investment rate will
produce a higher initial year payment, but a more slowly rising series of
subsequent payments (or a more rapidly falling series of subsequent payments)
than a lower assumed investment rate.
Although a higher initial payment would be received under a higher assumed
investment rate, there is a point in time after which payments under a lower
assumed investment rate would be greater, assuming payment continues after that
point in time.
The objective of a variable retirement Contract is to provide level payments
during periods when the economy is relatively stable and to reflect as increased
payments only the excess of investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend in part
upon the validity of the assumption that the net investment result, on an annual
basis, of a Sub-Account equals the assumed investment rate during periods of
stable prices.
GENERAL INFORMATION
SUBSTITUTION OF SECURITIES
If the shares of any Underlying Mutual Fund should no longer be available for
investment by the Variable Account or if, in the judgment of the Company's
management, further investment in such Underlying Mutual Fund shares should
become inappropriate in view of the purposes of the Contract, the Company may
substitute shares of another Underlying Mutual Fund for Underlying Mutual Fund
shares already purchased or to be purchased in the future by Purchase Payments
under the Contract.
From time to time, it may become necessary for the Company to substitute
Underlying Mutual Fund shares for reasons relating to the historical investment
performance of the Underlying Mutual Funds. The Company, in consultation with
NACo and NACo's advisers, has developed standards for substituting Underlying
Mutual Funds that consistently experience poor investment performance over time.
These standards involve comparing the
<PAGE> 29
performance of each Underlying Mutual Fund within the Variable Account to the
performance of all other mutual funds within the Underlying Mutual Fund's same
risk category. Underlying Mutual Funds within the same risk category are
Underlying Mutual Funds with similar investment objectives and policies, and
similar volatilities of investment return.
In no event will any substitution of securities in the Variable Account take
place without prior approval of the SEC.
PERFORMANCE ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide Money
Market Fund and the Short-Term Investments Trust Treasury Portfolio Sub-Account.
"Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the Sub-Accounts' units.
Yield is an annualized figure, which means that it is assumed that the
Sub-Account generates the same level of net income each week over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Accounts
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return". "Average annual total return" will
show the percentage rate of return of a hypothetical initial investment of
$1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account if the Underlying Mutual Fund option has not been available in
the Variable Account for any of the prescribed periods. THIS CALCULATION
REFLECTS THE DEDUCTION OF ALL APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT
FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges except the Participant Account Maintenance Charge and CDSC) had such
Underlying Mutual Fund options been available in the Variable Account for the
periods quoted. THE CDSC IS NOT REFLECTED BECAUSE THE CONTRACTS ARE DESIGNED FOR
LONG TERM INVESTMENT. THE CDSC, IF REFLECTED, WOULD DECREASE THE LEVEL OF
PERFORMANCE SHOWN. AN INITIAL INVESTMENT OF $10,000 IS ASSUMED BECAUSE THAT
AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL CONTRACT THAN DOES THE
$1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED AVERAGE ANNUAL TOTAL
RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown. The quotations and other comparative material advertised by the Company
are based upon historical earnings and are not intended to represent or
guarantee future results. A Contract Owner's or Participant's Account Value at
redemption may be more or less than the original cost.
The Company may also advertise the performance of the Sub-Accounts relative to
the performance of other variable annuity sub-accounts or mutual funds with
similar or different objectives, or the investment industry as a whole.
The Sub-Accounts of the Variable Account may also be compared to certain market
indexes which may include, but are not limited to: S&P 500; Shearson/Lehman
Intermediate Government/Corporate Bond Index; Shearson/Lehman Long-Term
Government/Corporate Bond Index; Donoghue Money Fund Average; U.S. Treasury Note
Index; and Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's,
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, U.S. News and
World Report, National Underwriter; rating services such as LIMRA, Value, Best's
Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and other
publications such as the Wall Street Journal, Barron's, Investor's Daily, and
Standard & Poor's Outlook. In addition, Variable
<PAGE> 30
Annuity Research & Data Service (The VARDS Report) is an independent rating
service that ranks over 500 variable annuity Underlying Mutual Funds based upon
total return performance. These rating services and publications rank the
performance of the Underlying Mutual Funds against all mutual funds over
specified periods and against mutual funds in specified categories. The rankings
may or may not include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contract. Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
The Statement of Additional Information contains more detailed information about
the performance calculations, including actual examples for each type of
performance advertised.
CONTRACT OWNER INQUIRIES
Contract Owner and Participant inquiries may be directed to the Company by
writing Nationwide Life Insurance Company, P.O. Box 16766, One Nationwide Plaza,
Columbus, Ohio 43216, or calling 1-800-545-4730, T.T.Y. 1-800-848-0833.
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b), and then subtracting (c) where:
(a) is the net of
(1) the Net Asset Value per share of the Underlying Mutual Fund held in
the Sub-Account determined at the end of the current Valuation
Period; and
(2) the per share amount of any income or capital gains distributions
made by the Underlying Mutual Fund held in the Sub-Account if the
ex-dividend date occurs during the current Valuation Period;
(b) is the Net Asset Value per share of the Underlying Mutual Fund held in the
Sub-Account determined as of the end of the immediately preceding Valuation
Period;
(c) is a factor representing the daily Variable Account Annual Expense Fee
deducted from the Variable Account. Such factor is equal to a maximum
annual rate of 0.95% of the average value of the Variable Account.
The net investment factor may be greater or less than one, therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the Net Asset Value of Underlying Mutual Fund shares, because of the
deduction for the Variable Account Annual Expense Fee and the effect of the
various purchase and sale transactions on any particular day.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be purchased and
valued at their Net Asset Value (daily bid price exclusive of any sales
charges). An Underlying Mutual Fund's Net Asset Value per share is determined by
dividing the value of the total assets of the Underlying Mutual Fund, less
liabilities, by the number of shares outstanding, with no charge for sales
expense.
FEDERAL TAX STATUS
The following description of the federal tax status of these Contracts is not
exhaustive and special rules are provided with respect to situations not
discussed herein. For complete information, consult a qualified tax adviser. The
Company does not make any guarantee regarding the tax status of any Contract or
any transaction involving the Contracts. The Contracts are treated as a trust
for purposes of the Code under rules similar to the rules under Section 401(f)
of the Code.
<PAGE> 31
For federal income tax purposes, the operations of the Variable Account form a
part of the Company's operations. Under existing federal income tax law, no
taxes are payable by the Company on the investment income of the Variable
Account to the extent it is credited to the Contract Owners under the Contracts.
The Company is taxed as a life insurance company under Part One, Subchapter L of
the Code.
Income and capital gains of the Variable Account would normally be taxable to
Contract Owners whether or not taken by the Owners in cash. However, the
Contracts are issued only to organizations exempt from federal income tax.
The amounts received by the Participant under the Plan normally represent the
accumulation of Purchase Payments which were not previously included in the
Participant's gross income, therefore, any such amounts should be included in
gross income of a Participant or Beneficiary when such amounts are received.
It is the responsibility of each Contract Owner to determine that its Plan is
established and administered in accordance with the applicable provisions of the
Code.
CONTRACTS ISSUED UNDER THE NEW YORK MODEL PLAN
The following Contract amendments are required by the Rules and Regulations of
the New York State Deferred Compensation Board in order to market the Contracts
to governmental employers for use in funding public employee deferred
compensation plans in the state of New York.
Throughout the prospectus, references to "annuity" payments are modified to
"benefit" payments.
The "Suspension and Termination" provisions are amended to permit a Participant
to "freeze" his or her account and maintain the account on deposit with the
Company notwithstanding the Contract Owner's termination of its contractual
relationship with the Company. These accounts will remain the exclusive property
of the Contract Owner, subject to the claims of its general creditors.
All references throughout the prospectus to Life Income Options B1 and B2 are
deleted. All references to "CDSC" are deleted.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all system
changes and replacements needed to achieve Year 2000 compliance to be completed
by the end of 1998. Compliance testing will be completed in the first quarter of
1999. The Company charges all costs associated with these system changes as the
costs are incurred.
Operating expenses in 1997 include approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of a new
policy administration system for traditional life insurance products and other
system enhancements. The Company anticipates spending a comparable amount in
1998 on technology projects, including Year 2000 initiatives. These expenses do
not have an effect on the assets of the Variable Account and are not charged
through to the Contract Owner.
LEGAL PROCEEDINGS
The Company is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on the Company.
The General Distributor, Nationwide Advisory Services, Inc., is not engaged in
any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In February 1997, Nationwide Life Insurance Company
was named as a defendant in a lawsuit filed in New York Supreme Court related to
the sale of whole life policies on a "vanishing premium" basis (John H. Snyder
v. Nationwide Life Insurance Co.). The plaintiff in such lawsuit
<PAGE> 32
seeks to represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit has not been
certified as a class action. In April, 1997, a motion to dismiss the Snyder
complaint in its entirety was filed by the defendants, and the plaintiff has
opposed such motion.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced an action against Nationwide Life Insurance Company and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this action, plaintiffs seek to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that some portion of their premiums were
invested in a publicly traded mutual fund when, in fact, the premium monies were
invested in a mutual fund whose shares may only be purchased by insurance
companies. The complaint seeks unspecified compensatory, treble and punitive
damages. In January 1998, both Nationwide Life Insurance Company and American
Century filed motions to dismiss the entire complaint. Plaintiffs' counsel have
opposed these motions and the federal court in Texas heard arguments on the
motions to dismiss in April, 1998. This lawsuit is in an early stage and has not
been certified as a class action. Nationwide Life Insurance Company intends to
defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the future.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
----
General Information and History................................................1
Services.......................................................................1
Purchase of Securities Being Offered...........................................1
Underwriters...................................................................2
Calculation of Performance.....................................................2
Annuity Payments...............................................................4
Financial Statements...........................................................5
<PAGE> 33
APPENDIX
PARTICIPATING UNDERLYING MUTUAL FUNDS
THE COMPANY MAY LIMIT THE NUMBER OF UNDERLYING MUTUAL
FUNDS SELECTED BY OWNER, AND ALL UNDERLYING MUTUAL
FUNDS MAY NOT BE AVAILABLE UNDER YOUR PLAN.
A SUMMARY OF INVESTMENT OBJECTIVES IS CONTAINED IN THE DESCRIPTIONS OF EACH
UNDERLYING MUTUAL FUND BELOW. MORE DETAILED INFORMATION MAY BE FOUND IN THE
CURRENT PROSPECTUS FOR EACH UNDERLYING MUTUAL FUND. SUCH A PROSPECTUS FOR THE
UNDERLYING MUTUAL FUND OR FUNDS BEING CONSIDERED SHOULD ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH. A COPY OF EACH PROSPECTUS
MAY BE OBTAINED WITHOUT CHARGE FROM NATIONWIDE LIFE INSURANCE COMPANY, P. O. BOX
16766, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216, 1-800-545-4730 (TDD
1-800-848-0833).
AMERICAN CENTURY: TWENTIETH CENTURY ULTRA
The investment objective of the Fund is capital growth by investing primarily in
common stocks that are considered by management to have better-than-average
prospects for appreciation. It is management's intention that the portfolio will
generally consist of common stocks of medium-sized and smaller companies.
American Century Investment Services, Inc. serves as the Fund's investment
adviser.
THE DREYFUS THIRD CENTURY FUND, INC.
The Fund's primary goal is to provide capital growth through equity investment
in companies that, in the opinion of the Fund's management, not only to meet
traditional investment standards, but which also show evidence that they conduct
their business in a manner that contributes to the enhancement of the quality of
life of America. Current income is secondary to the primary goal. The Dreyfus
Corporation serves as the Fund's investment adviser.
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS - INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund pursues this
investment objective by investing in U.S. government securities with remaining
maturities of five years or less. Federated Management serves as the Fund's
investment adviser.
FIDELITY EQUITY-INCOME FUND
The investment objective of the Fund is to obtain reasonable income from a
portfolio consisting primarily of income-producing equity securities. The Fund
seeks a yield which exceeds the composite yield on the securities comprising the
Standard & Poor's Composite Index of 500 Stocks. In pursuing this objective, the
Fund will also consider the potential for capital appreciation. Fidelity
Management & Research Company serves as the Fund's investment adviser.
FIDELITY OTC PORTFOLIO
The investment objective of the Fund is to seek capital appreciation by
investing primarily in securities traded on the over-the counter (OTC)
securities market. Securities traded on the OTC include, among others,
industrial corporations, financial services institutions, public utilities, and
transportation companies, common and preferred stocks, securities convertible
into common stock, warrants and similar rights, and debt securities, and
obligations of the federal government. The fund does not place any weight on
dividend and interest income unless it believes this income will have a
favorable influence on the market value of a security. Fidelity Management &
Research Company serves as the Fund's investment adviser.
FIDELITY PURITAN FUND
The investment objective of the Fund seeks to obtain as much income as possible,
consistent with the preservation and conservation of capital, by investing in a
broadly diversified portfolio of securities, including common stocks, preferred
stocks, and bonds. While emphasis on income is an important objective, this does
not preclude growth in capital since some securities offering a better than
average yield may also possess some growth possibilities. Fidelity Management &
Research Company serves as the Fund's investment adviser.
<PAGE> 34
MAS FUNDS FIXED INCOME PORTFOLIO
The investment objective of the Fund is to achieve above-average total return
over a market cycle of three of five years, consistent with reasonable risk, by
investing in a diversified portfolio of U.S. government securities, corporate
bonds (including bonds rated below investment grade commonly referred to as
"junk bonds"), foreign fixed-income securities and mortgage-backed securities of
domestic issuers and other fixed-income securities. The portfolio's average
weighted maturity will ordinarily be greater than five years. Miller, Anderson &
Sherrerd, LLP serves as the Fund's investment adviser.
MFS(R) HIGH INCOME FUND - CLASS A
The investment objective of the Fund is high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features. Securities offering the
high current income sought by this Fund are ordinarily in the lower rating
categories of recognized rating agencies or are unrated and generally involve
greater volatility of price and risk of principal and income than securities in
the high rating categories. Capital growth, if any, is a consideration
incidental to the investment objective of high current income. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
NATIONWIDE(R) FUND
The investment objective of the Fund is to obtain a total return from a flexible
combination of current income and capital appreciation. Primary emphasis is
given to common stocks, but investments may also include convertible issues,
bonds and money market instruments. Nationwide Advisory Services, Inc., serves
as the Fund's investment adviser.
NATIONWIDE(R) MONEY MARKET FUND
The investment objective of the Fund is to provide as high a level of current
income as is consistent with the preservation of capital and maintenance of
liquidity, through investment in a diversified portfolio of high quality money
market instruments maturing in 397 days or less. These instruments include, but
are not limited to, U.S. Government and Agency obligations, obligations of large
commercial and foreign banks, certificates of deposit of large savings
associations, taxable or partly taxable obligations of state, county and local
governments, highly rated commercial paper, highly rated corporate obligations,
and repurchase agreements in any of the above. Nationwide Advisory Services,
Inc., serves as the Fund's investment adviser.
NATIONWIDE PROFESSIONALLY MANAGED PORTFOLIOS ("NPMP")
NPMP consists of five separate nondiversified funds each of which is a
separately managed nondiversified portfolio with its own investment objective
and policies. The objective of each of the Portfolios which is fundamental, is
to maximize total investment return (i.e. capital growth and income) subject to
investment restrictions and asset allocation policies. The Portfolios will
maximize total investment return as is specifically detailed in the following
objectives which are non-fundamental and can be changed without approval of a
Portfolio's shareholders.
NPMP - THE AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
by investing in underlying funds which invest primarily in equity
securities ("Equity Funds"). This Fund is generally appropriate for
investors seeking higher returns over an investment time horizon of at
least 15 years and having a higher tolerance for market fluctuations.
Nationwide Advisory Services, Inc. ("NAS") serves as the Fund's
investment adviser.
NPMP - THE CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income
and, secondarily, long term growth of capital. This Fund will seek to
meet its objectives by primarily investing in a combination of the
Nationwide Contract (a fixed interest contract) and fixed income
securities ("Bond Funds"), with a similar investment in Equity Funds.
This Fund is generally appropriate for investors seeking low
fluctuations in principal over an investment time horizon of less than
5 years, as well more conservative investors with an investment time
horizon of between 5 and 10 years. NAS serves as the Fund's investment
adviser.
<PAGE> 35
NPMP - THE MODERATE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
and income by investing primarily in Equity Funds, but will also invest
a significant percentage of its assets in the Nationwide Contract and
in Bond Funds. This Fund is generally appropriate for moderate
investors seeking moderate returns over an investment time horizon of
between 10 and 15 years; conservative investors with an investment time
horizon of at least 15 years or more; and more aggressive investors
with an investment time horizon of 5 to 10 years. NAS serves as the
Fund's investment adviser.
NPMP - THE MODERATELY AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
by investing primarily in Equity Funds. However, the Fund attempts to
reduce its volatility by also investing in the Nationwide Contract and
Proprietary Funds which also invest primarily in Bond Funds. This Fund
is generally appropriate for moderate investors seeking high returns
over an investment time horizon of 15 years or for more aggressive
investors with an investment time horizon of 10 to 15 years. NAS serves
as the Fund's investment adviser.
NPMP - THE MODERATELY CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income
and, secondarily, long term growth of capital. This Fund will seek to
meet its objective by generally investing half of its assets in Equity
Funds with the remainder in the Nationwide Contract and Bond Funds.
This Fund is generally appropriate for moderate investors seeking lower
fluctuations in principal combined with some of the upside potential of
equity investments over an investment time horizon of between 5 and 10
years. This Fund is also generally appropriate for conservative
investors with an investment time horizon of between 10 and 15 years
and more aggressive investors with an investment time horizon of less
than 5 years. NAS serves as the Fund's investment adviser.
NSAT - NATIONWIDE SMALL COMPANY FUND
The investment objective of the Fund is long term growth of capital by investing
primarily in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers, Dreyfus Corporation, Neuberger & Berman, L.P., Picket International
Management Limited with Van Eck Associates Corporation, Strong Capital
Management, Inc. and Warburg Pincus Asset Management, Inc., were chosen because
they utilize a number of different investment styles when investing in small
company stocks. By utilizing different styles, the Fund's advisor, Nationwide
Advisory Services, Inc., hopes to increase prospects for investment return and
reduce market risk and volatility.
NEUBERGER & BERMAN GUARDIAN FUND, INC.
The Fund seeks capital appreciation through investments generally in
dividend-paying issues of established companies that its investment officers
believe are well managed. The emphasis of the Fund's investments is on common
stock. The Fund diversifies its holdings among different industries and
different companies in light of conditions prevailing at any given time. Current
income is a secondary objective. Neuberger&Berman Management Incorporated serves
as the Fund's investment adviser.
PUTNAM INVESTORS FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and any
increased income resulting from such growth. The Fund is designed for investors
seeking long-term growth of capital from a portfolio consisting primarily of
common stocks. The Fund's management emphasizes investment in quality growth
stocks. Putnam Investment Management, Inc., serves as the Fund's investment
adviser.
PUTNAM VOYAGER FUND - CLASS A
The investment objective of the Fund is capital appreciation. The Fund invests
primarily in common stocks believed to have potential for capital appreciation
significantly greater than the market average. The Fund is designed for
investors willing to assume above-average risk in return for above-average
capital growth potential. Putnam Investment Management, Inc., serves as the
Fund's investment adviser.
<PAGE> 36
SEI INDEX FUNDS - S & P 500 INDEX PORTFOLIO
The S & P Index Portfolio seeks to provide investment results that correspond to
the aggregate price and dividend performance of the securities in the Standard &
Poor's 500 Composite Stock Price Index which is comprised of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The investment
objective is a fundamental policy of the Portfolio. There can be no assurance
that the Portfolio will achieve its investment objective. SEI Fund Management
serves as the Fund's investment adviser.
SELIGMAN GROWTH FUND, INC. - CLASS A
The investment objective of the Fund is longer-term growth in capital value and
an increase in future income. Fund assets have been invested primarily in common
stocks with the inherent investment risks tempered by portfolio diversification.
J & W Seligman & Co., Incorporated serves as the Fund's investment adviser.
SHORT-TERM INVESTMENTS TRUST - TREASURY PORTFOLIO - INSTITUTIONAL CLASS
The investment objective of the Portfolio is the maximization of current income
to the extent consistent with the preservation of capital and maintenance of
liquidity. The Portfolio seeks to achieve its objective by investing in a
portfolio consisting of direct obligations of the U.S. Treasury and repurchase
agreements secured by such obligations. The instruments purchased by the
Portfolio will have maturities of 397 days or less. AIM Advisers, Inc. serves as
the Fund's investment adviser.
T. ROWE PRICE INTERNATIONAL STOCK FUND(R)
The Fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. Companies. T. Rowe Price
Associates, Inc. serves as the Fund's investment adviser.
TEMPLETON FOREIGN FUND - CLASS I
The investment objective of the Fund is long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be incidental.
Templeton Investment Counsel, Inc. serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW PLANS ESTABLISHED
AFTER JUNE 30, 1998:
FIDELITY CONTRAFUND
The investment objective of the Fund is capital appreciation by investing in
securities that its manager believes are undervalued due to an overly
pessimistic appraisal by the public. Although the Fund will usually be invested
primarily in common stocks and securities convertible into common stock, the
percentage of its assets invested in other securities may vary. Fidelity
Management & Research Company serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1997:
FIDELITY MAGELLAN(R) FUND
The investment objective of the Fund is capital appreciation by investing
primarily in common stock and securities convertible into common stock. The Fund
may also invest in foreign securities, which involves additional risks. The Fund
may also invest in stock index futures and options both of which can be volatile
investments. Fidelity Management & Research Company serves as the Fund's
investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER MAY 1, 1997:
AMERICAN CENTURY: TWENTIETH CENTURY GROWTH
The investment objective of the Fund is capital growth through investment in
securities which the management considers to have better-than-average prospects
for appreciation. It is management's intention that the portfolio will generally
consist of common stocks of large established companies. American Century
Investment Services, Inc. serves as the Fund's investment adviser.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - CLASS A
The investment objective of the Fund is the long-term growth of capital and
future income rather than current income. Massachusetts Financial Services
Company serves as the Fund's investment adviser.
<PAGE> 37
THE FOLLOWING UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE TO ALL CONTRACT
OWNERS ON OR AFTER JULY 1, 1994:
THE BOND FUND OF AMERICA(SM), INC.
The Fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital. The Fund invests
substantially all of its assets in marketable corporate debt securities, U.S.
Government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. Normally, at least 65% of the
Fund's assets will be invested in bonds. Capital Research and Management Company
serves as the Fund's investment adviser.
THE INVESTMENT COMPANY OF AMERICA(R), INC.
The investment objectives are long-term growth of capital and income. The Fund
strives to accomplish these objectives through constant supervision, careful
selection and broad diversification. In the selection of securities for
investment, the possibilities of appreciation and potential dividends are given
more weight than current yield. The Fund ordinarily invests principally in
common stocks. However, assets may also be held in securities convertible into
common stocks, straight debt securities (rated in the top three quality
categories by Standard & Poor's Corporation or Moody's Investor Service, Inc. or
determined to be of equivalent quality by Capital Research and Management
Company), cash equivalent quality by Capital Research and Management Company),
cash or cash equivalents, U.S. Government securities, or nonconvertible
preferred stocks. Massachusetts Financial Services Company serves as the Fund's
investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1993:
EVERGREEN INCOME AND GROWTH FUND (FORMERLY THE EVERGREEN TOTAL RETURN FUND)
The investment objective of the Fund is current income and capital appreciation.
The Fund invests primarily in common and preferred stocks, securities
convertible into or exchangeable for common stocks, and fixed income securities.
The Fund's objective is to maximize the "total return" on its portfolio of
investments. Evergreen Asset Management Corp. serves as the Fund's investment
adviser.
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A (FORMERLY "MFS(R) CAPITAL DEVELOPMENT
FUND")
The investment objective of the Fund is growth of capital. Dividend income, if
any, is incidental to the objective of capital growth. To achieve this
objective, a flexible approach toward types of companies as well as types of
securities is maintained by the Fund, depending upon the economic environment
and the relative attractiveness of the various securities markets. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
NATIONWIDE(R) GROWTH FUND
The investment objective of the Fund is to achieve long-term capital
appreciation without emphasis on current return. Major emphasis in the selection
of securities is placed on companies which have capable management, and are in
fields where social and economic trends, technological developments, and new
processes or products indicate a potential for greater than average growth.
Nationwide Advisory Services, Inc. serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR OWNERS WHOSE
PREDECESSOR NATIONWIDE DCVA CONTRACT WAS ISSUED ON OR AFTER JANUARY 1, 1987:
FIDELITY CAPITAL & INCOME FUND (FORMERLY, "FIDELITY HIGH INCOME FUND")
The investment objective of the Fund is to seek to provide a combination of
income and capital growth by investing primarily in debt instruments and common
and preferred stocks, with a focus on lower-quality debt securities and
securities of companies with uncertain financial positions. Fidelity Management
& Research Company serves as the Fund's investment adviser.
Effective on and after July 1, 1991, the Company shall no longer permit Owners
or Participants to make additional Purchase Payments or to exchange Contract
Values into the Fidelity Capital & Income Fund Sub-Account. However, Contract
Values held in the Fidelity Capital & Income Fund Sub-Account as of July 1, 1991
may continue to be invested in that Sub-Account. Unless the Company is notified
otherwise, any Purchase Payments or exchanges which the Contract Owner or
Participant directs the Company to invest in the Fidelity
<PAGE> 38
Capital & Income Fund Sub-Account on and after July 1, 1991 shall instead be
automatically invested in the Nationwide Money Market Fund Sub-Account.
The Company has determined that further investment in the Fidelity Capital &
Income Fund Sub-Account is not in the best interests of the Owners and
Participants in view of the Fund's adoption, effective for shares purchased on
and after February 1, 1991, of a redemption fee equal to 1.5% of the Net Asset
Value of any Fund shares redeemed which are held less than twelve months. Any
redemption fees which the Fund may assess against Fund shares held by the
Company in the NACo Variable Account which were purchased from February 1, 1991
to July 1, 1991 shall be paid by the Company from surplus and shall not be paid,
directly or indirectly, by Contract Owners, Participants or the NACo Variable
Account.
<PAGE> 39
APPENDIX B
Information is shown below for each different Accumulation Unit value (current
as of December 31 of the preceding year). A Statement of Additional Information,
as well as specific information concerning the Accumulation Unit values for any
particular Plan, may be obtained by calling 1-800-545-4730 or by writing to P.O.
Box 16766, Columbus, Ohio 43216.
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
TIER I****...............................................................0.95%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.562802 5.842997 17,611,062 1997
Century Growth -------------------- -------------------- --------------------- --------
4.005400 4.562802 15,929,074 1996
-------------------- -------------------- --------------------- --------
3.359891 4.005400 37,362,979 1995
-------------------- -------------------- --------------------- --------
3.443124 3.359891 38,748,520 1994
-------------------- -------------------- --------------------- --------
3.350122 3.443124 41,912,416 1993
-------------------- -------------------- --------------------- --------
3.533694 3.350122 43,106,409 1992
-------------------- -------------------- --------------------- --------
2.571846 3.533694 31,955,054 1991
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.424846 1.737833 125,555,220 1997
Century Ultra -------------------- -------------------- --------------------- --------
1.263551 1.424846 51,280,940 1996
-------------------- -------------------- --------------------- --------
0.926489 1.263551 79,405,506 1995
-------------------- -------------------- --------------------- --------
0.970411 0.926489 59,484,505 1994
-------------------- -------------------- --------------------- --------
1.000000 0.970411 21,036,904 1993
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.155739 2.332586 6,366,974 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
2.039710 2.155739 3,393,296 1996
-------------------- -------------------- --------------------- --------
1.741422 2.039710 6,578,720 1995
-------------------- -------------------- --------------------- --------
1.850918 1.741422 5,740,929 1994
-------------------- -------------------- --------------------- --------
1.637181 1.850918 5,644,051 1993
-------------------- -------------------- --------------------- --------
1.484255 1.637181 4,185,113 1992
-------------------- -------------------- --------------------- --------
1.338732 1.484255 3,262,200 1991*
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.756438 3.532278 14,863,803 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
2.238323 2.756438 5,449,596 1996
-------------------- -------------------- --------------------- --------
1.663803 2.238323 9,402,637 1995
-------------------- -------------------- --------------------- --------
1.814915 1.663803 9,817,673 1994
-------------------- -------------------- --------------------- --------
1.740666 1.814915 10,291,485 1993
-------------------- -------------------- --------------------- --------
1.723855 1.740666 8,918,980 1992
-------------------- -------------------- --------------------- --------
1.503652 1.723855 4,654,790 1991*
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.947502 2.422617 1,666,312 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
(formerly Evergreen Total 1.741651 1.947502 1,070,229 1996
Return Fund) -------------------- -------------------- --------------------- --------
1.419467 1.741651 2,635,928 1995
-------------------- -------------------- --------------------- --------
1.531292 1.419467 3,343,918 1994
-------------------- -------------------- --------------------- --------
1.368966 1.531292 10,220,011 1993
-------------------- -------------------- --------------------- --------
1.256090 1.368966 8,701,160 1992
-------------------- -------------------- --------------------- --------
1.146614 1.256090 7,977,105 1991*
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
(Continued on next page)
<PAGE> 40
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Federated U.S. Government 1.226751 1.301886 3,296,152 1997
Securities Fund: 2-5 years - -------------------- -------------------- ------------------ -----------
Institutional Shares 1.195751 1.226751 1,296,431 1996
-------------------- -------------------- ------------------ -----------
1.062969 1.195751 2,344,091 1995
-------------------- -------------------- ------------------ -----------
1.094086 1.062969 1,802,090 1994
-------------------- -------------------- ------------------ -----------
1.031362 1.094086 1,501,568 1993
-------------------- -------------------- ------------------ -----------
1.000000 1.031362 359,089 1992
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity Capital & 4.096488 4.654233 570,207 1997
Income Fund -------------------- -------------------- ------------------ -----------
3.712491 4.096488 294,263 1996
-------------------- -------------------- ------------------ -----------
3.210584 3.712491 818,785 1995
-------------------- -------------------- ------------------ -----------
3.397953 3.210584 900,127 1994
-------------------- -------------------- ------------------ -----------
2.746533 3.397953 1,009,928 1993
-------------------- -------------------- ------------------ -----------
2.165417 2.746533 1,100,291 1992
-------------------- -------------------- ------------------ -----------
1.972198 2.165417 1,260,909 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity Contrafund 1.588961 1.935931 165,606,687 1997
-------------------- -------------------- ------------------ -----------
1.315600 1.588961 63,488,282 1996
-------------------- -------------------- ------------------ -----------
0.974545 1.315600 86,483,728 1995
-------------------- -------------------- ------------------ -----------
0.994981 0.974545 59,048,072 1994
-------------------- -------------------- ------------------ -----------
1.000000 0.994981 17,300,194 1993
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity Equity-Income Fund 5.359692 6.900916 51,141,002 1997
-------------------- -------------------- ------------------ -----------
4.471070 5.359692 21,843,280 1996
-------------------- -------------------- ------------------ -----------
3.424310 4.471070 41,090,717 1995
-------------------- -------------------- ------------------ -----------
3.448520 3.424310 37,439,255 1994
-------------------- -------------------- ------------------ -----------
2.869860 3.448520 30,564,448 1993
-------------------- -------------------- ------------------ -----------
2.526472 2.869860 25,417,028 1992
-------------------- -------------------- ------------------ -----------
2.283309 2.526472 24,200,256 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity Magellan(R) Fund 1.439440 1.804998 68,868,962 1997
-------------------- -------------------- ------------------ -----------
1.301185 1.439440 35,450,214 1996
-------------------- -------------------- ------------------ -----------
0.960039 1.301185 63,751,788 1995
-------------------- -------------------- ------------------ -----------
0.987051 0.960039 43,410,162 1994
-------------------- -------------------- ------------------ -----------
1.000000 0.987051 9,307,585 1993
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity OTC Portfolio 1.680710 1.829868 17,193,114 1997
-------------------- -------------------- ------------------ -----------
1.371346 1.680710 4,002,730 1996
-------------------- -------------------- ------------------ -----------
1.001544 1.371346 3,611,136 1995
-------------------- -------------------- ------------------ -----------
1.000000 1.001544 414,031 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
Fidelity Puritan Fund 1.317344 1.596539 19,817,717 1997
-------------------- -------------------- ------------------ -----------
1.154955 1.317344 8,701,486 1996
-------------------- -------------------- ------------------ -----------
0.959935 1.154955 11,375,851 1995
-------------------- -------------------- ------------------ -----------
1.000000 0.959935 3,191,039 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
The Investment 1.771097 2.277283 31,651,569 1997
Company of America(R) -------------------- -------------------- ------------------ -----------
1.498194 1.771097 14,871,400 1996
-------------------- -------------------- ------------------ -----------
1.157835 1.498194 21,189,283 1995
-------------------- -------------------- ------------------ -----------
1.167040 1.157835 15,911,747 1994
-------------------- -------------------- ------------------ -----------
1.055548 1.167040 9,316,764 1993
-------------------- -------------------- ------------------ -----------
1.000000 1.055548 1,904,764 1992
- ----------------------------- -------------------- -------------------- ------------------ -----------
MAS Funds Fixed Income 1.229760 1.335173 2,016,658 1997
Portfolio -------------------- -------------------- ------------------ -----------
1.156444 1.229760 554,865 1996
-------------------- -------------------- ------------------ -----------
0.980782 1.156444 461,663 1995
-------------------- -------------------- ------------------ -----------
1.000000 0.980782 16,059 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
MFS(R) Growth 7.380232 9.012670 1,768,566 1997
Opportunities Fund-Class A -------------------- -------------------- ------------------ -----------
6.114190 7.380232 1,022,657 1996
-------------------- -------------------- ------------------ -----------
4.589533 6.114190 2,209,754 1995
-------------------- -------------------- ------------------ -----------
4.834037 4.589533 2,656,048 1994
-------------------- -------------------- ------------------ -----------
4.200054 4.834037 6,486,767 1993
-------------------- -------------------- ------------------ -----------
3.936838 4.200054 6,897,026 1992
-------------------- -------------------- ------------------ -----------
3.656615 3.936838 7,710,706 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
(Continued on next page)
<PAGE> 41
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
MFS(R)High 5.518160 6.168371 2,328,945 1997
Income Fund- Class A -------------------- -------------------- ------------------ -----------
4.949752 5.518160 1,009,326 1996
-------------------- -------------------- ------------------ -----------
4.265493 4.949752 1,898,625 1995
-------------------- -------------------- ------------------ -----------
4.422523 4.265493 1,736,718 1994
-------------------- -------------------- ------------------ -----------
3.739642 4.422523 1,666,484 1993
-------------------- -------------------- ------------------ -----------
3.225557 3.739642 1,036,199 1992
-------------------- -------------------- ------------------ -----------
2.894993 3.225557 817,803 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Massachusetts Investors 10.880822 15.968069 801,488 1997
Growth Stock Fund - -------------------- -------------------- ------------------ -----------
Class A 8.942612 10.880822 491,538 1996
-------------------- -------------------- ------------------ -----------
7.034148 8.942612 877,034 1995
-------------------- -------------------- ------------------ -----------
7.613442 7.034148 876,723 1994
-------------------- -------------------- ------------------ -----------
6.714892 7.613442 837,196 1993
-------------------- -------------------- ------------------ -----------
6.368639 6.714892 711,003 1992
-------------------- -------------------- ------------------ -----------
5.100857 6.368639 559,059 1991
- ----------------------------- -------------------- -------------------- ------------------ -----------
Nationwide(R) 14.964379 20.697282 4,299,707 1997
Fund -------------------- -------------------- ------------------ -----------
12.191058 14.964379 1,456,965 1996
-------------------- -------------------- ------------------ -----------
9.468045 12.191058 2,755,666 1995
-------------------- -------------------- ------------------ -----------
9.502760 9.468045 2,754,540 1994
-------------------- -------------------- ------------------ -----------
8.985447 9.502760 2,950,704 1993
-------------------- -------------------- ------------------ -----------
8.810680 8.985447 3,032,348 1992
-------------------- -------------------- ------------------ -----------
7.837093 8.810680 2,238,323 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Nationwide(R) 3.083008 3.854877 1,987,181 1997
Growth Fund -------------------- -------------------- ------------------ -----------
2.667201 3.083008 1,157,824 1996
-------------------- -------------------- ------------------ -----------
2.092009 2.667201 2,409,384 1995
-------------------- -------------------- ------------------ -----------
2.081399 2.092009 2,602,594 1994
-------------------- -------------------- ------------------ -----------
1.887524 2.081399 6,293,504 1993
-------------------- -------------------- ------------------ -----------
1.792687 1.887524 5,507,203 1992
-------------------- -------------------- ------------------ -----------
1.498853 1.792687 4,283,563 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Nationwide(R)Money 2.884848 3.003821 14,828,575 1997
Market Fund** -------------------- -------------------- ------------------ -----------
2.774433 2.884848 6,821,937 1996
-------------------- -------------------- ------------------ -----------
2.654661 2.774433 15,458,252 1995
-------------------- -------------------- ------------------ -----------
2.583387 2.654661 14,664,113 1994
-------------------- -------------------- ------------------ -----------
2.542721 2.583387 15,887,549 1993
-------------------- -------------------- ------------------ -----------
2.487178 2.542721 17,431,451 1992
-------------------- -------------------- ------------------ -----------
2.437912 2.487178 20,546,392 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Neuberger & Berman 1.460410 1.706116 23,446,031 1997
Guardian Fund, Inc. -------------------- -------------------- ------------------ -----------
1.250781 1.460410 6,973,153 1996
-------------------- -------------------- ------------------ -----------
0.955773 1.250781 7,940,457 1995
-------------------- -------------------- ------------------ -----------
1.000000 0.955773 907,272 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
Putnam Investors 13.594501 18.110411 3,305,277 1997
Fund-Class A -------------------- -------------------- ------------------ -----------
11.305164 13.594501 1,545,059 1996
-------------------- -------------------- ------------------ -----------
8.297318 11.305164 2,260,621 1995
-------------------- -------------------- ------------------ -----------
8.652501 8.297318 2,145,377 1994
-------------------- -------------------- ------------------ -----------
7.410567 8.652501 1,975,963 1993
-------------------- -------------------- ------------------ -----------
6.934213 7.410567 1,682,860 1992
-------------------- -------------------- ------------------ -----------
6.383603 6.934213 1,597,104 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Putnam Voyager 3.074879 3.837109 52,162,678 1997
Fund-Class A -------------------- -------------------- ------------------ -----------
2.752130 3.074879 22,936,312 1996
-------------------- -------------------- ------------------ -----------
1.982311 2.752130 27,203,903 1995
-------------------- -------------------- ------------------ -----------
1.992379 1.982311 19,751,850 1994
-------------------- -------------------- ------------------ -----------
1.698751 1.992379 12,946,038 1993
-------------------- -------------------- ------------------ -----------
1.563079 1.698751 5,917,563 1992
-------------------- -------------------- ------------------ -----------
1.256187 1.563079 1,655,847 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
SEI Index Fund - S & P 500 1.139331 1.501834 38,540,683 1997
Index Portfolio -------------------- -------------------- ------------------ -----------
1.000000 1.139331 4,129,102 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
(Continued on next page)
<PAGE> 42
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.720312 12.541848 772,926 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
8.934609 10.720312 381,977 1996
-------------------- -------------------- ------------------ -----------
7.020585 8.934609 616,776 1995
-------------------- -------------------- ------------------ -----------
7.370495 7.020585 582,039 1994
-------------------- -------------------- ------------------ -----------
6.989639 7.370495 538,601 1993
-------------------- -------------------- ------------------ -----------
6.340967 6.989639 364,304 1992
-------------------- -------------------- ------------------ -----------
5.483042 6.340967 308,224 1991*
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.168909 1.222017 3,399,331 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional 1.119630 1.168909 1,151,812 1996
Class *** -------------------- -------------------- ------------------ -----------
1.066889 1.119630 1,524,715 1995
-------------------- -------------------- ------------------ -----------
1.034183 1.066889 1,223,255 1994
-------------------- -------------------- ------------------ -----------
1.012172 1.034183 500,957 1993
-------------------- -------------------- ------------------ -----------
1.000000 1.012172 246,584 1992
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.178559 1.198954 23,881,713 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
1.025854 1.178559 9,304,599 1996
-------------------- -------------------- ------------------ -----------
0.929695 1.025854 10,412,582 1995
-------------------- -------------------- ------------------ -----------
1.000000 0.929695 4,482,375 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.215580 1.284158 37,738,973 1997
Class I -------------------- -------------------- ------------------ -----------
1.040054 1.215580 13,461,397 1996
-------------------- -------------------- ------------------ -----------
0.944596 1.040054 16,316,118 1995
-------------------- -------------------- ------------------ -----------
1.000000 0.944596 6,972,585 1994
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** The 7-day yield on the Nationwide(R) Money Market Fund as of December 31,
1997 was 4.23%.
*** The 7-day yield on the Short-Term Investments Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
**** For Plans converted to a Variable Account Annual Expense Fee of 0.95% of
average net assets on December 31, 1995.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 43
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IIA**...............................................................0.90%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.564331 5.847874 2,972,496 1997
Century Growth -------------------- -------------------- --------------------- --------
4.258167 4.564331 6,416,724 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.425323 1.739283 17,512,296 1997
Century Ultra -------------------- -------------------- --------------------- --------
1.349699 1.425323 17,364,360 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.156482 2.334569 838,935 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
2.019231 2.156482 1,041,402 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.757360 3.535226 2,141,147 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
2.450467 2.757360 1,806,885 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.948154 2.424638 164,209 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
1.797369 1.948154 267,437 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.227166 1.302984 485,556 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares 1.179520 1.227166 431,282 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.097872 4.658156 50,755 1997
Income Fund -------------------- -------------------- --------------------- --------
3.859929 4.097872 76,382 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.589493 1.937547 23,258,606 1997
-------------------- -------------------- --------------------- --------
1.428112 1.589493 22,719,185 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.361485 6.906673 6,412,368 1997
-------------------- -------------------- --------------------- --------
4.790401 5.361485 7,437,534 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.439922 1.806504 9,967,418 1997
-------------------- -------------------- --------------------- --------
1.327329 1.439922 12,036,679 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.681272 1.831396 2,364,115 1997
-------------------- -------------------- --------------------- --------
1.509365 1.681272 1,269,335 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.317785 1.597871 2,540,462 1997
-------------------- -------------------- --------------------- --------
1.202745 1.317785 3,037,801 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.771690 2.279183 5,422,918 1997
Company of America(R) -------------------- -------------------- --------------------- --------
1.588880 1.771690 5,329,249 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.230172 1.336288 274,281 1997
Portfolio -------------------- -------------------- --------------------- --------
1.148924 1.230172 236,446 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.382705 9.020195 235,276 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
6.921487 7.382705 323,628 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.520025 6.173570 244,788 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
5.086868 5.520025 244,640 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 10.884466 15.981395 111,799 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
10.146619 10.884466 155,643 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 14.969386 20.714549 592,502 1997
Fund -------------------- -------------------- --------------------- --------
13.111630 14.969386 557,908 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.084040 3.858094 360,606 1997
Growth Fund -------------------- -------------------- --------------------- --------
2.839932 3.084040 507,782 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.885823 3.006353 1,760,454 1997
Market Fund -------------------- -------------------- --------------------- --------
2.810833 2.885823 2,854,818 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.460899 1.707540 3,222,201 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
1.325880 1.460899 2,513,725 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 13.599051 18.125525 329,877 1997
Fund-Class A -------------------- -------------------- --------------------- --------
12.145782 13.599051 371,840 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.075909 3.840312 7,200,296 1997
Fund-Class A -------------------- -------------------- --------------------- --------
3.068900 3.075909 7,518,991 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.139711 1.503085 5,223,019 1997
Index Portfolio -------------------- -------------------- --------------------- --------
1.000000 1.139711 1,547,081 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 44
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.723901 12.552317 80,990 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
9.776056 10.723901 90,771 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.169304 1.223047 203,199 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional 1.135916 1.169304 201,261 1996
Class
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.178953 1.199955 3,056,840 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
1.108680 1.178953 3,705,323 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.215987 1.285230 5,823,447 1997
Class I -------------------- -------------------- ------------------ -----------
1.114639 1.215987 5,803,820 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.90% of
average net assets on December 31, 1995.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 45
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IIB**.............................................................0.90%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.764658 5.844955 1,115,895 1997
Century Growth -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.470933 1.738415 6,429,806 1997
Century Ultra -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.179712 2.333393 463,715 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.906659 3.533462 828,576 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.944620 2.423429 104,407 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.235181 1.302328 153,705 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.129010 4.655810 22,125 1997
Income Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.593589 1.936580 8,810,458 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.625012 6.903229 2,726,805 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.490427 1.805603 3,146,118 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.600124 1.830482 750,546 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.384849 1.597074 1,227,566 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.885626 2.278047 1,973,413 1997
Company of America(R) -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.244949 1.335621 39,766 1997
Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.657658 9.015691 106,751 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.601820 6.170461 148,670 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 12.09650 15.973419 38,917 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 16.371504 20.704221 180,761 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.186783 3.856169 106,963 1997
Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.922724 3.004839 472,514 1997
Market Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.524036 1.706688 1,051,558 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 14.537628 18.116482 157,603 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.040484 3.838394 2,560,666 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.231347 1.502337 1,203,420 1997
Index Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 46
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.978898 12.546053 42,594 1997
Fund, Inc.-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.185797 1.222431 156,120 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional
Class -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.190178 1.199356 1,203,031 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.266735 1.284589 1,891,595 1997
Class I -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.90% of
average net assets on December 31, 1996.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 47
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IIIA**..............................................................0.80%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.567388 5.857641 1,491,035 1997
Century Growth -------------------- -------------------- --------------------- --------
4.258179 4.567388 3,952,718 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.426278 1.742188 9,471,388 1997
Century Ultra -------------------- -------------------- --------------------- --------
1.349702 1.426278 11,724,488 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.157968 2.338535 597,695 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
2.019264 2.157968 737,276 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.759207 3.541129 917,688 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
2.450473 2.759207 1,075,140 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.949458 2.428687 130,014 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
1.797374 1.949458 303,775 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.227995 1.305179 241,356 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares 1.179523 1.227995 184,497 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.100640 4.666006 120,784 1997
Income Fund -------------------- -------------------- --------------------- --------
3.859939 4.100640 203,017 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.590557 1.940782 12,620,829 1997
-------------------- -------------------- --------------------- --------
1.428116 1.590557 13,966,075 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.365074 6.918202 5,904,892 1997
-------------------- -------------------- --------------------- --------
4.790414 5.365074 6,668,170 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.440886 1.809520 5,726,530 1997
-------------------- -------------------- --------------------- --------
1.327332 1.440886 6,812,829 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.682398 1.834455 1,302,436 1997
-------------------- -------------------- --------------------- --------
1.509369 1.682398 886,668 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.318667 1.600539 1,283,945 1997
-------------------- -------------------- --------------------- --------
1.202749 1.318667 1,390,626 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.772876 2.282988 2,356,594 1997
Company of America(R) -------------------- -------------------- --------------------- --------
1.588884 1.772876 2,306,070 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.230995 1.338520 94,434 1997
Portfolio -------------------- -------------------- --------------------- --------
1.148928 1.230995 116,525 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.387651 9.035263 197,549 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
6.921506 7.387651 330,931 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.523753 6.183974 233,869 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
5.086882 5.523753 252,930 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 10.891758 16.008079 78,577 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
10.146647 10.891758 136,164 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 14.979404 20.749126 355,149 1997
Fund -------------------- -------------------- --------------------- --------
13.111665 14.979404 289,479 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.086105 3.864536 89,839 1997
Growth Fund -------------------- -------------------- --------------------- --------
2.839940 3.086105 133,215 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.887772 3.011419 1,219,186 1997
Market Fund -------------------- -------------------- --------------------- --------
2.810841 2.887772 1,754,115 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.461877 1.710392 1,596,621 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
1.325883 1.461877 1,655,042 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 13.608156 18.155790 233,708 1997
Fund-Class A -------------------- -------------------- --------------------- --------
12.145815 13.608156 239,486 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.077970 3.846728 3,817,279 1997
Fund-Class A -------------------- -------------------- --------------------- --------
3.068905 3.077970 4,941,310 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.140471 1.505589 3,491,065 1997
Index Portfolio -------------------- -------------------- --------------------- --------
1.000000 1.140471 1,023,459 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 48
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.731082 12.573280 61,083 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
9.776083 10.731082 107,031 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.170093 1.225108 331,148 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional 1.135919 1.170093 394,386 1996
Class -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.179742 1.201960 1,722,849 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
1.108683 1.179742 2,213,126 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.216800 1.287377 2,363,601 1997
Class I -------------------- -------------------- ------------------ -----------
1.114642 1.216800 2,314,772 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.80% of
average net assets on December 31, 1995.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 49
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IIIB**...............................................................0.80%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.767050 5.851796 674,415 1997
Century Growth -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.471671 1.740450 4,660,957 1997
Century Ultra -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.180847 2.336182 219,702 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.908118 3.537596 406,041 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.945596 2.426264 25,537 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.235806 1.303866 61,181 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.131192 4.661311 14,865 1997
Income Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.594389 1.938846 6,956,699 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.627834 6.911304 2,138,680 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.491175 1.807715 2,856,554 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.600928 1.832624 658,565 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.385544 1.598943 860,797 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.886572 2.280712 1,183,576 1997
Company of America(R) -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.245574 1.337185 8,001 1997
Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.661505 9.026243 63,570 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.604658 6.177751 67,909 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 12.102572 15.992105 39,760 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 16.379716 20.728440 193,920 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.188382 3.860681 119,317 1997
Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.924205 3.008389 683,175 1997
Market Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.524801 1.708685 826,685 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 14.544925 18.137679 183,147 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.042012 3.842887 1,982,897 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.231963 1.504092 1,782,753 1997
Index Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 50
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.984409 12.560735 23,580 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.186398 1.223875 28,293 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional
Class -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.190775 1.200760 1,125,641 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.267370 1.286093 1,989,093 1997
Class I -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.80% of
average net assets on December 31, 1996.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 51
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IVA**................................................................0.70%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.570448 5.867425 672,795 1997
Century Growth -------------------- -------------------- --------------------- --------
4.258190 4.570448 6,694,438 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.427234 1.745098 4,693,395 1997
Century Ultra -------------------- -------------------- --------------------- --------
1.349706 1.427234 24,600,287 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.159454 2.342504 293,584 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
2.019297 2.159454 1,310,545 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.761054 3.547042 724,635 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
2.450480 2.761054 2,645,579 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.950763 2.432742 90,044 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
1.797380 1.950763 626,778 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.228823 1.307377 199,160 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares 1.179526 1.228823 925,850 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.103407 4.673860 15,630 1997
Income Fund -------------------- -------------------- --------------------- --------
3.859950 4.103407 152,550 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.591621 1.944023 6,919,494 1997
-------------------- -------------------- --------------------- --------
1.428120 1.591621 26,974,645 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.368665 6.929751 1,480,026 1997
-------------------- -------------------- --------------------- --------
4.790428 5.368665 11,209,254 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.441850 1.812541 2,947,714 1997
-------------------- -------------------- --------------------- --------
1.327336 1.441850 12,376,864 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.683525 1.837520 498,827 1997
-------------------- -------------------- --------------------- --------
1.509373 1.683525 2,239,000 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.319550 1.603211 734,376 1997
-------------------- -------------------- --------------------- --------
1.202752 1.319550 3,250,797 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.774063 2.286799 1,186,761 1997
Company of America(R) -------------------- -------------------- --------------------- --------
1.588888 1.774063 4,423,281 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.231819 1.340756 84,398 1997
Portfolio -------------------- -------------------- --------------------- --------
1.148931 1.231819 359,528 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.392601 9.050357 33,173 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
6.921525 7.392601 399,976 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.527479 6.194384 108,967 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
5.086896 5.527479 494,287 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 10.899055 16.034807 28,741 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
10.146674 10.899055 248,216 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 14.989429 20.783760 218,220 1997
Fund -------------------- -------------------- --------------------- --------
13.111701 14.989429 664,951 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.088171 3.870989 62,008 1997
Growth Fund -------------------- -------------------- --------------------- --------
2.839948 3.088171 534,141 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.889720 3.016489 1,244,833 1997
Market Fund -------------------- -------------------- --------------------- --------
2.810849 2.889720 6,170,419 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.462856 1.713248 828,370 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
1.325887 1.462856 3,851,735 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 13.617267 18.186106 93,488 1997
Fund-Class A -------------------- -------------------- --------------------- --------
12.145848 13.617267 476,103 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.080033 3.853154 1,919,434 1997
Fund-Class A -------------------- -------------------- --------------------- --------
3.068913 3.080033 9,182,389 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.141231 1.508098 1,436,973 1997
Index Portfolio -------------------- -------------------- --------------------- --------
1.000000 1.141231 2,582,625 1996
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 52
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.738267 12.594278 29,833 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
9.776109 10.738267 206,422 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.170883 1.227171 1,061,646 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional 1.135922 1.170883 549,456 1996
Class
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.180532 1.203968 867,768 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
1.108686 1.180532 6,337,264 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.217615 1.289527 1,164,252 1997
Class I -------------------- -------------------- ------------------ -----------
1.114645 1.217615 5,552,808 1996
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of
average net assets on December 31, 1995.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 53
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IVB**................................................................0.70%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.764684 5.861569 791,919 1997
Century Growth -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.470941 1.743357 4,507,568 1997
Century Ultra -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.179785 2.340149 124,227 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.906675 3.543503 528,101 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.944631 2.430315 78,659 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.235187 1.306062 88,326 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & 4.129122 4.669162 51,553 1997
Income Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.593598 1.942084 5,170,372 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.625043 6.922841 1,223,287 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.490435 1.810733 1,539,847 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.600133 1.835685 781,703 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.384857 1.601612 379,214 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.8856367 2.284519 318,963 1997
Company of America(R) -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.244956 1.339418 68,206 1997
Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.657700 9.041322 84,709 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.601851 6.188157 51,594 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 12.096565 16.018807 21,209 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 16.371594 20.763040 90,530 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.186800 3.867128 19,388 1997
Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.922740 3.013456 364,874 1997
Market Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.524045 1.711539 751,166 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 14.537708 18.167964 65,920 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.040501 3.849306 1,809,222 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.231354 1.506599 1,151,075 1997
Index Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 54
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.978958 12.581713 25,438 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.185040 1.225937 102,438 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional
Class
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.190184 1.202766 811,683 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.266741 1.288241 990,793 1997
Class I -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of
average net assets on December 31, 1996.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 55
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER IVC**...............................................................0.70%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.771826 5.852797 2,226 1997
Century Growth -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.473146 1.740747 39,473 1997
Century Ultra -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.183080 2.336617 139 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.911030 3.538202 4,553 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.237055 1.304091 34,364 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.595986 1.939178 51,788 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.633468 6.912488 6,909 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.492668 1.808025 36,399 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.602532 1.832937 4,185 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.386931 1.599217 9,482 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.888461 2.281103 3,811 1997
Company of America(R) -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.246208 1.337415 438 1997
Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.669182 9.027786 693 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.610319 6.178817 117 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 12.1146941 15.994835 353 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 16.396107 20.731998 2,085 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.191575 3.861342 226 1997
Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.927158 3.008908 5,303 1997
Market Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.526328 1.708978 19,355 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 14.559488 18.140786 2,047 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.045061 3.843542 15,376 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.233193 1.504352 29,469 1997
Index Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 56
<TABLE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 10.995409 12.562888 406 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.187596 1.224087 7,027 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional
Class
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.191967 1.200967 6,790 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.268639 1.286315 8,712 1997
Class I -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of
average net assets on December 31, 1996. Tier IVc includes certain
departments of a Member County that was previously converted to Tier IVc
using the asset balance as of December 31, 1995.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 57
CONDENSED FINANCIAL INFORMATION (CONTINUED)
TIER V**..................................................................0.65%
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
American Century: Twentieth 4.776599 5.869391 2,322,606 1997
Century Growth -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
American Century: Twentieth 1.474619 1.745683 19,969,711 1997
Century Ultra -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Bond Fund of 2.185294 2.343312 753,555 1997
America(SM), Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
The Dreyfus Third 2.913941 3.548231 2,219,012 1997
Century Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Evergreen 1.949492 2.433557 297,366 1997
Income and Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government 1.238301 1.307818 579,571 1997
Securities Fund: 2-5 years - -------------------- -------------------- --------------------- --------
Institutional Shares
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Capital & Income 4.139531 4.675440 61,610 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Contrafund 1.597582 1.944675 19,667,377 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Equity-Income Fund 5.639098 6.932074 8,086,997 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Magellan(R)Fund 1.494160 1.813149 6,992,191 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity OTC Portfolio 1.604136 1.838136 2,776,451 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
Fidelity Puritan Fund 1.388317 1.603749 2,031,661 1997
- ----------------------------- -------------------- -------------------- --------------------- --------
The Investment 1.890348 2.287566 2,872,363 1997
Company of America(R)
- ----------------------------- -------------------- -------------------- --------------------- --------
MAS Funds Fixed Income 1.248067 1.341206 277,396 1997
Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)Growth 7.676856 9.053391 212,160 1997
Opportunities Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
MFS(R)High 5.615972 6.196477 418,967 1997
Income Fund- Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Massachusetts Investors 12.126811 16.040180 117,830 1997
Growth Stock Fund - -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 16.412492 20.790728 569,519 1997
Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R) 3.194767 3.872287 269,417 1997
Growth Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Nationwide(R)Money 2.930108 3.017508 3,269,252 1997
Market Fund -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Neuberger & Berman 1.527855 1.713822 4,309,283 1997
Guardian Fund, Inc. -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Investors 14.574047 18.192202 377,276 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
Putnam Voyager 3.048108 3.854445 6,307,757 1997
Fund-Class A -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
SEI Index Fund - S & P 500 1.234422 1.508603 5,095,657 1997
Index Portfolio -------------------- -------------------- --------------------- --------
- ----------------------------- -------------------- -------------------- --------------------- --------
</TABLE>
<PAGE> 58
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation Units
At Beginning At End Outstanding At The
Underlying Mutual Fund Of Period Of Period End Of The Period Year
- ----------------------------- -------------------- -------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Seligman Growth 11.006405 12.598501 124,591 1997
Fund, Inc.-Class A -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Short-Term Investments - 1.188793 1.227585 238,580 1997
Trust - Treasury -------------------- -------------------- ------------------ -----------
Portfolio - Institutional
Class
- ----------------------------- -------------------- -------------------- ------------------ -----------
T. Rowe Price International 1.193159 1.204372 4,374,310 1997
Stock Fund(R) -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
Templeton Foreign Fund - 1.269907 1.289960 4,910,891 1997
Class I -------------------- -------------------- ------------------ -----------
- ----------------------------- -------------------- -------------------- ------------------ -----------
</TABLE>
* Period from July 1, 1991 (the date Participant accounts of the NACo Program
were transferred from the Nationwide DC Variable Account to the NACo
Variable Account and the NACo Variable Account commenced operations
exclusive to the NACo Program).
** For Plans converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.65% of
average net assets on December 31, 1996.
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio,
Nationwide Professionally Managed Portfolios - The Conservative Portfolio,
Nationwide Professionally Managed Portfolios - The Moderate Portfolio,
Nationwide Professionally Managed Portfolios - The Moderately Aggressive
Portfolio, Nationwide Professionally Managed Portfolios - The Moderately
Conservative Portfolio and NSAT - Nationwide Small Company Fund were first
available January 19, 1998, and therefore unit value information is not
available.
<PAGE> 59
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS ISSUED
BY THE NACO VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth the prospectus and
should be read in conjunction with the prospectus dated May 1, 1998. The
prospectus may be obtained from Nationwide Life Insurance Company, P.O. Box
16766, One Nationwide Plaza, Columbus, Ohio 43216, or by calling 1-800-545-4730,
(T.T.Y. 1-800-848-0833).
TABLE OF CONTENTS
PAGE
----
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered ........................................1
Underwriters ................................................................2
Calculation of Performance ..................................................2
Annuity Payments.............................................................4
Financial Statements.........................................................5
GENERAL INFORMATION AND HISTORY
The Variable Account is a separate investment account of Nationwide Life
Insurance Company (the "Company"). The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned by
Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.2%) and
Nationwide Mutual Fire Insurance Company (4.8%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
SERVICES
The Company has responsibility for administration of the Contracts and the
Variable Account, maintaining records, including name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contracts issued to each such Contract Owner and the
Contract Value of each Contract.
All assets of the Variable Account are held in custody for safekeeping by the
Company. The assets of each Sub-Account will be kept physically segregated and
held separate and apart from assets of other Sub-Accounts and from assets of any
other firm, person, or corporation. The Company will maintain a record of all
and redemption for shares of the Underlying Mutual Fund held in each
Sub-Account.
The Company, or affiliates of the Company, may have entered into agreements with
either the investment adviser or distributor for several of the Underlying
Mutual Funds. The agreements relate to administrative services furnished by the
Company or an affiliate of the Company and provide for an annual fee based on
the average aggregate net assets of the Variable Account (and other separate
accounts of the Company or life insurance company subsidiaries of the Company)
invested in particular Underlying Mutual Funds. These fees in no way affect the
Net Asset Value of the Underlying Mutual Funds or fees paid by the Contract
Owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc.
<PAGE> 60
For those Plans which provide this Contract and the Company's Group Fixed Fund
Retirement Contracts, the Contract Owner, or the Participant if the Plan so
provides, may exchange Accumulation Units between any Sub-Account of the
Variable Account and the deposit fund of the Group Fixed Fund Retirement
Contract. Exchanges from the deposit fund to any Sub-Account of the Variable
Account will be subject to the limitations of the Group Fixed Fund Retirement
Contract. Exchanges will be effective when received in good order at the Home
Office.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, a
wholly-owned subsidiary of the Company. No underwriting commissions are paid by
the Company to NAS.
CALCULATION OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund and the
Short-Term Investments Trust Treasury Portfolio Sub-Accounts, subject to Rule
482 of the Securities Act of 1933, shall consist of a seven calendar day
historical yield, carried at least to the nearest hundredth of a percent. The
yield will be calculated by determining the net change, exclusive capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1997, the
Nationwide Money Market Fund and the Short-Term Investments Trust Treasury
Portfolio Sub-Accounts seven-day current yield were 4.23% and 3.91%
respectively. The Nationwide Money Market Fund and the Short-Term Investments
Trust Treasury Portfolio Sub-Accounts' seven-day effective yield is computed
similarly but includes the effect of assumed compounding on an annualized basis
of the current yield quotations of the Sub-Accounts, and at December 31, 1997
were 4.32% and 3.98% respectively.
The yield and effective yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Sub-Accounts' portfolios,
portfolio quality and average maturity, changes in interest rates, and the
Sub-Accounts' expenses. Although the Sub-Account determines its yield on the
basis of a seven calendar day period, it may use a different time period on
occasion. There is no assurance that the yields quoted on any given occasion
will remain in effect for any period of time and there is no guarantee that the
Net Asset Values will remain constant. It should be noted that a Contract
Owner's investment in Nationwide Money Market Fund and the Short Term Investment
Trust Treasury Portfolio Sub-Account is not guaranteed or insured. Yields of
other money market funds may not be comparable if a different base period or
another method of calculation is used.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Accounts
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return". "Average annual total return" will
show the percentage rate of return of a hypothetical initial investment of
$1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account if the Underlying Mutual Fund option has not been available in
the Variable Account for any of the prescribed periods. THIS CALCULATION
REFLECTS THE DEDUCTION OF ALL APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT
FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges except the Participant Account Maintenance Charge and CDSC) had such
Underlying Mutual Fund options been available in the Variable Account for the
periods quoted. THE CDSC IS NOT REFLECTED BECAUSE THE CONTRACTS ARE DESIGNED FOR
LONG TERM INVESTMENT. THE CDSC, IF REFLECTED, WOULD DECREASE THE LEVEL OF
PERFORMANCE SHOWN. AN INITIAL INVESTMENT OF $10,000 IS ASSUMED BECAUSE THAT
AMOUNT MORE CLOSELY
<PAGE> 61
APPROXIMATES THE SIZE OF A TYPICAL CONTRACT THAN DOES THE $1,000 ASSUMPTION USED
IN CALCULATING THE STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown. The quotations and other comparative material advertised by the Company
are based upon historical earnings and are not intended to represent or
guarantee future results. A Contract Owner's or Participant's Account Value at
redemption may be more or less than the original cost.
NACO VARIABLE ACCOUNT
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
MONEY MARKET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CURRENT YIELD PERIOD ENDING EFFECTIVE YIELD PERIOD
SERIES OPTIONS 12/31/97 ENDING 12/31/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nationwide(R)Money Market Fund 4.23% 4.32%
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury Portfolio - 3.91% 3.98%
Institutional Class
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
OTHER THAN MONEY MARKET
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR TO 3 YEARS TO 5 YEARS TO 10 YEARS TO
SUB ACCOUNT OPTIONS 12/31/97 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century Growth 24.06% 19.33% 11.25% 14.17%
- ----------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 17.97% 22.44% 16.23% 20.66%
- ----------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 4.20% 9.12% 6.73% 8.52%
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 24.15% 27.71% 14.75% 14.98%
- ----------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 20.40% 18.56% 11.58% 11.06%
- ----------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 2.12% 5.81% 4.10% 6.29%
Institutional Shares
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 9.62% 12.13% 10.60% 10.74%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity ContraFund 17.84% 24.86% 18.13% 21.80%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 24.76% 25.47% 18.78% 15.47%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 21.40% 22.54% 17.27% 17.67%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 4.87% 21.35% 13.14% 16.70%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 17.19% 17.52% 14.63% 13.83%
- ----------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 24.58% 24.44% 16.19% 15.14%
- ----------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 42.75% 30.65% 18.51% 16.88%
- ----------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 4.57% 9.73% 6.95% 8.70%
- ----------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund-Class A 18.12% 24.37% 16.06% 13.59%
- ----------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 7.78% 12.03% 9.99% 9.48%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 34.31% 28.99% 17.75% 16.42%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 21.04% 21.70% 14.90% 13.75%
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 12.82% 20.39% 14.59% 16.27%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 29.22% 28.92% 19.17% 16.19%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 20.79% 23.76% 17.28% 17.83%
- ----------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 27.82% 28.83% 18.44% 16.48%
- ----------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 12.99% 20.43% 11.90% 13.51%
- ----------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) -2.27% 7.71% 11.46% 9.41%
- ----------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 1.64% 9.68% 12.37% 11.31%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
SUB-ACCOUNT PERFORMANCE SUMMARY -- NACO VARIABLE ACCOUNT
NON-STANDARDIZED TOTAL RETURN
(The above return figures quoted below do not reflect the deduction of the
Participant Account Maintenance Charge or any applicable Contingent Deferred
Sales Charges)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1 YEAR TO 3 YEARS TO 5 YEARS TO 10 YEARS TO
SUB ACCOUNT OPTIONS 12/31/97 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century Growth 28.06% 20.26% 11.77% 14.29%
- ----------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 21.97% 23.33% 16.66% 20.74%
- ----------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 8.20% 10.23% 7.34% 8.71%
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century(R)Fund, Inc. 28.15% 28.52% 15.20% 15.09%
- ----------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 24.40% 19.51% 12.09% 11.21%
- ----------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 6.12% 6.99% 4.77% 6.52%
Institutional Shares
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 13.62% 13.18% 11.13% 10.90%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 21.84% 25.71% 18.54% 21.86%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 28.76% 26.31% 19.18% 15.58%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 25.40% 23.42% 17.69% 17.76%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 8.87% 22.25% 13.62% 16.80%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 21.19% 18.48% 15.09% 13.96%
- ----------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 28.58% 25.29% 16.62% 15.26%
- ----------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 46.75% 31.43% 18.92% 16.98%
- ----------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 8.57% 10.83% 7.56% 8.88%
- ----------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund-Class A 22.12% 25.23% 16.50% 13.71%
- ----------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund-Class A 11.78% 13.08% 10.53% 9.66%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 38.31% 29.78% 18.16% 16.52%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 25.04% 22.60% 15.35% 13.87%
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 16.82% 21.31% 15.05% 16.37%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund-Class A 33.22% 29.72% 19.57% 16.29%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund-Class A 24.79% 24.63% 17.70% 17.92%
- ----------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 31.82% 29.63% 18.84% 16.58%
- ----------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc.-Class A 16.99% 21.34% 12.40% 13.64%
- ----------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 1.73% 8.85% 11.97% 9.58%
- ----------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 5.64% 10.78% 12.87% 11.46%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" located in the
prospectus.
<PAGE> 63
<PAGE> 1
- --------------------------------------------------------------------------------
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, 1997, and
the related statements of operations and changes in contract owners' equity for
each of the years in the two year period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures include confirmation of securities owned as of December 31, 1997, by
correspondence with the transfer agents of the underlying mutual funds. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NACo Variable Account as of
December 31, 1997, and the results of its operations and its changes in
contract owners' equity for each of the years in the two year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NACO VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
4,291,370 shares (cost $88,601,874) ............................................................. $ 103,035,805
American Century: Twentieth Century Ultra Fund (ACTCUltra)
8,004,428 shares (cost $216,934,024) ............................................................ 218,520,874
The Bond Fund of America(SM), Inc. (BdFdAm)
1,062,195 shares (cost $14,617,410) ............................................................. 14,870,732
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
5,002,424 shares (cost $45,056,483) ............................................................. 52,575,475
Evergreen Income and Growth Fund - Class Y (EvIncGro)
168,957 shares (cost $3,368,230) ................................................................ 4,043,133
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
404,319 shares (cost $4,264,947) ................................................................ 4,297,907
Fidelity Capital & Income Fund (FidCapInc)
265,562 shares (cost $2,237,282) ................................................................ 2,658,279
Fidelity Contrafund (FidContr)
6,884,041 shares (cost $270,249,054) ............................................................ 321,002,831
Fidelity Equity-Income Fund (FidEqInc)
6,743,244 shares (cost $239,634,342) ............................................................ 353,413,444
Fidelity Magellan(R) Fund (FidMgln)
1,306,291 shares (cost $104,252,765) ............................................................ 124,450,301
Fidelity OTC Portfolio (FidOTC)
941,944 shares (cost $31,926,103) ............................................................... 31,508,034
Fidelity Puritan(R) Fund (FidPurtn)
1,634,297 shares (cost $28,386,708) ............................................................. 31,672,685
The Investment Company of America(R) (InvCoAm)
2,554,066 shares (cost $57,497,295) ............................................................. 72,152,374
MAS Funds - Fixed Income Portfolio (MASFIP)
226,135 shares (cost $2,700,953) ................................................................ 2,695,530
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,146,474 shares (cost $13,461,885) ............................................................. 15,958,923
MFS(R) High Income Fund - Class A (MFSHiInc)
2,601,403 shares (cost $14,193,356) ............................................................. 14,385,760
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,031,758 shares (cost $11,575,941) ............................................................. 12,814,439
Nationwide(R) Fund (NWFund)
3,363,858 shares (cost $68,052,739) ............................................................. 89,108,593
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Nationwide(R) Growth Fund (NWGroFd)
523,849 shares (cost $6,208,414) ................................................................ 7,669,144
Nationwide(R) Money Market Fund (NWMyMkt)
44,019,657 shares (cost $44,019,657) ............................................................ 44,019,657
Neuberger & Berman Guardian Fund (NBGuard)
1,546,964 shares (cost $40,472,926) ............................................................. 40,066,366
Putnam Investors Fund - Class A (PutInvFd)
5,331,304 shares (cost $50,456,063) ............................................................. 59,923,856
Putnam Voyager Fund - Class A (PutVoyFd)
10,519,384 shares (cost $161,006,964) ........................................................... 200,394,263
SEI Index Funds - S&P 500 Index Portfolio (SEI500lx)
1,891,075 shares (cost $50,913,658) ............................................................. 57,961,448
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,596,635 shares (cost $9,021,423) .............................................................. 9,707,543
Short-Term Investments Trust - Treasury Portfolio - Institutional Class (AIMTreas)
4,160,006 shares (cost $4,160,006) .............................................................. 4,160,006
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
2,136,462 shares (cost $31,045,917) ............................................................. 28,671,326
Templeton Foreign Fund - Class I (TemForFd)
4,876,616 shares (cost $50,264,551) ............................................................. 48,522,327
-------------
Total investments ............................................................................ 1,970,261,055
Accounts receivable ................................................................................... 599,224
-------------
Total assets ................................................................................. 1,970,860,279
ACCOUNTS PAYABLE ......................................................................................... 66,032
-------------
CONTRACT OWNERS' EQUITY (NOTE 4) ......................................................................... $ 1,970,794,247
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACTCGRO
-------------- ------------- ----------- -----------
1997 1996 1997 1996
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 21,526,606 18,399,398 - 1,237,485
Mortality and expense charges (note 2) ............. (8,687,459) (6,124,188) (597,743) (773,702)
Administration charge (note 2)
Tier I ....................................... (3,835,645) (2,597,055) (241,160) (321,103)
Tier II ...................................... (1,270,800) (836,073) (106,219) (117,371)
Tier III ..................................... (639,538) (432,408) (42,450) (57,199)
Tier IV ...................................... (235,537) (589,120) (19,525) (69,950)
Tier V ....................................... (354,719) - (23,235) -
-------------- ------------- ----------- -----------
Net investment activity .......................... 6,502,908 7,820,554 (1,030,332) (101,840)
Proceeds from mutual fund shares sold .............. 390,188,601 129,158,279 76,437,716 21,718,951
Cost of mutual fund shares sold .................... (330,761,963) (119,175,064) (77,270,118) (19,610,019)
-------------- ------------- ----------- -----------
Realized gain (loss) on investments .............. 59,426,638 9,983,215 (832,402) 2,108,932
Change in unrealized gain (loss) on investments .... 133,294,095 79,007,949 13,050,693 15,963,893
-------------- ------------- ----------- -----------
Net gain (loss) on investments ................... 192,720,733 88,991,164 12,218,291 18,072,825
-------------- ------------- ----------- -----------
Reinvested capital gains ........................... 158,561,197 78,266,596 15,163,270 1,663,504
-------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 357,784,838 175,078,314 26,351,229 19,634,489
-------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 428,935,376 318,493,085 9,656,125 16,288,513
Transfers between funds ............................ - - (67,825,676) (26,081,481)
Redemptions ........................................ (222,355,417) (71,502,064) (15,764,285) (8,867,521)
Adjustments to maintain reserves ................... (104,195) (127,810) 1,467 (8,235)
-------------- ------------- ----------- -----------
Net equity transactions ........................ 206,475,764 246,863,211 (73,932,369) (18,668,724)
Net change in contract owners' equity .............. 564,260,602 421,941,525 (47,581,140) 965,765
Contract owners' equity beginning of period ........ 1,406,533,645 984,592,120 150,619,441 149,653,676
-------------- ------------- ----------- -----------
Contract owners' equity end of period .............. $1,970,794,247 1,406,533,645 103,038,301 150,619,441
============== ============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACTCULTRA BDFDAM
-------------- ------------ ----------- -----------
1997 1996 1997 1996
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 83,084 - 1,010,649 983,502
Mortality and expense charges (note 2) ............. (953,698) (648,777) (71,217) (68,410)
Administration charge (note 2)
Tier I ....................................... (405,576) (271,468) (32,333) (31,741)
Tier II ...................................... (141,718) (87,166) (10,968) (8,216)
Tier III ..................................... (62,578) (43,731) (5,391) (4,757)
Tier IV ...................................... (28,453) (66,121) (1,857) (5,977)
Tier V ....................................... (45,144) - (2,386) -
-------------- ------------ ----------- -----------
Net investment activity .......................... (1,554,083) (1,117,263) 886,497 864,401
Proceeds from mutual fund shares sold .............. 30,918,833 10,123,449 6,105,619 3,918,729
Cost of mutual fund shares sold .................... (20,795,085) (7,647,599) (5,779,601) (4,170,224)
-------------- ------------ ----------- -----------
Realized gain (loss) on investments .............. 10,123,748 2,475,850 326,018 (251,495)
Change in unrealized gain (loss) on investments .... (17,363,508) 5,194,710 (75,230) 120,398
-------------- ------------ ----------- -----------
Net gain (loss) on investments ................... (7,239,760) 7,670,560 250,788 (131,097)
-------------- ------------ ----------- -----------
Reinvested capital gains ........................... 44,171,059 8,455,551 - -
-------------- ------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 35,377,216 15,008,848 1,137,285 733,304
-------------- ------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 53,715,959 44,415,944 2,197,440 2,665,962
Transfers between funds ............................ 3,392,831 (123,456) (571,835) (1,815,612)
Redemptions ........................................ (23,610,763) (9,988,739) (1,874,029) (1,020,041)
Adjustments to maintain reserves ................... (32,791) 4,505 (934) (388)
-------------- ------------ ----------- -----------
Net equity transactions ........................ 33,465,236 34,308,254 (249,358) (170,079)
Net change in contract owners' equity .............. 68,842,452 49,317,102 887,927 563,225
Contract owners' equity beginning of period ........ 149,650,009 100,332,907 13,981,906 13,418,681
-------------- ------------ ----------- -----------
Contract owners' equity end of period .............. $ 218,492,461 149,650,009 14,869,833 13,981,906
============== ============ =========== ===========
</TABLE>
<PAGE> 5
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Dry3dCen EvincGro
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 91,287 58,249 195,572 230,814
Mortality and expense charges (note 2) ................... (221,903) (128,394) (21,028) (22,935)
Administration charge (note 2)
Tier I ............................................. (97,392) (55,900) (9,235) (9,315)
Tier II ............................................ (34,054) (16,664) (2,503) (2,088)
Tier III ........................................... (11,626) (7,707) (1,203) (1,899)
Tier IV ............................................ (7,396) (13,044) (764) (2,724)
Tier V ............................................. (9,978) - (1,117) -
------------ ------------ ------------ ------------
Net investment activity ................................ (291,062) (163,460) 159,722 191,853
Proceeds from mutual fund shares sold .................... 4,764,654 2,082,457 1,435,669 812,536
Cost of mutual fund shares sold .......................... (3,479,290) (1,902,636) (1,298,478) (810,548)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,285,364 179,821 137,191 1,988
Change in unrealized gain (loss) on investments .......... 5,489,938 1,051,717 361,146 299,106
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 6,775,302 1,231,538 498,337 301,094
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 4,107,891 4,062,877 250,452 -
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 10,592,131 5,130,955 908,511 492,947
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 9,531,871 4,367,438 219,542 263,265
Transfers between funds .................................. 6,920,263 1,020,985 (890,063) (690,152)
Redemptions .............................................. (4,743,489) (1,289,248) (615,031) (236,697)
Adjustments to maintain reserves ......................... (2,888) (1,444) (227) (57)
------------ ------------ ------------ ------------
Net equity transactions .............................. 11,705,757 4,097,731 (1,285,779) (663,641)
Net change in contract owners' equity .................... 22,297,888 9,228,686 (377,268) (170,694)
Contract owners' equity beginning of period .............. 30,274,825 21,046,139 4,420,173 4,590,867
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 52,572,713 30,274,825 4,042,905 4,420,173
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FedUSGvt FidCapInc
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 209,493 165,458 200,858 254,679
Mortality and expense charges (note 2) ............... (18,574) (15,988) (14,160) (15,511)
Administration charge (note 2)
Tier I ......................................... (7,959) (6,388) (5,604) (5,478)
Tier II ........................................ (2,671) (1,708) (1,301) (1,341)
Tier III ....................................... (799) (702) (1,998) (2,553)
Tier IV ........................................ (688) (2,234) (614) (1,397)
Tier V ......................................... (1,002) - (434) -
------------ ------------- ------------- -------------
Net investment activity ............................ 177,800 138,438 176,747 228,399
Proceeds from mutual fund shares sold ................ 3,311,692 1,121,910 708,617 402,846
Cost of mutual fund shares sold ...................... (3,290,687) (1,104,963) (510,739) (303,343)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 21,005 16,947 197,878 99,503
Change in unrealized gain (loss) on investments ...... 34,443 (74,664) (9,038) (32,719)
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 55,448 (57,717) 188,840 66,784
------------ ------------- ------------- -------------
Reinvested capital gains ............................. - - - -
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 233,248 80,721 365,587 295,183
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 845,763 917,785 13 79
Transfers between funds .............................. 373,832 (15,253) (236,823) (206,511)
Redemptions .......................................... (638,843) (302,046) (447,420) (151,301)
Adjustments to maintain reserves ..................... (213) (236) (261) (258)
------------ ------------- ------------- -------------
Net equity transactions .......................... 580,539 600,250 (684,491) (357,991)
Net change in contract owners' equity ................ 813,787 680,971 (318,904) (62,808)
Contract owners' equity beginning of period .......... 3,483,920 2,802,949 2,976,924 3,039,732
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 4,297,707 3,483,920 2,658,020 2,976,924
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 6
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidContr FidEqInc
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,195,540 1,729,074 6,194,440 5,475,347
Mortality and expense charges (note 2) ................... (1,359,850) (798,784) (1,565,778) (1,122,012)
Administration charge (note 2)
Tier I ............................................. (616,290) (344,719) (659,522) (446,967)
Tier II ............................................ (203,894) (114,869) (215,189) (139,206)
Tier III ........................................... (95,933) (53,673) (143,887) (98,535)
Tier IV ............................................ (39,669) (73,089) (32,619) (114,864)
Tier V ............................................. (48,345) - (72,789) -
------------ ------------ ------------ ------------
Net investment activity ................................ (168,441) 343,940 3,504,656 3,553,763
Proceeds from mutual fund shares sold .................... 21,045,430 1,366,015 28,097,646 2,277,100
Cost of mutual fund shares sold .......................... (13,726,446) (1,138,648) (13,468,143) (1,372,592)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 7,318,984 227,367 14,629,503 904,508
Change in unrealized gain (loss) on investments .......... 19,495,166 16,820,570 46,925,897 25,291,931
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 26,814,150 17,047,937 61,555,400 26,196,439
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 27,727,162 12,840,593 13,064,496 10,075,492
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 54,372,871 30,232,470 78,124,552 39,825,694
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 80,513,062 56,201,369 50,674,836 37,458,833
Transfers between funds .................................. 17,826,645 10,119,538 11,399,955 1,709,515
Redemptions .............................................. (33,838,679) (8,109,140) (39,688,848) (9,799,106)
Adjustments to maintain reserves ......................... (25,668) (82,591) (5,107) (10,973)
------------ ------------ ------------ ------------
Net equity transactions .............................. 64,475,360 58,129,176 22,380,836 29,358,269
Net change in contract owners' equity .................... 118,848,231 88,361,646 100,505,388 69,183,963
Contract owners' equity beginning of period .............. 202,139,639 113,777,993 252,903,435 183,719,472
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $320,987,870 202,139,639 353,408,823 252,903,435
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidMgIn FidOTC
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................... $ 1,505,116 1,231,059 - 23,360
Mortality and expense charges (note 2) .................. (556,391) (470,560) (130,795) (45,939)
Administration charge (note 2)
Tier I ............................................ (265,730) (210,832) (56,929) (18,847)
Tier II ........................................... (82,339) (67,570) (17,458) (5,450)
Tier III .......................................... (40,641) (30,164) (8,619) (2,930)
Tier IV ........................................... (14,355) (40,626) (3,645) (5,320)
Tier V ............................................ (16,376) - (6,672) -
------------ ------------- ------------- -------------
Net investment activity ............................... 529,284 411,307 (224,118) (55,126)
Proceeds from mutual fund shares sold ................... 12,485,988 9,511,017 7,535,213 5,210,061
Cost of mutual fund shares sold ......................... (9,950,443) (9,021,392) (6,716,721) (4,935,771)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................... 2,535,545 489,625 818,492 274,290
Change in unrealized gain (loss) on investments ......... 15,085,951 (5,107,582) (488,087) 192,680
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................ 17,621,496 (4,617,957) 330,405 466,970
------------ ------------- ------------- -------------
Reinvested capital gains ................................ 6,362,186 13,496,407 2,202,654 1,432,109
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 24,512,966 9,289,757 2,308,941 1,843,953
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ....................................... 25,481,895 31,416,476 11,403,571 5,657,606
Transfers between funds ................................. (7,601,758) (21,447,207) 7,515,284 2,619,455
Redemptions ............................................. (13,965,007) (6,185,751) (3,842,544) (953,105)
Adjustments to maintain reserves ........................ (3,444) (3,719) (3,592) 2,639
------------ ------------- ------------- -------------
Net equity transactions ............................. 3,911,686 3,779,799 15,072,719 7,326,595
Net change in contract owners' equity ................... 28,424,652 13,069,556 17,381,660 9,170,548
Contract owners' equity beginning of period ............. 96,022,426 82,952,870 14,122,665 4,952,117
------------ ------------- ------------- -------------
Contract owners' equity end of period ................... $124,447,078 96,022,426 31,504,325 14,122,665
============ ============= ============= =============
</TABLE>
<PAGE> 7
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FIDPURTN INVCOAM
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,002,542 663,018 1,117,268 858,735
Mortality and expense charges (note 2) ................... (137,123) (92,533) (310,471) (201,765)
Administration charge (note 2)
Tier I ............................................. (66,667) (42,011) (147,489) (98,152)
Tier II ............................................ (21,034) (14,101) (56,789) (31,791)
Tier III ........................................... (8,864) (4,836) (20,464) (10,503)
Tier IV ............................................ (3,289) (8,068) (5,858) (14,185)
Tier V ............................................. (4,128) - (8,057) -
------------ ------------ ------------ ------------
Net investment activity ................................ 761,437 501,469 568,140 502,339
Proceeds from mutual fund shares sold .................... 3,662,742 962,001 4,672,687 675,337
Cost of mutual fund shares sold .......................... (2,886,331) (865,169) (2,891,566) (513,445)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 776,411 96,832 1,781,121 161,892
Change in unrealized gain (loss) on investments .......... 2,156,757 169,722 6,778,676 4,136,181
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 2,933,168 266,554 8,559,797 4,298,073
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 1,480,106 1,666,308 6,012,594 1,928,126
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 5,174,711 2,434,331 15,140,531 6,728,538
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 8,122,684 7,953,081 14,055,579 10,683,322
Transfers between funds .................................. 359,606 (1,017,005) 2,266,399 378,502
Redemptions .............................................. (3,573,534) (916,941) (7,025,850) (1,818,340)
Adjustments to maintain reserves ......................... (346) (2,681) (636) (1,655)
------------ ------------ ------------ ------------
Net equity transactions .............................. 4,908,410 6,016,454 9,295,492 9,241,829
Net change in contract owners' equity .................... 10,083,121 8,450,785 24,436,023 15,970,367
Contract owners' equity beginning of period .............. 21,589,381 13,138,596 47,716,024 31,745,657
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 31,672,502 21,589,381 72,152,047 47,716,024
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MASFIP MFSGROPP
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... $ 138,468 80,179 - -
Mortality and expense charges (note 2) ..................... (10,147) (5,596) (81,246) (74,504)
Administration charge (note 2)
Tier I ............................................... (5,562) (2,333) (36,299) (32,153)
Tier II .............................................. (1,154) (809) (11,776) (9,036)
Tier III ............................................. (317) (322) (6,917) (7,134)
Tier IV .............................................. (281) (582) (2,083) (6,237)
Tier V ............................................... (387) - (2,838) -
------------ ------------- ------------- -------------
Net investment activity .................................. 120,620 70,537 (141,159) (129,064)
Proceeds from mutual fund shares sold ...................... 1,286,155 507,874 2,859,690 1,150,785
Cost of mutual fund shares sold ............................ (1,260,770) (513,015) (2,016,264) (948,141)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ...................... 25,385 (5,141) 843,426 202,644
Change in unrealized gain (loss) on investments ............ (5,429) 991 547,661 996,452
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................... 19,956 (4,150) 1,391,087 1,199,096
------------ ------------- ------------- -------------
Reinvested capital gains ................................... 35,341 15,684 1,975,637 1,657,280
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 175,917 82,071 3,225,565 2,727,312
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 796,916 757,253 289,620 323,809
Transfers between funds .................................... 552,003 238,058 (778,278) (372,651)
Redemptions ................................................ (388,815) (51,714) (2,103,012) (840,556)
Adjustments to maintain reserves ........................... 122 (20) (13,012) (10,408)
------------ ------------- ------------- -------------
Net equity transactions ................................ 960,226 943,577 (2,604,682) (899,806)
Net change in contract owners' equity ...................... 1,136,143 1,025,648 620,883 1,827,506
Contract owners' equity beginning of period ................ 1,559,535 533,887 15,338,362 13,510,856
------------ ------------- ------------- -------------
Contract owners' equity end of period ...................... $ 2,695,678 1,559,535 15,959,245 15,338,362
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 8
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MFSHIINC MFSGRSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,110,356 889,431 5,750 -
Mortality and expense charges (note 2) ................... (64,630) (52,543) (60,114) (48,355)
Administration charge (note 2)
Tier I ............................................... (27,160) (22,596) (25,523) (19,892)
Tier II .............................................. (8,510) (5,087) (8,400) (5,932)
Tier III ............................................. (4,958) (3,885) (5,187) (3,649)
Tier IV .............................................. (1,712) (5,842) (1,546) (5,102)
Tier V ............................................... (3,381) - (2,624) -
------------ ------------ ------------ ------------
Net investment activity ................................. 1,000,005 799,478 (97,644) (82,930)
Proceeds from mutual fund shares sold .................... 11,436,316 4,588,314 4,936,847 1,966,038
Cost of mutual fund shares sold .......................... (10,796,798) (4,584,436) (4,951,950) (1,887,331)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ...................... 639,518 3,878 (15,103) 78,707
Change in unrealized gain (loss) on investments .......... (181,828) 309,388 2,506,771 (849,763)
------------ ------------ ------------ ------------
Net gain (loss) on investments ........................... 457,690 313,266 2,491,668 (771,056)
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 1,959,714 2,673,340
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 1,457,695 1,112,744 4,353,738 1,819,354
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 2,868,284 1,750,588 1,918,046 1,557,760
Transfers between funds .................................. 346,011 (516,810) (3,240,441) 525,257
Redemptions .............................................. (1,335,492) (693,668) (1,447,659) (513,838)
Adjustments to maintain reserves ......................... 1,475 (1,252) 1,016 (695)
------------ ------------ ------------ ------------
Net equity transactions ................................ 1,880,278 538,858 (2,769,038) 1,568,484
Net change in contract owners' equity .................... 3,337,973 1,651,602 1,584,700 3,387,838
Contract owners' equity beginning of period .............. 11,049,325 9,397,723 11,230,813 7,842,975
------------ ------------ ------------ ------------
Contract owners' equity end of period ...................... $ 14,387,298 11,049,325 12,815,513 11,230,813
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NWFUND NWGROFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 858,226 665,218 60,952 73,925
Mortality and expense charges (note 2) ............... (330,998) (197,452) (38,660) (34,864)
Administration charge (note 2)
Tier I ........................................... (148,673) (83,411) (17,881) (14,949)
Tier II .......................................... (47,277) (30,586) (6,779) (6,067)
Tier III ......................................... (25,296) (11,762) (2,338) (1,259)
Tier IV .......................................... (9,148) (18,775) (622) (3,428)
Tier V ........................................... (12,503) - (1,460) -
------------ ------------- ------------- -------------
Net investment activity ............................ 284,331 323,232 (6,788) 13,358
Proceeds from mutual fund shares sold ................ 6,266,837 2,896,804 1,515,017 589,678
Cost of mutual fund shares sold ...................... (3,680,205) (2,273,962) (992,381) (443,098)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 2,586,632 622,842 522,636 146,580
Change in unrealized gain (loss) on investments ...... 13,332,389 4,317,064 283,755 350,942
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 15,919,021 4,939,906 806,391 497,522
------------ ------------- ------------- -------------
Reinvested capital gains ............................. 4,357,194 2,639,185 928,742 474,821
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 20,560,546 7,902,323 1,728,345 985,701
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 17,504,981 5,816,573 423,584 540,709
Transfers between funds .............................. 15,259,707 (221,892) (580,789) (505,058)
Redemptions .......................................... (8,674,178) (2,632,012) (1,098,214) (251,120)
Adjustments to maintain reserves ..................... (2,327) (1,901) (35) (308)
------------ ------------- ------------- -------------
Net equity transactions ............................ 24,088,183 2,960,768 (1,255,454) (215,777)
Net change in contract owners' equity ................ 44,648,729 10,863,091 472,891 769,924
Contract owners' equity beginning of period .......... 44,457,575 33,594,484 7,196,235 6,426,311
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 89,106,304 44,457,575 7,669,126 7,196,235
============ ============= ============= =============
</TABLE>
<PAGE> 9
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NWMYMKT NBGUARD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,538,526 2,149,385 219,518 196,669
Mortality and expense charges (note 2) ................... (254,376) (232,068) (170,400) (83,256)
Administration charge (note 2)
Tier I ............................................. (95,174) (78,586) (72,318) (33,390)
Tier II ............................................ (27,102) (26,094) (24,787) (11,620)
Tier III ........................................... (17,915) (14,966) (10,868) (5,748)
Tier IV ............................................ (10,690) (34,876) (4,336) (8,820)
Tier V ............................................. (17,451) - (9,033) -
------------ ------------ ------------ ------------
Net investment activity ................................ 2,115,818 1,762,795 (72,224) 53,835
Proceeds from mutual fund shares sold .................... 65,472,045 36,057,505 4,722,451 1,397,739
Cost of mutual fund shares sold .......................... (65,472,045) (36,057,505) (3,617,011) (1,206,162)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... - - 1,105,440 191,577
Change in unrealized gain (loss) on investments .......... - - (1,847,382) 1,430,910
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... - - (741,942) 1,622,487
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 5,284,078 1,002,975
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 2,115,818 1,762,795 4,469,912 2,679,297
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 10,477,258 5,939,190 14,909,263 10,662,720
Transfers between funds .................................. (10,384,252) 6,268,382 3,648,156 (308,504)
Redemptions .............................................. (8,399,390) (6,040,030) (4,870,821) (1,054,373)
Adjustments to maintain reserves ......................... (686) (3,204) (7,439) (951)
------------ ------------ ------------ ------------
Net equity transactions .............................. (8,307,070) 6,164,338 13,679,159 9,298,892
Net change in contract owners' equity .................... (6,191,252) 7,927,133 18,149,071 11,978,189
Contract owners' equity beginning of period .............. 50,815,017 42,887,884 21,909,962 9,931,773
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 44,623,765 50,815,017 40,059,033 21,909,962
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PUTINVFD PUTVOYFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 201,337 183,827 - -
Mortality and expense charges (note 2) .............. (245,470) (156,121) (845,606) (550,692)
Administration charge (note 2)
Tier I ........................................ (128,526) (80,822) (392,409) (249,007)
Tier II ....................................... (26,541) (17,637) (122,438) (74,066)
Tier III ...................................... (18,768) (8,805) (56,223) (37,901)
Tier IV ....................................... (4,493) (11,839) (24,210) (47,307)
Tier V ........................................ (8,093) - (30,696) -
------------ ------------- ------------- -------------
Net investment activity ........................... (230,554) (91,397) (1,471,582) (958,973)
Proceeds from mutual fund shares sold ............... 7,194,124 1,318,475 13,936,317 1,631,415
Cost of mutual fund shares sold ..................... (5,511,306) (1,244,147) (7,581,337) (906,797)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ............... 1,682,818 74,328 6,354,980 724,618
Change in unrealized gain (loss) on investments ..... 7,106,597 1,609,874 21,628,132 1,835,298
------------ ------------- ------------- -------------
Net gain (loss) on investments .................... 8,789,415 1,684,202 27,983,112 2,559,916
------------ ------------- ------------- -------------
Reinvested capital gains ............................ 5,186,816 3,982,924 11,805,197 8,602,740
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 13,745,677 5,575,729 38,316,727 10,203,683
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 9,952,027 5,272,327 49,543,414 40,603,066
Transfers between funds ............................. 6,647,199 928,922 (5,787,505) 17,094,396
Redemptions ......................................... (6,224,509) (1,529,851) (18,823,850) (5,623,714)
Adjustments to maintain reserves .................... (299) (656) (3,442) (728)
------------ ------------- ------------- -------------
Net equity transactions ......................... 10,374,418 4,670,742 24,928,617 52,073,020
Net change in contract owners' equity ............... 24,120,095 10,246,471 63,245,344 62,276,703
Contract owners' equity beginning of period ......... 35,803,162 25,556,691 137,145,381 74,868,678
------------ ------------- ------------- -------------
Contract owners' equity end of period ............... $ 59,923,257 35,803,162 200,390,725 137,145,381
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 10
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SEI500IX SELGROFD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 496,400 28,314 - -
Mortality and expense charges (note 2) ................... (180,116) (13,423) (47,926) (35,287)
Administration charge (note 2)
Tier I ............................................. (81,570) (5,772) (22,236) (15,080)
Tier II ............................................ (23,893) (1,822) (5,696) (3,364)
Tier III ........................................... (14,809) (960) (2,991) (2,768)
Tier IV ............................................ (4,741) (1,252) (1,383) (3,885)
Tier V ............................................. (6,925) - (2,297) -
------------ ------------ ------------ ------------
Net investment activity ................................ 184,346 5,085 (82,529) (60,384)
Proceeds from mutual fund shares sold .................... 6,510,687 1,226,914 2,225,057 665,681
Cost of mutual fund shares sold .......................... (4,821,399) (1,131,438) (1,924,254) (685,474)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,689,288 95,476 300,803 (19,793)
Change in unrealized gain (loss) on investments .......... 6,582,190 465,601 129,162 689,754
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 8,271,478 561,077 429,965 669,961
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 382,784 131,859 1,117,389 620,965
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 8,838,608 698,021 1,464,825 1,230,542
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 25,239,383 4,620,835 1,994,573 1,441,227
Transfers between funds .................................. 21,078,872 5,546,852 (842,537) 573,792
Redemptions .............................................. (7,775,480) (282,950) (1,342,748) (322,865)
Adjustments to maintain reserves ......................... (8,585) (522) (659) 157
------------ ------------ ------------ ------------
Net equity transactions .............................. 38,534,190 9,884,215 (191,371) 1,692,311
Net change in contract owners' equity .................... 47,372,798 10,582,236 1,273,454 2,922,853
Contract owners' equity beginning of period .............. 10,582,236 - 8,433,505 5,510,652
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 57,955,034 10,582,236 9,706,959 8,433,505
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AIMTREAS TRINTSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 217,515 115,635 404,000 318,699
Mortality and expense charges (note 2) ............. (20,246) (11,332) (150,968) (95,586)
Administration charge (note 2)
Tier I ....................................... (6,730) (4,804) (63,120) (36,081)
Tier II ...................................... (1,889) (728) (21,402) (13,753)
Tier III ..................................... (1,303) (1,360) (11,121) (5,859)
Tier IV ...................................... (2,261) (1,127) (3,996) (11,415)
Tier V ....................................... (776) - (7,667) -
------------ ------------- ------------- -------------
Net investment activity .......................... 184,310 96,284 145,726 156,005
Proceeds from mutual fund shares sold .............. 22,350,432 4,232,659 29,556,434 6,973,759
Cost of mutual fund shares sold .................... (22,350,432) (4,232,659) (26,380,399) (5,889,819)
------------ ------------- ------------- -------------
Realized gain (loss) on investments .............. - - 3,176,035 1,083,940
Change in unrealized gain (loss) on investments .... - - (3,819,017) 922,999
------------ ------------- ------------- -------------
Net gain (loss) on investments ................... - - (642,982) 2,006,939
------------ ------------- ------------- -------------
Reinvested capital gains ........................... - - 1,111,001 354,110
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 184,310 96,284 613,745 2,517,054
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 976,012 820,514 10,320,079 9,239,961
Transfers between funds ............................ 1,160,637 260,363 (2,910,875) 3,932,941
Redemptions ........................................ (847,759) (197,508) (4,778,319) (946,866)
Adjustments to maintain reserves ................... 2,892 (255) 3,678 1,803
------------ ------------- ------------- -------------
Net equity transactions ........................ 1,291,782 883,114 2,634,563 12,227,839
Net change in contract owners' equity .............. 1,476,092 979,398 3,248,308 14,744,893
Contract owners' equity beginning of period ........ 2,686,515 1,707,117 25,426,682 10,681,789
------------ ------------- ------------- -------------
Contract owners' equity end of period .............. $ 4,162,607 2,686,515 28,674,990 25,426,682
============ ============= ============= =============
</TABLE>
<PAGE> 11
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TemForFd
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................... $ 1,469,709 787,336
Mortality and expense charges (note 2) ................. (227,825) (127,799)
Administration charge (note 2)
Tier I ............................................. (100,578) (55,258)
Tier II ............................................ (37,019) (21,931)
Tier III ........................................... (16,074) (6,841)
Tier IV ............................................ (5,303) (11,034)
Tier V ............................................. (8,925) -
------------ ------------
Net investment activity .............................. 1,073,985 564,473
Proceeds from mutual fund shares sold .................. 8,737,686 3,772,230
Cost of mutual fund shares sold ........................ (7,341,764) (3,774,731)
------------ ------------
Realized gain (loss) on investments .................. 1,395,922 (2,501)
Change in unrealized gain (loss) on investments ........ (4,411,710) 2,902,496
------------ ------------
Net gain (loss) on investments ....................... (3,015,788) 2,899,995
------------ ------------
Reinvested capital gains ............................... 3,875,434 489,746
------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 1,933,631 3,954,214
------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ...................................... 15,303,596 10,856,880
Transfers between funds ................................ 2,903,432 2,104,634
Redemptions ............................................ (4,616,849) (883,023)
Adjustments to maintain reserves ....................... (2,254) (3,777)
------------ ------------
Net equity transactions .............................. 13,587,925 12,074,714
NET CHANGE IN CONTRACT OWNERS' EQUITY .................... 15,521,556 16,028,928
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .............. 32,998,572 16,969,644
------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD .................... $ 48,520,128 32,998,572
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
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)
Evergreen Income and Growth Fund - Class Y (EvIncGro) (formerly
The Evergreen Total Return Fund - Class Y) (not available for
contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares (FedUSGvt)
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)
<PAGE> 13
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, 1997.
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, 1997. 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 1996 amounts have been reclassified to conform with the current
year presentation.
<PAGE> 14
(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 participant's 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 to $150 .20%
V Over $150 .15%
</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.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 15
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
TIER I (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 7,567,678 $ 5.842997 $ 44,217,920 28%
American Century: Twentieth Century
Ultra Fund ................................... 58,270,626 1.737833 101,264,617 22%
The Bond Fund of America(SM), Inc. ............. 3,075,422 2.332586 7,173,686 8%
The Dreyfus Third Century Fund, Inc. ........... 7,094,050 3.532278 25,058,157 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 776,076 2.422617 1,880,135 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 1,452,934 1.301886 1,891,554 6%
Fidelity Capital & Income Fund ................. 232,885 4.654233 1,083,901 14%
Fidelity Contrafund ............................ 82,151,064 1.935931 159,038,791 22%
Fidelity Equity-Income Fund .................... 23,161,038 6.900916 159,832,378 29%
Fidelity Magellan(R) Fund ...................... 35,656,191 1.804998 64,359,353 25%
Fidelity OTC Portfolio ......................... 8,056,286 1.829868 14,741,940 9%
Fidelity Puritan(R) Fund ....................... 10,750,214 1.596539 17,163,136 21%
The Investment Company of America(R) ........... 16,333,170 2.277283 37,195,250 29%
MAS Funds - Fixed Income Portfolio ............. 1,169,738 1.335173 1,561,803 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 834,685 9.012670 7,522,740 22%
MFS(R) High Income Fund - Class A .............. 1,054,064 6.168371 6,501,858 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 364,302 15.968069 5,817,199 47%
Nationwide(R) Fund ............................. 2,097,021 20.697282 43,402,635 38%
Nationwide(R) Growth Fund ...................... 959,417 3.854877 3,698,435 25%
Nationwide(R) Money Market Fund ................ 5,808,984 3.003821 17,449,148 4%
Neuberger & Berman Guardian Fund ............... 10,840,792 1.706116 18,495,649 17%
Putnam Investors Fund - Class A ................ 1,862,211 18.110411 33,725,407 33%
Putnam Voyager Fund - Class A .................. 26,549,651 3.837109 101,873,905 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 19,127,252 1.501834 28,725,957 32%
Seligman Growth Fund, Inc. - Class A. .......... 384,411 12.541848 4,821,224 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 1,270,880 1.222017 1,553,037 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 10,712,801 1.198954 12,844,156 2%
Templeton Foreign Fund - Class I ............... 18,596,589 1.284158 23,880,959 6%
========== ========= -----------
Sub-Total Tier I (December 31, 1995) ......... $ 946,774,930
===========
</TABLE>
(Continued)
<PAGE> 16
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ----------- ----------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,972,496 $ 5.847874 $ 17,382,782 28%
American Century: Twentieth Century
Ultra Fund ................................... 17,512,296 1.739283 30,458,839 22%
The Bond Fund of America(SM), Inc. ............. 838,935 2.334569 1,958,552 8%
The Dreyfus Third Century Fund, Inc. ........... 2,141,147 3.535226 7,569,439 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 164,209 2.424638 398,147 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 485,556 1.302984 632,672 6%
Fidelity Capital & Income Fund ................. 50,755 4.658156 236,425 14%
Fidelity Contrafund ............................ 23,258,606 1.937547 45,064,642 22%
Fidelity Equity-Income Fund .................... 6,412,368 6.906673 44,288,129 29%
Fidelity Magellan(R) Fund ...................... 9,967,418 1.806504 18,006,180 25%
Fidelity OTC Portfolio ......................... 2,364,115 1.831396 4,329,631 9%
Fidelity Puritan(R) Fund ....................... 2,540,462 1.597871 4,059,331 21%
The Investment Company of America(R) ........... 5,422,918 2.279183 12,359,823 29%
MAS Funds - Fixed Income Portfolio ............. 274,281 1.336288 366,518 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 235,276 9.020195 2,122,235 22%
MFS(R) High Income Fund - Class A .............. 244,788 6.173570 1,511,216 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 111,799 15.981395 1,786,704 47%
Nationwide(R) Fund ............................. 592,502 20.714549 12,273,412 38%
Nationwide(R) Growth Fund ...................... 360,606 3.858094 1,391,252 25%
Nationwide(R) Money Market Fund ................ 1,760,454 3.006353 5,292,546 4%
Neuberger & Berman Guardian Fund ............... 3,222,201 1.707540 5,502,037 17%
Putnam Investors Fund - Class A ................ 329,877 18.125525 5,979,194 33%
Putnam Voyager Fund - Class A .................. 7,200,296 3.840312 27,651,383 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,223,019 1.503085 7,850,642 32%
Seligman Growth Fund, Inc. - Class A. .......... 80,990 12.552317 1,016,612 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 203,199 1.223047 248,522 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 3,056,840 1.199955 3,668,070 2%
Templeton Foreign Fund - Class I ............... 5,823,447 1.285230 7,484,469 6%
========== ========= -----------
Sub-Total Tier II (December 31, 1995) ........ $ 270,889,404
===========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 1,115,895 $5.844955 $ 6,522,356 28%
American Century: Twentieth Century
Ultra Fund .................................... 6,429,806 1.738415 11,177,671 22%
The Bond Fund of America(SM), Inc. .............. 463,715 2.333393 1,082,029 8%
The Dreyfus Third Century Fund, Inc. ............ 828,576 3.533462 2,927,742 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 104,407 2.423429 253,023 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 153,705 1.302328 200,174 6%
Fidelity Capital & Income Fund .................. 22,125 4.655810 103,010 14%
Fidelity Contrafund ............................. 8,810,458 1.936580 17,062,157 22%
Fidelity Equity-Income Fund ..................... 2,726,805 6.903229 18,823,759 29%
Fidelity Magellan(R) Fund ....................... 3,146,118 1.805603 5,680,640 25%
Fidelity OTC Portfolio .......................... 750,546 1.830482 1,373,861 9%
Fidelity Puritan(R) Fund ........................ 1,227,566 1.597074 1,960,514 21%
The Investment Company of America(R) ............ 1,973,413 2.278047 4,495,528 29%
MAS Funds - Fixed Income Portfolio .............. 39,766 1.335621 53,112 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 106,751 9.015691 962,434 22%
MFS(R) High Income Fund - Class A ............... 148,670 6.170461 917,362 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 38,917 15.973419 621,638 47%
Nationwide(R) Fund .............................. 180,761 20.704221 3,742,516 38%
Nationwide(R) Growth Fund ....................... 106,963 3.856169 412,467 25%
Nationwide(R) Money Market Fund ................. 472,514 3.004839 1,419,828 4%
Neuberger & Berman Guardian Fund ................ 1,051,558 1.706688 1,794,681 17%
Putnam Investors Fund - Class A ................. 157,603 18.116482 2,855,212 33%
Putnam Voyager Fund - Class A ................... 2,560,666 3.838394 9,828,845 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,203,420 1.502337 1,807,942 32%
Seligman Growth Fund, Inc. - Class A. ........... 42,594 12.546053 534,387 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 156,120 1.222431 190,846 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,203,031 1.199356 1,442,862 2%
Templeton Foreign Fund - Class I ................ 1,891,595 1.284589 2,429,922 6%
========= ======== ------------
Sub-Total Tier II (December 31, 1996) ......... $100,676,518
============
</TABLE>
(Continued)
<PAGE> 18
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 1,491,035 $ 5.857641 $ 8,733,948 28%
American Century: Twentieth Century
Ultra Fund ................................... 9,471,388 1.742188 16,500,939 22%
The Bond Fund of America(SM), Inc. ............. 597,695 2.338535 1,397,731 8%
The Dreyfus Third Century Fund, Inc. ........... 917,688 3.541129 3,249,652 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 130,014 2.428687 315,763 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 241,356 1.305179 315,013 6%
Fidelity Capital & Income Fund ................. 120,784 4.666006 563,579 14%
Fidelity Contrafund ............................ 12,620,829 1.940782 24,494,278 22%
Fidelity Equity-Income Fund .................... 5,904,892 6.918202 40,851,236 29%
Fidelity Magellan(R) Fund ...................... 5,726,530 1.809520 10,362,271 26%
Fidelity OTC Portfolio ......................... 1,302,436 1.834455 2,389,260 9%
Fidelity Puritan(R) Fund ....................... 1,283,945 1.600539 2,055,004 21%
The Investment Company of America(R) ........... 2,356,594 2.282988 5,380,076 29%
MAS Funds - Fixed Income Portfolio ............. 94,434 1.338520 126,402 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 197,549 9.035263 1,784,907 22%
MFS(R) High Income Fund - Class A .............. 233,869 6.183974 1,446,240 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 78,577 16.008079 1,257,867 47%
Nationwide(R) Fund ............................. 355,149 20.749126 7,369,031 39%
Nationwide(R) Growth Fund ...................... 89,839 3.864536 347,186 25%
Nationwide(R) Money Market Fund ................ 1,219,186 3.011419 3,671,480 4%
Neuberger & Berman Guardian Fund ............... 1,596,621 1.710392 2,730,848 17%
Putnam Investors Fund - Class A ................ 233,708 18.155790 4,243,153 33%
Putnam Voyager Fund - Class A .................. 3,817,279 3.846728 14,684,034 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 3,491,065 1.505589 5,256,109 32%
Seligman Growth Fund, Inc. - Class A. .......... 61,083 12.573280 768,014 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 331,148 1.225108 405,692 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 1,722,849 1.201960 2,070,796 2%
Templeton Foreign Fund - Class I ............... 2,363,601 1.287377 3,042,846 6%
========== ========= ------------
Sub-Total Tier III (December 31, 1995) ....... $165,813,355
============
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 674,415 $ 5.851796 $ 3,946,539 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,660,957 1.740450 8,112,163 22%
The Bond Fund of America(SM), Inc. .............. 219,702 2.336182 513,264 8%
The Dreyfus Third Century Fund, Inc. ............ 406,041 3.537596 1,436,409 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 25,537 2.426264 61,960 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 61,181 1.303866 79,772 6%
Fidelity Capital & Income Fund .................. 14,865 4.661311 69,290 14%
Fidelity Contrafund ............................. 6,956,699 1.938846 13,487,968 22%
Fidelity Equity-Income Fund ..................... 2,138,680 6.911304 14,781,068 29%
Fidelity Magellan(R) Fund ....................... 2,856,554 1.807715 5,163,836 26%
Fidelity OTC Portfolio .......................... 658,565 1.832624 1,206,902 9%
Fidelity Puritan(R) Fund ........................ 860,797 1.598943 1,376,365 21%
The Investment Company of America(R) ............ 1,183,576 2.280712 2,699,396 29%
MAS Funds - Fixed Income Portfolio .............. 8,001 1.337185 10,699 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 63,570 9.026243 573,798 22%
MFS(R) High Income Fund - Class A ............... 67,909 6.177751 419,525 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 39,760 15.992105 635,846 47%
Nationwide(R) Fund .............................. 193,920 20.728440 4,019,659 39%
Nationwide(R) Growth Fund ....................... 119,317 3.860681 460,645 25%
Nationwide(R) Money Market Fund ................. 683,175 3.008389 2,055,256 4%
Neuberger & Berman Guardian Fund ................ 826,685 1.708685 1,412,544 17%
Putnam Investors Fund - Class A ................. 183,147 18.137679 3,321,861 33%
Putnam Voyager Fund - Class A ................... 1,982,897 3.842887 7,620,049 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,782,753 1.504092 2,681,425 32%
Seligman Growth Fund, Inc. - Class A. ........... 23,580 12.560735 296,182 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 28,293 1.223875 34,627 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,125,641 1.200760 1,351,625 2%
Templeton Foreign Fund - Class I ................ 1,989,093 1.286093 2,558,159 6%
========= ========= ------------
Sub-Total Tier III (December 31, 1996) ........ $ 80,386,832
============
</TABLE>
(Continued)
<PAGE> 20
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 672,795 $ 5.867425 $ 3,947,574 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,693,395 1.745098 8,190,434 22%
The Bond Fund of America(SM), Inc. .............. 293,584 2.342504 687,722 8%
The Dreyfus Third Century Fund, Inc. ............ 724,635 3.547042 2,570,311 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 90,044 2.432742 219,054 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 199,160 1.307377 260,377 6%
Fidelity Capital & Income Fund .................. 15,630 4.673860 73,052 14%
Fidelity Contrafund ............................. 6,919,494 1.944023 13,451,655 22%
Fidelity Equity-Income Fund ..................... 1,480,026 6.929751 10,256,212 29%
Fidelity Magellan(R) Fund ....................... 2,947,714 1.812541 5,342,852 26%
Fidelity OTC Portfolio .......................... 498,827 1.837520 916,605 9%
Fidelity Puritan(R) Fund ........................ 734,376 1.603211 1,177,360 21%
The Investment Company of America(R) ............ 1,186,761 2.286799 2,713,884 29%
MAS Funds - Fixed Income Portfolio .............. 84,398 1.340756 113,157 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 33,173 9.050357 300,227 22%
MFS(R) High Income Fund - Class A ............... 108,967 6.194384 674,983 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 28,741 16.034807 460,856 47%
Nationwide(R) Fund .............................. 218,220 20.783760 4,535,432 39%
Nationwide(R) Growth Fund ....................... 62,008 3.870989 240,032 25%
Nationwide(R) Money Market Fund ................. 1,244,833 3.016489 3,755,025 4%
Neuberger & Berman Guardian Fund ................ 828,370 1.713248 1,419,203 17%
Putnam Investors Fund - Class A ................. 93,488 18.186106 1,700,183 34%
Putnam Voyager Fund - Class A ................... 1,919,534 3.853154 7,396,260 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,436,973 1.508098 2,167,096 32%
Seligman Growth Fund, Inc. - Class A. ........... 29,833 12.594278 375,725 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 1,061,646 1.227171 1,302,821 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 867,768 1.203968 1,044,765 2%
Templeton Foreign Fund - Class I ................ 1,164,252 1.289527 1,501,334 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1995) ......... $ 76,794,191
============
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 791,919 $ 5.861569 $ 4,641,888 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,507,568 1.743357 7,858,300 22%
The Bond Fund of America(SM), Inc. .............. 124,227 2.340149 290,710 9%
The Dreyfus Third Century Fund, Inc. ............ 528,101 3.543503 1,871,327 29%
Evergreen Income and Growth Fund -
Class Y ....................................... 78,659 2.430315 191,166 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 88,325 1.306062 115,358 6%
Fidelity Capital & Income Fund .................. 51,553 4.669162 240,709 14%
Fidelity Contrafund ............................. 5,170,372 1.942084 10,041,297 22%
Fidelity Equity-Income Fund ..................... 1,223,287 6.922841 8,468,621 29%
Fidelity Magellan(R) Fund ....................... 1,539,847 1.810733 2,788,252 26%
Fidelity OTC Portfolio .......................... 781,703 1.835685 1,434,960 9%
Fidelity Puritan(R) Fund ........................ 379,214 1.601612 607,354 22%
The Investment Company of America(R) ............ 318,963 2.284519 728,677 29%
MAS Funds - Fixed Income Portfolio .............. 68,206 1.339418 91,356 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 84,709 9.041322 765,881 23%
MFS(R) High Income Fund - Class A ............... 51,594 6.188157 319,272 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 21,209 16.018807 339,743 47%
Nationwide(R) Fund .............................. 90,530 20.763040 1,879,678 39%
Nationwide(R) Growth Fund ....................... 19,388 3.867128 74,976 25%
Nationwide(R) Money Market Fund ................. 364,874 3.013456 1,099,532 4%
Neuberger & Berman Guardian Fund ................ 751,166 1.711539 1,285,650 17%
Putnam Investors Fund - Class A ................. 65,920 18.167964 1,197,632 34%
Putnam Voyager Fund - Class A ................... 1,809,222 3.849306 6,964,249 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,151,075 1.506599 1,734,208 32%
Seligman Growth Fund, Inc. - Class A. ........... 25,438 12.581713 320,054 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 102,438 1.225937 125,583 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 811,683 1.202766 976,265 2%
Templeton Foreign Fund - Class I ................ 990,793 1.288241 1,276,380 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1996) ......... $ 57,729,078
============
</TABLE>
(Continued)
<PAGE> 22
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2)* UNITS UNIT VALUE RETURN
---------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 2,223 $ 5.852797 $ 13,011 28%
American Century: Twentieth Century
Ultra Fund .................................... 39,473 1.740747 68,713 22%
The Bond Fund of America(SM), Inc. .............. 139 2.336617 325 8%
The Dreyfus Third Century Fund, Inc. ............ 4,553 3.538202 16,109 28%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 34,364 1.304091 44,814 6%
Fidelity Contrafund ............................. 51,788 1.939178 100,426 22%
Fidelity Equity-Income Fund ..................... 6,909 6.912488 47,758 29%
Fidelity Magellan(R) Fund ....................... 36,399 1.808025 65,810 26%
Fidelity OTC Portfolio .......................... 4,185 1.832937 7,671 9%
Fidelity Puritan(R) Fund ........................ 9,482 1.599217 15,164 21%
The Investment Company of America(R) ............ 3,811 2.281103 8,693 29%
MAS Funds - Fixed Income Portfolio .............. 438 1.337415 586 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 693 9.027786 6,256 22%
MFS(R) High Income Fund - Class A ............... 117 6.178817 723 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 353 15.994835 5,646 47%
Nationwide(R) Fund .............................. 2,085 20.731998 43,226 39%
Nationwide(R) Growth Fund ....................... 226 3.861342 873 25%
Nationwide(R) Money Market Fund ................. 5,303 3.008908 15,956 4%
Neuberger & Berman Guardian Fund ................ 19,355 1.708978 33,077 17%
Putnam Investors Fund - Class A ................. 2,047 18.140786 37,134 33%
Putnam Voyager Fund - Class A ................... 15,376 3.843542 59,098 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 29,469 1.504352 44,332 32%
Seligman Growth Fund, Inc. - Class A. ........... 406 12.562888 5,101 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 7,027 1.224087 8,602 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 6,790 1.200967 8,155 2%
Templeton Foreign Fund - Class I ................ 8,712 1.286315 11,206 6%
====== ========= ---------
Sub-Total Tier IV (December 31, 1996) ......... $ 668,465
=========
</TABLE>
*Tier includes certain Departments of a Member County that was previously
converted to Tier IV using the Asset Balance as of December 31, 1995.
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL
TIER V (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,322,606 $ 5.869391 $ 13,632,283 29%
American Century: Twentieth Century
Ultra Fund ................................... 19,969,711 1.745683 34,860,785 23%
The Bond Fund of America(SM), Inc. ............. 753,555 2.343312 1,765,814 9%
The Dreyfus Third Century Fund, Inc. ........... 2,219,012 3.548231 7,873,567 29%
Evergreen Income and Growth Fund -
Class Y ...................................... 297,366 2.433557 723,657 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 579,571 1.307818 757,973 7%
Fidelity Capital & Income Fund ................. 61,610 4.675440 288,054 14%
Fidelity Contrafund ............................ 19,667,377 1.944675 38,246,656 22%
Fidelity Equity-Income Fund .................... 8,086,997 6.932074 56,059,662 29%
Fidelity Magellan(R) Fund ...................... 6,992,191 1.813149 12,677,884 26%
Fidelity OTC Portfolio ......................... 2,776,451 1.838136 5,103,495 9%
Fidelity Puritan(R) Fund ....................... 2,031,661 1.603749 3,258,274 22%
The Investment Company of America(R) ........... 2,872,363 2.287566 6,570,720 29%
MAS Funds - Fixed Income Portfolio ............. 277,396 1.341206 372,045 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 212,160 9.053391 1,920,767 23%
MFS(R) High Income Fund - Class A .............. 418,967 6.196477 2,596,119 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 117,830 16.040180 1,890,014 47%
Nationwide(R) Fund ............................. 569,519 20.790728 11,840,715 39%
Nationwide(R) Growth Fund ...................... 269,417 3.872287 1,043,260 26%
Nationwide(R) Money Market Fund ................ 3,269,252 3.017508 9,864,994 5%
Neuberger & Berman Guardian Fund ............... 4,309,283 1.713822 7,385,344 17%
Putnam Investors Fund - Class A ................ 377,276 18.192202 6,863,481 34%
Putnam Voyager Fund - Class A .................. 6,307,757 3.854445 24,312,902 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,095,657 1.508603 7,687,323 32%
Seligman Growth Fund, Inc. - Class A. .......... 124,591 12.598501 1,569,660 18%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 238,580 1.227585 292,877 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 4,374,310 1.204372 5,268,296 2%
Templeton Foreign Fund - Class I ............... 4,910,891 1.289960 6,334,853 6%
========== ========= --------------
Sub-Total Tier V (December 31, 1996) ......... 271,061,474
==============
Total Contract Owners' Equity .................. $1,970,794,247
==============
</TABLE>
<PAGE> 64
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
respectively. The contract is immaterial to the Company's results of
operations. The ceding of risk does not discharge the original insurer
from its primary obligation to the policyholder. Under the terms of the
contract, Franklin has established a trust as collateral for the
recoveries. The trust assets are invested in investment grade
securities, the market value of which must at all times be greater than
or equal to 102% of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
CREDIT RISK: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 65
Part C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(a) Financial Statements:
(1) Financial statements included in Prospectus (Part A):
Condensed Financial Information 15
(2) Financial statements included in Part B:
Those financial statements required by Item 23 to be included
in Part B have been incorporated therein by reference to the
Prospectus (Part A).
NACo Variable Account:
Independent Auditors' Report. 43
Statement of Assets, Liabilities and Contract Owners' Equity
as of December 31, 1997. 44
Statement of Operations and Changes in Contract Owners'
Equity for the years ended December 31, 1997 and 1996. 46
Notes to Financial Statements. 54
Nationwide Life Insurance Company:
Independent Auditors' Report. 66
Consolidated Balance Sheets as of December 31, 1997 and 1996. 67
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995. 68
Consolidated Statements of Shareholder's Equity for the years
ended December 31, 1997, 1996 and 1995. 69
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. 70
Notes to Consolidated Financial Statements. 71
Schedule I - Consolidated Summary of Investments Other Than
Investments in Related Parties. 109
Schedule III - Supplementary Insurance Information. 110
Schedule IV - Reinsurance. 111
Schedule V - Valuation and Qualifying Accounts. 112
</TABLE>
<PAGE> 66
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors authorizing the
establishment of the Registrant, adopted September 7, 1988-Filed
previously with pre-effective Amendment No. 1 to the registration
statement (File No. 33-33425), and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contract between the Registrant and
Principal Underwriter- Filed previously with pre-effective Amendment
No. 1 to the registration statement (File No. 33-33425), and hereby
incorporated by reference.
(4) The form of the variable annuity contract- Filed previously with
pre-effective Amendment No. 1 to the registration statement (file No.
33-33425), and hereby incorporated by reference.
(5) Variable Annuity Application-Filed previously with pre-effective
Amendment No. 1 to the registration statement (file No. 33-33425), and
hereby incorporated by reference.
(6) Articles of Incorporation of Depositor. --Filed previously with
pre-effective Amendment No. 1 to the registration statement (File No.
33-33425), and hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel-Filed previously with pre-effective Amendment No. 1
to the registration statement (File No. 33-33425), and hereby
incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule-Filed previously with
pre-effective Amendment No. 1 to the registration statement (File No.
33-33425), and hereby incorporated by reference.
<PAGE> 67
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 70
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Inc. Texas Group and Variable Contract Agent
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare
Supplement Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts of
other persons, associations,
corporations, domestic or
foreign and to form
or acquire the control of
other corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts
of other persons, associations,
corporations, domestic or
foreign and to form or acquire
the control of other corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Inc. Ohio Membership Non-Profit Corporation
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
<S> <C> <C> <C>
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 83
Item 27. Number of Contract Owners
The number of Owners of Contracts as of January 31, 1998 was 3,071.
Item 28. Indemnification
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by the Company of any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that such person
is or was a director, officer or employee of the Company, against
expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law of the
State of Ohio.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
Item 29. Principal Underwriter
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the NACo Variable
Account, Nationwide Multi-Flex Variable Account, Nationwide
DC Variable Account, Nationwide DCVA-II, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide Variable Account-9, Nationwide VA Separate
Account-A, Nationwide VA Separate Account-B, Nationwide VA
Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VLI Separate Account-2, Nationwide VLI
Separate Account-3, Nationwide VLI Separate Account-4 and
Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
</TABLE>
<PAGE> 84
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
<S> <C>
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c)NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
<PAGE> 85
Item 30. Location of Accounts and Records
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
(d) Represent that any contract offered by the prospectus and
which is issued pursuant to Section 403(b) of the Code, is
issued by the Registrant in reliance upon, and in compliance
with, the Securities and Exchange Commission's no-action
letter to the American Council of Life Insurance (publicly
available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC
Section 403(b)(11).
The Depositor hereby represents:
(a) That the fees and charges deducted under the Contract in the
aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by
the Company.
<PAGE> 86
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
NACo National Association of Counties
Counties Care for America
Group
Flexible Fund
Retirement
Contracts
offered by
NATIONWIDE
Life Insurance
Company
through its NACo Variable Account
- --------------------------------------------------------------------------------
MAY 1, 1998
- --------------------------------------------------------------------------------
<PAGE> 87
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of NACo Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 30, 1998, included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1998
<PAGE> 88
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in millions of dollars)
As of December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Column A Column B Column C Column D
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Amount at
which shown
in the
Market consolidated
Type of Investment Cost value balance sheet
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Fixed maturity securities available-for-sale:
Bonds:
<S> <C> <C> <C>
U.S. Government and government agencies and authorities $ 3,859.7 $ 3,981.7 $ 3,981.7
States, municipalities and political subdivisions 1.6 1.6 1.6
Foreign governments 93.3 95.8 95.8
Public utilities 1,555.3 1,609.8 1,609.8
All other corporate 7,223.0 7,515.2 7,515.2
---------- ---------- ----------
Total fixed maturity securities available-for-sale 12,732.9 13,204.1 13,204.1
---------- ---------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 67.8 78.0 78.0
Non-redeemable preferred stock - 2.4 2.4
---------- ---------- ----------
Total equity securities available-for-sale 67.8 80.4 80.4
---------- ---------- ----------
Mortgage loans on real estate, net 5,228.1 5,181.6 (1)
Real estate, net:
Investment properties 254.9 235.7 (1)
Acquired in satisfaction of debt 82.6 75.7 (1)
Policy loans 415.3 415.3
Other long-term investments 27.9 25.2 (2)
Short-term investments 358.4 358.4
---------- ----------
Total investments $19,167.9 $19,576.4
========== ==========
</TABLE>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains (losses) of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ------------------------------- ------------------ -------------------- ------------------- ------------------ ---------------
1997: Variable Annuities $1,018.4 $ - $ -
Fixed Annuities 277.9 14,103.1 27.3
Life Insurance 472.9 2,683.4 178.1
Corporate and Other (103.8) 1,916.3 -
-------- ------------- ---------
Total $1,665.4 $18,702.8 $ 205.4
======== ============= =========
1996: Variable Annuities $ 792.1 $ - $ -
Fixed Annuities 242.0 13,388.9 24.0
Life Insurance 414.4 2,391.5 174.6
Corporate and Other (82.0) 1,820.2 -
-------- ------------- ---------
Total $1,366.5 $17,600.6 $ 198.6
======== ============= =========
1995: Variable Annuities $ 569.8 $ - $ -
Fixed Annuities 220.7 12,759.3 32.8
Life Insurance 366.9 2,282.6 166.3
Corporate and Other (136.9) 1,730.0 -
-------- ------------- ---------
Total $1,020.5 $ 16,771.9 $ 199.1
======== ============= =========
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ---------------------------------------------------- -------------------- ------------------- ------------------ ----------------
Net investment Benefits, claims, Amortization Other
income losses and of deferred policy operating Premiums
Segment (2) settlement expenses acquisition costs expenses written
(2)
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C> <C>
1997: Variable Annuities $ (26.8) $ 5.9 $ 87.8 $ 159.4
Fixed Annuities 1,098.2 846.7 39.8 85.4
Life Insurance 189.1 227.5 39.6 94.5
Corporate and Other 148.7 114.7 - 45.6
-------- ---------- ------- -------
Total $1,409.2 $ 1,194.8 $ 167.2 $ 384.9
======== ========== ======= =======
1996: Variable Annuities $ (21.4) $ 4.6 $ 57.4 $ 132.3
Fixed Annuities 1,050.6 838.5 38.6 79.7
Life Insurance 174.0 211.4 37.4 79.0
Corporate and Other 154.6 106.1 - 51.4
-------- ---------- ------- -------
Total $1,357.8 $ 1,160.6 $ 133.4 $ 342.4
======== ========== ======= =======
1995: Variable Annuities $ (17.6) $ 2.9 $ 26.3 $ 109.1
Fixed Annuities 1,002.7 805.0 29.5 80.3
Life Insurance 171.2 202.0 31.0 68.8
Corporate and Other 137.7 105.6 (4.1) 14.8
-------- ---------- ------- -------
Total $1,294.0 $ 1,115.5 $ 82.7 $ 273.0
======== ========== ======= =======
</TABLE>
- ----------
(1) Unearned premiums and other policy claims and benefits payable are included
in Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditors' report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
REINSURANCE
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
--------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997:
Life insurance in force $ 52,648.4 $13,678.7 $ 289.7 $ 39,259.4 0.7%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 235.9 $ 32.7 $ 2.2 $ 205.4 1.1%
Accident and health insurance 261.2 272.6 11.4 - N/A
----------- ---------- --------- ----------- -------
Total $ 497.1 $ 305.3 $ 13.6 $ 205.4 6.6%
=========== ========= ========= =========== =======
1996:
Life insurance in force $47,150.6 $11,164.6 $ 288.6 $ 36,274.6 0.8%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 225.6 $ 29.3 $ 2.3 $ 198.6 1.2%
Accident and health insurance 291.9 305.8 13.9 - N/A
----------- --------- -------- ----------- -------
Total $ 517.5 $ 335.1 $ 16.2 $ 198.6 8.2%
=========== ========= ======== =========== =======
1995:
Life Insurance in force $41,087.9 $ 8,935.7 $ 391.2 $ 32,543.4 1.2%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 221.3 $ 24.4 $ 2.2 $ 199.1 1.1%
Accident and health insurance 298.0 313.0 15.0 - N/A
----------- --------- -------- ----------- -------
Total $ 519.3 $ 337.4 $ 17.2 $ 199.1 8.6%
=========== ========= ======== =========== =======
</TABLE>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on investment products and universal life insurance
products.
See accompanying independent auditors' report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions of dollars)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- --------------------------------------------------- ----------------------------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- --------------------------------------------------- -------------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ - $ 16.2 $ - $ 16.2 $ -
Valuation allowances - mortgage loans on real estate 51.0 (1.2) - 7.3 42.5
Valuation allowances - real estate 15.2 (4.1) - - 11.1
-------- ------ ------- ------- -------
Total $ 66.2 $ 10.9 $ - $ 23.5 $ 53.6
======== ====== ======= ======= =======
1996:
Valuation allowances - mortgage loans on real estate $ 49.1 $ 4.5 $ - $ 2.6 $ 51.0
Valuation allowances - real estate 25.8 (10.6) - - 15.2
-------- ------ ------- ------- -------
Total $ 74.9 $ (6.1) $ - $ 2.6 $ 66.2
======== ====== ======= ======= =======
1995:
Valuation allowances - fixed maturity securities $ - $ 8.9 $ - $ 8.9 $ -
Valuation allowances - mortgage loans on real estate 46.4 7.4 - 4.7 49.1
Valuation allowances - real estate 27.3 (1.5) - - 25.8
-------- ------ ------- ------- -------
Total $ 73.7 $ 14.8 $ - $ 13.6 $ 74.9
======== ====== ======= ======= =======
</TABLE>
- ----------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditors' report.
<PAGE> 89
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, NACo VARIABLE ACCOUNT certifies that it meets the
requirements of Securities Act Rule 485 for effectiveness of the Post-Effective
Amendment and has caused this Post-Effective Amendment to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 30th day of June,
1998.
NACo VARIABLE ACCOUNT
------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
------------------------------------
(Depositor)
By /s/JOSEPH P. RATH
------------------------------------
Joseph P. Rath
Vice President-Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 30th day
of June, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------
Lewis J. Alphin
A. I. BELL Director
- ---------------------------
A. I. Bell
KEITH W. ECKEL Director
- ---------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ---------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ---------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- ---------------------------
Dimon R. McFerson Nationwide Insurance Enterprise and Director
DAVID O. MILLER Chairman of the Board and Director
- ---------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- ---------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- ---------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By /s/JOSEPH P. RATH
- --------------------------- ---------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- ---------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ---------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ---------------------------
Harold W. Weihl
</TABLE>
