<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. 13 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 [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
_________ on (date), pursuant to paragraph (b) of Rule 485
____X____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_________ on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
===============================================================================
1 of 133
<PAGE> 2
NACo VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
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............................................... 19
Item 6. Deductions and Expenses............................................... 20
Item 7. General Description of the Variable Annuity Contract.................. 22
Item 8. Annuity Period........................................................ 26
Item 9. Death Benefit......................................................... 26
Item 10. Purchases and Contract Value.......................................... 24
Item 11. Redemptions........................................................... 25
Item 12. Taxes................................................................. 31
Item 13. Legal Proceedings..................................................... 32
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..................................... 110
Item 25. Directors and Officers of the Depositor............................... 113
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant...................................... 115
Item 27. Number of Contract Owners............................................. 124
Item 28. Indemnification....................................................... 124
Item 29. Principal Underwriters................................................ 124
Item 30. Location of Accounts and Records...................................... 125
Item 31. Management Services................................................... 125
Item 32. Undertakings.......................................................... 126
</TABLE>
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<PAGE> 3
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>
- -------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra Nationwide Asset Allocation Trust (collectively
"Nationwide Professionally Managed Portfolios" or
"NPMP")
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
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
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund - NPMP - The Moderate Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund - NPMP - The Moderately Aggressive Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund - NPMP - The Moderately Conservative Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio Neuberger & Berman Guardian Fund, Inc.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund Putnam Investors Fund - Class A
- -------------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio Putnam Voyager Fund - Class A
- -------------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A SEI Index Funds - S&P 500 Index Portfolio
- -------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund Seligman Growth Fund, Inc. - Class A
- -------------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
- -------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R)
- -------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
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<PAGE> 4
<TABLE>
<CAPTION>
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER MAY 1, 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 Nationwide(R) Growth Fund
"Evergreen Total Return Fund")
- -------------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A (formerly
"MFS (R) Capital Development Fund")
- -------------------------------------------------------------------------------------------------------------------------
NOT AVAILABLE FOR OWNERS WHOSE PREDECESSOR NATIONWIDE 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.
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 27 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
2
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<PAGE> 5
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- An account comprised of all of the assets of the Company other
than those in any segregated asset account.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INITIAL TRANSFER - The initial amount transferred by the Owner from any
investment product not offered by 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.
3
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<PAGE> 6
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- The registered 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
Net Asset Value of its Accumulation Units 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
account value.
4
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<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..............................................................................14
THE VARIABLE ACCOUNT...........................................................................................14
Voting Rights.........................................................................................14
PERIODIC REPORTS...............................................................................................14
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS..................................................................15
Contingent Deferred Sales Charge......................................................................15
Participant Account Maintenance Charge................................................................16
Variable Account Annual Expense Fee...................................................................16
Premium Taxes and Other Expenses......................................................................17
Experience Credits....................................................................................17
DESCRIPTION OF THE CONTRACTS...................................................................................17
Purpose of the Contracts..............................................................................17
Modification of the Contract..........................................................................17
Contract Rights and Privileges and Assignments........................................................18
Exchange Privilege....................................................................................18
Suspension and Termination............................................................................18
Application of Purchase Payments......................................................................19
Additional Purchase Payment Prior to Commencement of Annuity Payments.................................19
Crediting Accumulation Units..........................................................................19
Variable Account Accumulation Unit Value..............................................................19
Allocation of Purchase Payments.......................................................................20
Valuation of an Account...............................................................................20
Redemption of Participant Accounts....................................................................20
DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD).......................................................21
Retirement Income Payments............................................................................21
Election of Income Form and Date......................................................................21
Allocation of Retirement Income.......................................................................21
Fixed Dollar Annuity..................................................................................21
Minimum Payment.......................................................................................21
Death Benefit Before Retirement.......................................................................21
Optional Retirement Income Forms......................................................................21
Death of Retired Participant..........................................................................22
Withdrawal............................................................................................22
Frequency of Payment..................................................................................22
Determination of Payments Under Options A1 and A2.....................................................22
Determination of Payments Under Options B1 and B2.....................................................23
Determination of Amount of Variable Monthly Payments for the First Year...............................23
Determination of Amount of Variable Monthly Payments for the Second
and Subsequent Years................................................................................23
Alternate Assumed Investment Rate.....................................................................23
GENERAL INFORMATION............................................................................................24
Substitution of Securities............................................................................24
Performance Advertising...............................................................................24
Contract Owner Inquiries..............................................................................25
Net Investment Factor.................................................................................25
Valuation of Assets...................................................................................26
Federal Tax Status....................................................................................26
Contracts Issued Under the New York Model Plan........................................................26
LEGAL PROCEEDINGS..............................................................................................27
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................................27
APPENDIX.......................................................................................................28
</TABLE>
5
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<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1).................................... 4%
(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 account value)
</TABLE>
1 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 levied 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).
6
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<PAGE> 9
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. 0.35% 0.11% 0.25% 0.71%
- ------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 0.75% 0.36% 0.00% 1.11%
- ------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 0.98% 0.21% 0.00% 1.19%
- ------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities: 0.40% 0.14% 0.00% 0.54%
2-5 Years - Institutional Shares
- ------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 0.62% 0.27% 0.00% 0.89%
- ------------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.63% 0.16% 0.00% 0.79%
- ------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.45% 0.23% 0.00% 0.68%
- ------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 0.47% 0.21% 0.00% 0.68%
- ------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 0.53% 0.30% 0.00% 0.83%
- ------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.46% 0.28% 0.00% 0.74%
- ------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 0.26% 0.12% 0.21% 0.59%
- ------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 0.38% 0.11% 0.00% 0.49%
- ------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock 0.31% 0.23% 0.19% 0.73%
Fund - Class A
- ------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund -
Class A 0.90% 0.36% 0.25% 1.51%
- ------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A 0.45% 0.34% 0.26% 1.05%
- ------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 0.50% 0.11% 0.00% 0.61%
- ------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 0.50% 0.14% 0.00% 0.64%
- ------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 0.45% 0.15% 0.00% 0.60%
- ------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - 1.00% 0.10% 0.00% 1.10%
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, Inc. 0.70% 0.12% 0.00% 0.82%
- -----------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 0.59% 0.19% 0.25% 1.03%
- ------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 0.51% 0.27% 0.25% 1.03%
- ------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index 0.19% 0.06% 0.00% 0.25%
Portfolio
- ------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A(2) 0.70% 0.27% 0.23% 1.20%
- ------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury
Portfolio - Institutional Class 0.06% 0.03% 0.00% 0.09%
- ------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 0.68% 0.20% 0.00% 0.88%
- ------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 0.61% 0.26% 0.25% 1.12%
- ------------------------------------------------------------------------------------------------------
</TABLE>
1 The 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. The following funds are subject to fee waivers or expense reimbursement
arrangements:
7
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<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Federated U.S. Government Securities Fund: 2-5 The total operating expenses would have been 0.79%
Years - Institutional Shares absent the voluntary waiver of a portion of the
shareholder service fee.
- ------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.68%.
- ------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.95%.
- ------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.83%.
- ------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.69%.
-----------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund The Fund will waive 0.05% of the total 0.50%
management fee until further notice.
- ------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio The Fund's Manager has waived, on a voluntary
basis, a portion of its fee, and the
said management/advisory fees shown above reflect
waiver. Absent such waiver, the
management/advisory fees would be .25%. The
Distributor has waived, on a voluntary basis, all
or a portion of its shareholder servicing fee.
Absent such waiver, the shareholder servicing fee
would be .25%. Absent these fee waivers, total
operating expenses would be .56%.
- ------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - The Fund's Adviser has currently agreed to
Institutional Class voluntarily waive a portion of its Advisory fee and/or
assume certain expenses of the Portfolio. Absent such
waiver, total operating fees would have been 0.14%.
- ------------------------------------------------------------------------------------------------------------
</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.
8
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<PAGE> 11
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a total 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 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 60 103 149 274
- ---------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc. 57 94 133 242
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc 62 107 154 286
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 62 109 159 295
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 56 89 124 223
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 59 100 143 262
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 58 97 137 251
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund 57 93 131 239
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 57 93 131 239
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 59 98 139 256
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 58 95 135 246
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 56 90 127 229
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 55 87 121 217
- ---------------------------------------------------------------------------------------------------------------------
MFS Growth Opportunities Fund 66 119 176 328
- ---------------------------------------------------------------------------------------------------------------------
MFS High Income Fund 61 105 151 280
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 58 95 134 244
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 56 91 128 231
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 57 92 129 234
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 56 90 127 230
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small 62 106 154 285
Company Fund
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 55 87 122 218
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 55 87 122 218
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 55 87 122 218
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 55 87 122 218
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 55 87 122 218
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 59 98 139 254
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 61 104 150 277
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 61 104 150 277
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 53 79 108 189
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 63 110 159 296
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 51 74 99 171
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 59 99 142 261
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 62 107 155 287
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
9
11 of 133
<PAGE> 12
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a total 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 54 93 202
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 22 67 114 246
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 22 69 119 255
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 60 103 222
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 18 57 97 211
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 58 99 216
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 18 55 95 206
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 50 87 189
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ---------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A 26 79 136 288
- ---------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A 21 65 111 240
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 55 94 204
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 16 51 88 191
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 17 52 89 194
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small 22 66 114 245
Company 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. 19 58 99 214
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 23 70 119 256
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 59 131
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 59 102 221
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 67 115 247
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
10
12 of 133
<PAGE> 13
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a total 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>
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 54 93 202
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 22 67 114 246
- ---------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 22 69 119 255
- ---------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 years - 16 49 84 183
Institutional Shares
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 60 103 222
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 18 57 97 211
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 17 53 91 199
- ---------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 58 99 216
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 18 55 95 206
- ---------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R) 16 50 87 189
- ---------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ---------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A 26 79 136 288
- ---------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A 21 65 111 240
- ---------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 55 94 204
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 16 51 88 191
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 17 52 89 194
- ---------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small 22 66 114 245
Company Fund
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 15 47 82 178
- ---------------------------------------------------------------------------------------------------------------------
NPMP - The Conservative 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. 19 58 99 214
- ---------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio 13 39 68 149
- ---------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 23 70 119 256
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 59 131
Institutional Class
- ---------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 59 102 221
- ---------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 67 115 247
- ---------------------------------------------------------------------------------------------------------------------
</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."
11
13 of 133
<PAGE> 14
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 4% 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"). 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").
A Variable Account Annual Expense Fee is assessed in connection with the
Company's contractual promise to accept various risks and administrative
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 account value (see "Variable
Account Annual Expense"). 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").
12
14 of 133
<PAGE> 15
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
<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
Century Growth 4.562802 5.842996 17,611,062 1997
-------------------- -------------------- --------------------- --------
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
Century Ultra 1.424846 1.737832 125,555,220 1997
-------------------- -------------------- --------------------- --------
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
America(SM), Inc. 2.155739 2.332586 6,366,974 1997
-------------------- -------------------- --------------------- --------
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
Century Fund, Inc. 2.756438 3.532277 14,863,803 1997
-------------------- -------------------- --------------------- --------
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 Income and Growth
Fund (formerly Evergreen
Total Return Fund) 1.947502 2.422616 1,666,312 1997
-------------------- -------------------- --------------------- --------
1.741651 1.947502 1,070,229 1996
-------------------- -------------------- --------------------- --------
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*
- ----------------------------- -------------------- -------------------- --------------------- --------
Federated U.S. Government
Securities Fund: 2-5 years -
Institutional Shares 1.226751 1.301886 3,296,152 1997
-------------------- -------------------- --------------------- --------
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 &
Income Fund 4.096488 4.654233 570,207 1997
-------------------- -------------------- --------------------- --------
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 1.935930 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
- ----------------------------- -------------------- -------------------- --------------------- --------
</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).
(Continued on next page)
13
15 of 133
<PAGE> 16
CONDENSED FINANCIAL INFORMATION (CONTINUED)
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
<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>
Fidelity Equity - Income Fund 5.359692 6.900915 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 1.804997 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 1.596538 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 Company
of America(R) 1.771097 2.277283 31,651,569 1997
-------------------- ------------------- ------------------- -----------
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
Portfolio 1.229760 1.335173 2,016,658 1997
-------------------- ------------------- ------------------- -----------
1.156444 1.229760 554,865 1996
-------------------- ------------------- ------------------- -----------
0.980782 1.156444 461,663 1995
-------------------- ------------------- ------------------- -----------
1.000000 0.980782 16,059 1994
- ----------------------------- -------------------- ------------------- ------------------- -----------
MFS(R) Growth Opportunities
Fund - Class A 7.380232 9.012669 1,768,566 1997
-------------------- ------------------- ------------------- -----------
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*
- ----------------------------- -------------------- ------------------- ------------------- -----------
MFS(R) High Income Fund -
Class A 5.518160 6.168371 2,328,945 1997
-------------------- ------------------- ------------------- -----------
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
Growth Stock Fund - Class A 10.880822 15.968068 801,488 1997
-------------------- ------------------- ------------------- -----------
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
- ----------------------------- -------------------- ------------------- ------------------- -----------
</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).
(Continued on next page)
11
16 of 133
<PAGE> 17
CONDENSED FINANCIAL INFORMATION (CONTINUED)
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
<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>
Nationwide(R) Fund 14.964379 20.697282 4,299,707 1997
------------------- -------------------- ------------------- -----------
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) Growth Fund 3.083008 3.854876 1,987,181 1997
------------------- -------------------- ------------------- -----------
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
Market Fund** 2.884848 3.003821 14,828,575 1997
------------------- -------------------- ------------------- -----------
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 Guardian
Fund, Inc. 1.460410 1.706116 23,446,031 1997
------------------- -------------------- ------------------- -----------
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 Fund -
Class A 13.594501 18.110411 3,305,277 1997
------------------- -------------------- ------------------- -----------
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 Fund -
Class A 3.074879 3.837108 52,162,678 1997
------------------- -------------------- ------------------- -----------
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
Index Portfolio 1.139331 1.501833 38,540,683 1997
------------------- -------------------- ------------------- -----------
1.000000 1.139331 4,129,102 1996
- ----------------------------- ------------------- -------------------- ------------------- -----------
Seligman Growth Fund, Inc.-
Class A 10.720312 12.541848 772,926 1997
------------------- -------------------- ------------------- -----------
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*
- ----------------------------- ------------------- -------------------- ------------------- -----------
</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,
1996 was 3.89%.
(Continued on next page)
12
17 of 133
<PAGE> 18
CONDENSED FINANCIAL INFORMATION (CONTINUED)
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
<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>
Short-Term Investments - 1.168909 1.222017 3,399,331 1997
------------------- -------------------- ------------------- -----------
Trust- Treasury 1.119630 1.168909 1,151,812 1996
------------------- -------------------- ------------------- -----------
Portfolio - Institutional
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
Stock Fund(R) 1.178559 1.198953 23,881,713 1997
------------------- -------------------- ------------------- -----------
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 -
Class I 1.215580 1.284157 37,738,973 1997
------------------- -------------------- ------------------- -----------
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>
* The 7-day yield on the Short-Term Investments Trust - Treasury Portfolio -
Institutional Class as of December 31, 1996 was 4.52%.
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.
13
18 of 133
<PAGE> 19
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.
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.
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.
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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
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.
For withdrawals made after December 31, 1997, the CDSC will be the lesser of (i)
and (ii) below, where:
(i) is the lesser of 2% of the Purchase Payments made on behalf of a
Participant prior to the date of the withdrawal, or 2% of the amount
withdrawn; and
(ii) is the lesser of the applicable percentage set forth in the table
below multiplied by the Purchase Payments made on behalf of a
Participant prior to the date of withdrawal, or the applicable
percentage set forth below multiplied by the amount withdrawn.
<TABLE>
<CAPTION>
Number of Completed Years of
Participation
CDSC Percentage (Beginning July 1, 1985)
<S> <C>
4% 1 through 12
3% 13
2% 14
1% 15
0% 16 and after
</TABLE>
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 Contracts.
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:
* any life income payment option;
* 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
* 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 5%
of the lesser of: (1) 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) 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.
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When a CDSC of less than 5% is negotiated and assessed, the reduced charge will
reflect actual variations in expenses, usually resulting from reduced agent's
commissions.
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.
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 deducted on each Valuation Date from amounts held in
the Variable Account. On an annual basis, the maximum Variable Account Fee
is equivalent to 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 Funds; (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.
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The Variable Account's total expenses for the fiscal year ended December 31,
1996, were 0.88% of the average net assets. Deductions from and expenses paid
out of the assets of the Underlying Mutual Funds are described in the prospectus
for each Underlying Mutual Fund.
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.
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 Owner, covering all present and future participating employees.
The Company will issue a certificate to the 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 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 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 Owner not less than 90
days before the effective date of the change.
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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 utilize the telephone exchange
privilege for exchanging amounts among Sub-Accounts, if forms are executed by
the Contract Owner and Participant agreeing with certain restrictions applicable
to such privilege. Telephone 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. A telephone exchange request may not be revoked once
instructions have been recorded and accepted. If the Participant is unable to
execute an exchange request by telephone (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 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 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 in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers. However, any
losses incurred pursuant to actions taken by the Company in reliance on
telephone instructions reasonably believed to be genuine shall be borne by the
Participant. The Company may withdraw the telephone 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 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 Owner if: (a) the 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 Owner, which in the
Company's opinion would adversely affect its financial experience with respect
to the Contract. The 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 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 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
benefits under retirement Options B1 and B2 (see "Optional Retirement Income
Forms"). Payment of redemption values may be suspended
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<PAGE> 24
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 Owner, payment
of Contract Values will be subject to any applicable CDSC.
APPLICATION OF PURCHASE PAYMENTS
The Company will receive Purchase Payments from the 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 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 Owner will be informed of the reasons
for the delay and the Purchase Payment will be returned immediately unless the
Owner 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.
ADDITIONAL PURCHASE PAYMENT PRIOR TO COMMENCEMENT OF ANNUITY PAYMENTS
The 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
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 formerly held 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
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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 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 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 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 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 Owner in
accordance with the terms of the Plan.
The Participant and 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
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"), One Nationwide Plaza, Columbus, Ohio, 43215.
REDEMPTION OF PARTICIPANT ACCOUNTS
The 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
Owner. It is the Owner's obligation to distribute such payments to a
Participant. The Company may undertake the obligation on behalf of the Owner to
distribute such payments directly to a Participant by agreement with the 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 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 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 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 Owners or Participants. Instead of a lump
sum Distribution of a full or partial redemption, the 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.
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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 Owner. It is the Owner's obligation to pay such amounts to
a Participant. The Company may undertake the obligation on behalf of the Owner
to pay such amounts directly to a Participant by agreement with the 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.
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 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 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
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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.
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 Options 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 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.
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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).
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, an 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.
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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 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.
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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 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
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 dividend or capital gain 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.
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For Underlying Mutual Funds that credit dividends on a daily basis and pay such
dividends once each month or quarter (such as money market funds and certain
bond funds), the net investment factor allows for the monthly or quarterly
reinvestment of these daily dividends.
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.
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 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
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 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.
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LEGAL PROCEEDINGS
From time to time 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.
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 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
Mutual Insurance Company, Nationwide Mutual Insurance Co. and Nationwide Life
Insurance Co.). The plaintiff in such lawsuit seeks to represent a national
class of Nationwide Life policyholders and claims unspecified compensatory and
punitive damages. This lawsuit is in an early stage and has not been certified
as a class action. Nationwide Life intends to defend this case vigorously. There
can be no assurance that any future litigation relating to pricing and sales
practices will not 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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
<S> <C>
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
</TABLE>
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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 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.
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 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.
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.
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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.
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 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.
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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.
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, Nueberger & 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.
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<PAGE> 36
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.
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 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.
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.
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<PAGE> 37
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 Owner or Participant
directs the Company to invest in the Fidelity 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.
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<PAGE> 38
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>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
General Information and History................................................1
Services.......................................................................1
Purchase of Securities Being Offered ..........................................2
Underwriters ..................................................................2
Calculation of Performance ....................................................2
Annuity Payments...............................................................4
Financial Statements...........................................................5
</TABLE>
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 Owner and the
number and type of Contracts issued to each such 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 and schedules 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.
1
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<PAGE> 39
For those Plans which provide this Contract and the Company's Group Fixed Fund
Retirement Contracts, the 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. As of December 31, 1996, the
Nationwide Money Market Fund and the Short-Term Investments Trust Treasury
Portfolio Sub-Accounts seven-day current yield were 3.89% and 4.52%
respectively. The Nationwide Money Market Fund and the Short-Term Investments
Trust Treasury Portfolio Sub-Accounts' 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 for the period ending December 31,
1996 were 3.96% and 4.63%, 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
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<PAGE> 40
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 5.06% 5.18%
- ------------------------------------------------------------------------------------------ -----------------------------
Short-Term Investments Trust-Treasury Portfolio - 5.66% 5.82%
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>
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<PAGE> 41
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.
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<PAGE> 42
<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, 1996, and
the related statements of operations and changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended. These financial statements and schedules of changes in unit
value are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules of changes in
unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of NACo Variable Account as of December 31, 1996, and the results of
its operations and its changes in contract owners' equity and the schedules of
changes in unit value for each of the years in the three year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<S> <C>
Assets:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
6,884,285 shares (cost $149,244,925) $ 150,628,164
American Century: Twentieth Century Ultra Fund (ACTCUltra)
5,327,372 shares (cost $130,695,514) 149,645,871
The Bond Fund of America(SM), Inc. (BdFdAm)
1,016,897 shares (cost $13,653,782) 13,982,334
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
3,432,673 shares (cost $28,247,122) 30,276,176
The Evergreen Total Return Fund - Class Y (EvTotRet)
207,231 shares (cost $4,106,475) 4,420,233
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
332,140 shares (cost $3,485,635) 3,484,151
Fidelity Capital & Income Fund (FidCapInc)
318,077 shares (cost $2,547,163) 2,977,198
Fidelity Contrafund (FidContr)
4,600,210 shares (cost $162,640,226) 193,898,837
Fidelity Equity-Income Fund (FidEqInc)
5,905,088 shares (cost $186,061,700) 252,914,905
Fidelity Magellan(R) Fund (FidMgln)
1,190,655 shares (cost $90,914,716) 96,026,302
Fidelity OTC Portfolio (FidOTC)
431,672 shares (cost $14,049,990) 14,120,007
Fidelity Puritan Fund(R) (FidPurtn)
1,252,442 shares (cost $20,462,880) 21,592,100
The Investment Company of America(R) (InvCoAm)
1,969,367 shares (cost $39,841,359) 47,717,762
MAS Funds - Fixed Income Portfolio (MASFIP)
132,728 shares (cost $1,559,552) 1,559,558
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,055,763 shares (cost $11,743,867) 13,693,244
MFS(R) High Income Fund - Class A (MFSHiInc)
2,069,385 shares (cost $10,676,281) 11,050,514
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,125,406 shares (cost $12,499,820) 11,231,548
Nationwide(R) Fund (NWFund)
2,200,968 shares (cost $36,736,098) 44,459,563
Nationwide(R) Growth Fund (NWGroFd)
541,095 shares (cost $6,019,590) 7,196,565
Nationwide(R) Money Market Fund (NWMyMkt)
50,966,370 shares (cost $50,966,370) 50,966,370
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Neuberger & Berman Guardian Fund (NBGuard)
854,897 shares (cost $20,470,193) 21,911,015
Putnam Investors Fund - Class A (PutInvFd)
3,887,509 shares (cost $33,442,764) 35,803,961
Putnam Voyager Fund - Class A (PutVoyFd)
8,507,880 shares (cost $119,387,857) 137,147,025
SEI Index Funds -- S&P 500 Index Portfolio (SEI500lx)
448,612 shares (cost $10,117,146) 10,582,747
Seligman Growth Fund, Inc. -- Class A (SelGroFd)
1,441,764 shares (cost $7,877,364) 8,434,321
Short-Term Investments Trust -- Treasury Portfolio - Institutional Class (AIMTreas) 2,686,768 shares
(cost $2,686,768) 2,686,768
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk) 1,842,391 shares
(cost $23,980,568) 25,424,994
Templeton Foreign Fund - Class I (TemForFd)
3,185,558 shares (cost $30,332,897) 33,002,383
---------------
Total investments 1,396,834,616
Accounts receivable 9,992,675
---------------
Total assets 1,406,827,291
Accounts payable 293,646
---------------
Contract owners' equity $ 1,406,533,645
===============
</TABLE>
<PAGE> 4
Contract owners' equity represented by:
<TABLE>
<CAPTION>
TIER I UNITS UNIT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 15,929,074 $ 4.562802 $ 72,681,211
American Century: Twentieth Century Ultra Fund 51,280,940 1.424846 73,067,442
The Bond Fund of America(SM), Inc. 3,393,296 2.155739 7,315,061
The Dreyfus Third Century Fund, Inc. 5,449,596 2.756438 15,021,473
The Evergreen Total Return Fund - Class Y 1,070,229 1.947502 2,084,273
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 1,296,431 1.226751 1,590,398
Fidelity Capital & Income Fund 294,263 4.096488 1,205,445
Fidelity Contrafund 63,488,282 1.588961 100,880,404
Fidelity Equity-Income Fund 21,843,280 5.359692 117,073,253
Fidelity Magellan(R) Fund 35,450,214 1.439440 51,028,456
Fidelity OTC Portfolio 4,002,730 1.680710 6,727,428
Fidelity Puritan(R) Fund 8,701,486 1.317344 11,462,850
The Investment Company of America(R) 14,871,400 1.771097 26,338,692
MAS Funds - Fixed Income Portfolio 554,865 1.229760 682,351
MFS(R) Growth Opportunities Fund - Class A 1,022,657 7.380232 7,547,446
MFS(R) High Income Fund - Class A 1,009,326 5.518160 5,569,622
Massachusetts Investors Growth Stock Fund - Class A 491,538 10.880822 5,348,337
Nationwide(R) Fund 1,456,965 14.964379 21,802,576
Nationwide(R) Growth Fund 1,157,824 3.083008 3,569,581
Nationwide(R) Money Market Fund 6,821,937 2.884848 19,680,251
Neuberger & Berman Guardian Fund 6,973,153 1.460410 10,183,662
Putnam Investors Fund - Class A 1,545,059 13.594501 21,004,306
Putnam Voyager Fund - Class A 22,936,312 3.074879 70,526,384
SEI Index Funds - S & P 500 Index Portfolio 4,129,102 1.139331 4,704,414
Seligman Growth Fund, Inc. - Class A. 381,977 10.720312 4,094,913
Short-Term Investments Trust -- Treasury Portfolio --
Institutional Class 1,151,812 1.168909 1,346,363
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 9,304,599 1.178559 10,966,019
Templeton Foreign Fund - Class I 13,461,397 1.215580 16,363,405
========== ========= -------------
Sub-Total Tier I $ 689,866,016
-------------
</TABLE>
<PAGE> 5
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER II UNITS UNIT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 6,416,724 $ 4.564331 $ 29,288,052
American Century: Twentieth Century Ultra Fund 17,364,360 1.425323 24,749,822
The Bond Fund of America(SM), Inc. 1,041,402 2.156482 2,245,765
The Dreyfus Third Century Fund, Inc. 1,806,885 2.757360 4,982,232
The Evergreen Total Return Fund - Class Y 267,437 1.948154 521,008
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 431,282 1.227166 529,255
Fidelity Capital & Income Fund 76,382 4.097872 313,004
Fidelity Contrafund 22,719,185 1.589493 36,111,986
Fidelity Equity-Income Fund 7,437,534 5.361485 39,876,227
Fidelity Magellan(R) Fund 12,036,679 1.439922 17,331,879
Fidelity OTC Portfolio 1,269,335 1.681272 2,134,097
Fidelity Puritan(R) Fund 3,037,801 1.317785 4,003,169
The Investment Company of America(R) 5,329,249 1.771690 9,441,777
MAS Funds - Fixed Income Portfolio 236,446 1.230172 290,869
MFS(R) Growth Opportunities Fund - Class A 323,628 7.382705 2,389,250
MFS(R) High Income Fund - Class A 244,640 5.520025 1,350,419
Massachusetts Investors Growth Stock Fund - Class A 155,643 10.884466 1,694,091
Nationwide(R) Fund 557,908 14.969386 8,351,540
Nationwide(R) Growth Fund 507,782 3.084040 1,566,020
Nationwide(R) Money Market Fund 2,854,818 2.885823 8,238,499
Neuberger & Berman Guardian Fund 2,513,725 1.460899 3,672,298
Putnam Investors Fund - Class A 371,840 13.599051 5,056,671
Putnam Voyager Fund - Class A 7,518,991 3.075909 23,127,732
SEI Index Funds - S & P 500 Index Portfolio 1,547,081 1.139711 1,763,225
Seligman Growth Fund, Inc. - Class A. 90,771 10.723901 973,419
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 201,261 1.169304 235,335
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 3,705,323 1.178953 4,368,402
Templeton Foreign Fund - Class I 5,803,820 1.215987 7,057,370
========== ========= -------------
Sub-Total Tier II $ 241,663,413
-------------
</TABLE>
<PAGE> 6
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER III UNITS UNIT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 3,952,718 $ 4.567388 $ 18,053,597
American Century: Twentieth Century Ultra Fund 11,724,488 1.426278 16,722,379
The Bond Fund of America(SM), Inc. 737,276 2.157968 1,591,018
The Dreyfus Third Century Fund, Inc. 1,075,140 2.759207 2,966,534
The Evergreen Total Return Fund - Class Y 303,775 1.949458 592,197
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 184,497 1.227995 226,561
Fidelity Capital & Income Fund 203,017 4.100640 832,500
Fidelity Contrafund 13,966,075 1.590557 22,213,838
Fidelity Equity-Income Fund 6,668,170 5.365074 35,775,225
Fidelity Magellan(R) Fund 6,812,829 1.440886 9,816,510
Fidelity OTC Portfolio 886,668 1.682398 1,491,728
Fidelity Puritan(R) Fund 1,390,626 1.318667 1,833,773
The Investment Company of America(R) 2,306,070 1.772876 4,088,376
MAS Funds - Fixed Income Portfolio 116,525 1.230995 143,442
MFS(R) Growth Opportunities Fund - Class A 330,931 7.387651 2,444,803
MFS(R) High Income Fund - Class A 252,930 5.523753 1,397,123
Massachusetts Investors Growth Stock Fund - Class A 136,164 10.891758 1,483,065
Nationwide(R) Fund 289,479 14.979404 4,336,223
Nationwide(R) Growth Fund 133,215 3.086105 411,115
Nationwide(R) Money Market Fund 1,754,115 2.887772 5,065,484
Neuberger & Berman Guardian Fund 1,655,042 1.461877 2,419,468
Putnam Investors Fund - Class A 239,486 13.608156 3,258,963
Putnam Voyager Fund - Class A 4,941,310 3.077970 15,209,204
SEI Index Funds - S & P 500 Index Portfolio 1,023,459 1.140471 1,167,225
Seligman Growth Fund, Inc. - Class A. 107,031 10.731082 1,148,558
Short-Term Investments Trust -- Treasury Portfolio -
Institutional Class 394,386 1.170093 461,468
T. Rowe Price International Funds, Inc.--
International Stock Fund(R) 2,213,126 1.179742 2,610,918
Templeton Foreign Fund - Class I 2,314,772 1.216800 2,816,615
========== ========= -------------
Sub-Total Tier III $ 160,577,910
-------------
</TABLE>
<PAGE> 7
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER IV UNITS UNIT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 6,694,438 $ 4.570448 $ 30,596,581
American Century: Twentieth Century Ultra Fund 24,600,287 1.427234 35,110,366
The Bond Fund of America(SM), Inc. 1,310,545 2.159454 2,830,062
The Dreyfus Third Century Fund, Inc. 2,645,579 2.761054 7,304,586
The Evergreen Total Return Fund - Class Y 626,778 1.950763 1,222,695
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares 925,850 1.228823 1,137,706
Fidelity Capital & Income Fund 152,550 4.103407 625,975
Fidelity Contrafund 26,974,645 1.591621 42,933,411
Fidelity Equity-Income Fund 11,209,254 5.368665 60,178,730
Fidelity Magellan(R) Fund 12,376,864 1.441850 17,845,581
Fidelity OTC Portfolio 2,239,000 1.683525 3,769,412
Fidelity Puritan(R) Fund 3,250,797 1.319550 4,289,589
The Investment Company of America(R) 4,423,281 1.774063 7,847,179
MAS Funds - Fixed Income Portfolio 359,528 1.231819 442,873
MFS(R) Growth Opportunities Fund - Class A 399,976 7.392601 2,956,863
MFS(R) High Income Fund - Class A 494,287 5.527479 2,732,161
Massachusetts Investors Growth Stock Fund - Class A 248,216 10.899055 2,705,320
Nationwide(R) Fund 664,951 14.989429 9,967,236
Nationwide(R) Growth Fund 534,141 3.088171 1,649,519
Nationwide(R) Money Market Fund 6,170,419 2.889720 17,830,783
Neuberger & Berman Guardian Fund 3,851,735 1.462856 5,634,534
Putnam Investors Fund - Class A 476,103 13.617267 6,483,222
Putnam Voyager Fund - Class A 9,182,389 3.080033 28,282,061
SEI Index Funds - S & P 500 Index Portfolio 2,582,625 1.141231 2,947,372
Seligman Growth Fund, Inc - Class A. 206,422 10.738267 2,216,615
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 549,456 1.170883 643,349
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 6,337,264 1.180532 7,481,343
Templeton Foreign Fund - Class I 5,552,808 1.217615 6,761,182
========== ========= ---------------
Sub-Total Tier IV $ 314,426,306
---------------
Total Contract Owners' Equity $ 1,406,533,645
===============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 8
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C>
Reinvested capital gains and dividends $ 96,665,994 73,174,649 49,662,440
Mortality and expense charges (note 2) (6,124,188) (4,061,186) (2,923,770)
Administration charge-Tier I (note 2) (2,597,055) (3,655,067) (2,631,393)
Administration charge-Tier II (note 2) (836,073) -- --
Administration charge-Tier III (note 2) (432,408) -- --
Administration charge-Tier IV (note 2) (589,120) -- --
-------------- ----------- ------------
Net investment activity 86,087,150 65,458,396 44,107,277
-------------- ----------- ------------
Proceeds from mutual fund shares sold 129,158,279 94,814,984 109,813,731
Cost of mutual fund shares sold (119,175,064) (90,332,356) (103,752,916)
-------------- ----------- ------------
Realized gain (loss) on investments 9,983,215 4,482,628 6,060,815
Change in unrealized gain (loss) on investments 79,007,949 121,289,385 (63,425,619)
-------------- ----------- ------------
Net gain (loss) on investments 88,991,164 125,772,013 (57,364,804)
-------------- ----------- ------------
Net increase (decrease) in contract owners'
equity resulting from operations 175,078,314 191,230,409 (13,257,527)
-------------- ----------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 318,492,785 211,743,850 172,770,344
Redemptions (71,502,064) (59,225,086) (50,702,236)
Contingent deferred sales charges (note 2) (62) -- --
Adjustments to maintain reserves (127,448) 130,249 (9,107)
-------------- ----------- ------------
Net equity transactions 246,863,211 152,649,013 122,059,001
-------------- ----------- ------------
Net change in contract owners' equity 421,941,525 343,879,422 108,801,474
Contract owners' equity beginning of period 984,592,120 640,712,698 531,911,224
-------------- ----------- ------------
Contract owners' equity end of period $1,406,533,645 984,592,120 640,712,698
============== =========== ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 9
- --------------------------------------------------------------------------------
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the Company) on
September 7, 1988, and has been registered as a unit investment trust under the
Investment Company Act of 1940. The NACoVA was introduced for exclusive use by
Member Counties for deferred compensation Plans adopted under the National
Association of Counties (NACo) Program.
The Company offers group flexible fund retirement contracts through the
NACoVA. The primary distribution for the contracts is through an affiliated
sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts (the Contract) are offered for
purchase in connection with deferred compensation Plans adopted by Member
Counties under the NACo Program. Participants in the contracts may invest in
any of the following fund sub-accounts:
American Century: Twentieth Century Growth Fund (ACTCGro)
(formerly Twentieth Century Investors, Inc. - Growth Investors)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
(formerly Twentieth Century Investors, Inc. - Ultra Investors)
The Bond Fund of America(SM), Inc. (BdFdAm) (only available for
certain contracts issued beginning January 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
The Evergreen Total Return Fund - Class Y (EvTotRet) (not available
for contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares (FedUSGvt) (formerly Federated Intermediate
Government Trust)
Fidelity Capital & Income Fund (FidCapInc) (not available for
contracts issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan(R) Fund (FidPurtn)
The Investment Company of America(R) (InvCoAm) (only available
for certain contracts issued beginning July 1, 1994)
MAS Funds - Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp) (not available
for contracts issued on or after October 1, 1993)
MFS(R) High Income Fund - Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an
affiliated investment advisor) (not available for contracts
issued on or after October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
SEI Index Funds - S & P 500 Index Portfolio (SEI500Ix)
Seligman Growth Fund, Inc. - Class A (SelGroFd)
Short-Term Investments Trust -- Treasury Portfolio --
Institutional Class (AIMTreas)
T. Rowe Price International Funds, Inc. - International Stock
Fund(R) (TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
All of the above funds were being utilized as of December 31, 1996.
<PAGE> 10
The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain expenses (see note 2).
The accompanying financial statements include only contract owners' purchase
payments pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. The cost of investments sold is
determined on the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the NACoVA form a part of, and are taxed with, operations of
the Company, which is taxed as a life insurance company under the Internal
Revenue Code. The assets in this account are held pursuant to contracts with
entities which are exempt from federal income tax. Because of this exemption,
no taxes need be provided for investment income or realized and unrealized
capital gains. Annuity payouts and withdrawal payments are taxable as wages
when received by the participants.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
(2) EXPENSES
No deduction for a sales charge is made from the purchase payments for
these contracts. However, if an owner terminates the contract and directs the
Company to withdraw all or part of the contract value held in the Account for
less than sixteen (16) years, the Company will, with certain exceptions, assess
a contingent deferred sales charge by deducting an amount from each
participants account. This charge will be equal to not more than 4% in the
first year, declining to 1% in the fifteenth year, of the lesser of all
purchase payments made on behalf of a participant prior to the date of
withdrawal, or the amount withdrawn. No sales charges are deducted on
redemptions used to purchase units in the fixed investment options of the
Company. Sales charges may be reduced or eliminated upon negotiated conversion
of the contracts to other investment programs offered by the Company or its
affiliates.
The following charges are deducted by the Company: a mortality risk
charge, an expense risk charge and an administration charge which are assessed
through the daily unit value calculation. The morality risk charge and the
expense risk charge are equal to an annual rate of 0.10% and 0.40%
respectively; and the administration charge prior to May 1, 1996 was 0.45%.
Beginning May 1, 1996, the administration charge is based upon the aggregate
balance of assets held under the Contract by each Member County, as follows:
<TABLE>
<CAPTION>
Expense Administration
Tier Assets (Millions) Charge
<S> <C> <C>
I Up to $10 .45%
II Over $10 to $25 .40%
III Over $25 to $50 .30%
IV Over $50 .20%
</TABLE>
The administration charge is determined using the December 31 asset balance and
is effective at the next expense tier on the following May 1.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various investment
options for each participant's account. The number of transfers allowed, and
any administrative charges associated therewith, are subject to negotiation
between the contract owner and the Company.
<PAGE> 11
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented in the
following format:
o Beginning unit value - Jan. 1
o Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying
mutual funds.)
o Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
o Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration
charge discussed in note 2.)
o Ending unit value - Dec. 31
o Percentage increase (decrease) in unit value.
- --------------------------------------------------------------------------------
<PAGE> 12
SCHEDULE I
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET FEDUSGVT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. $4.005400 1.263551 2.039710 2.238323 1.741651 1.195751
Reinvested capital gains
and dividends .087806 .080915 .153233 .380918 .097028 .064355
Unrealized gain (loss) .510359 .093199 (.017387) .160989 .126113 (.021930)
Contract charges (.040763) (.012819) (.019817) (.023792) (.017290) (.011425)
Ending unit value - Dec. 31 $4.562802 1.424846 2.155739 2.756438 1.947502 1.226751
Percentage increase (decrease)
in unit value*(a) 14% 13% 6% 23% 12% 3%
================================================================================================================
1995
Beginning unit value - Jan. 1 $3.359891 .926489 1.741422 1.663803 1.419467 1.062969
Reinvested capital gains
and dividends .555289 .059786 .148075 .156545 .092352 .070177
Unrealized gain (loss) .127077 .287821 .168396 .436477 .244789 .073378
Contract charges (.036857) (.010545) (.018183) (.018502) (.014957) (.010773)
Ending unit value - Dec. 31 $4.005400 1.263551 2.039710 2.238323 1.741651 1.195751
Percentage increase (decrease)
in unit value*(a) 19% 36% 17% 35% 23% 12%
================================================================================================================
1994
Beginning unit value - Jan. 1 $3.443124 .970411 1.850918 1.814915 1.531292 1.094086
Reinvested capital gains
and dividends .495592 .029006 .138760 .233019 .106153 .053776
Unrealized gain (loss) (.549338) (.064074) (.231366) (.367765) (.204194) (.074693)
Contract charges (.032487) (.008854) (.016890) (.016366) (.013784) (.010200)
Ending unit value - Dec. 31 $3.359891 .926489 1.741422 1.663803 1.419467 1.062969
Percentage increase (decrease)
in unit value*(a) (2)% (5)% (6)% (8)% (7)% (3)%
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDCAPINC FIDCONTR FIDEQINC FIDMGIN FIDOTC
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 3.712491 1.315600 4.471070 1.301185 1.371346
Reinvested capital gains
and dividends .331771 .135279 .342426 .212013 .204072
Unrealized gain (loss) .089597 .151718 .592510 (.060982) .119575
Contract charges (.037371) (.013636) (.046314) (.012776) (.014283)
Ending unit value - Dec. 31 4.096488 1.588961 5.359692 1.439440 1.680710
Percentage increase (decrease)
in unit value*(a) 10% 21% 20% 11% 23%
=================================================================================================================
1995
Beginning unit value - Jan. 1 3.210584 .974545 3.424310 .960039 1.001544
Reinvested capital gains
and dividends .338236 .102679 .262606 .075533 .078671
Unrealized gain (loss) .197671 .249364 .821416 .276728 .302706
Contract charges (.034000) (.010988) (.037262) (.011115) (.011575)
Ending unit value - Dec. 31 3.712491 1.315600 4.471070 1.301185 1.371346
Percentage increase (decrease)
in unit value*(a) 16% 35% 31% 36% 37%
=================================================================================================================
1994
Beginning unit value - Jan. 1 3.397953 .994981 3.448520 .987051 1.000000
Reinvested capital gains
and dividends .285090 .007092 .333965 .038465 .008959
Unrealized gain (loss) (.440620) (.018188) (.325363) (.056248) (.004289)
Contract charges (.031839) (.009340) (.032812) (.009229) (.003126)
Ending unit value - Dec. 31 3.210584 .974545 3.424310 .960039 1.001544
Percentage increase (decrease)
in unit value*(a) (6)% (2)% (1)% (3)% 0%(b)
=================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
<PAGE> 13
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
FIDPURTN INVCOAM MASFIP MFSGROPP MFSHIINC
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $1.154955 1.498194 1.156444 6.114190 4.949752
Reinvested capital gains
and dividends .149398 .106623 .087565 .796398 .454249
Unrealized gain (loss) .024641 .181689 (.003056) .534047 .164181
Contract charges (.011650) (.015409) (.011193) (.064403) (.050022)
Ending unit value - Dec. 31 $1.317344 1.771097 1.229760 7.380232 5.518160
Percentage increase (decrease)
in unit value*(a) 14% 18% 6% 21% 11%
=====================================================================================================
1995
Beginning unit value - Jan. 1 $ .959935 1.157835 .980782 4.589533 4.265493
Reinvested capital gains
and dividends .060993 .093079 .073523 .768242 .403605
Unrealized gain (loss) .144010 .259870 .112302 .807886 .325361
Contract charges (.009983) (.012590) (.010163) (.051471) (.044707)
Ending unit value - Dec. 31 $1.154955 1.498194 1.156444 6.114190 4.949752
Percentage increase (decrease)
in unit value*(a) 20% 29% 18% 33% 16%
=====================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 1.167040 1.000000 4.834037 4.422523
Reinvested capital gains
and dividends .059967 .067770 .029902 .376509 .374437
Unrealized gain (loss) (.096987) (.065957) (.046046) (.576664) (.490350)
Contract charges (.003045) (.011018) (.003074) (.044349) (.041117)
Ending unit value - Dec. 31 $ .959935 1.157835 .980782 4.589533 4.265493
Percentage increase (decrease)
in unit value*(a) (4)%(b) (1)% (2)%(b) (5)% (4)%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSGRSTK NWFUND NWGROFD NWMYMKT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 8.942612 12.191058 2.667201 2.774433
Reinvested capital gains
and dividends 2.580988 1.119203 .234869 .137555
Unrealized gain (loss) (.547864) 1.782082 .208017 .000000
Contract charges (.094914) (.127964) (.027079) (.027140)
Ending unit value - Dec. 31 10.880822 14.964379 3.083008 2.884848
Percentage increase (decrease)
in unit value*(a) 22% 23% 16% 4%
==========================================================================================
1995
Beginning unit value - Jan. 1 7.034148 9.468045 2.092009 2.654661
Reinvested capital gains
and dividends 1.177905 .820350 .282003 .145674
Unrealized gain (loss) .807395 2.003431 .316217 .000000
Contract charges (.076836) (.100768) (.023028) (.025902)
Ending unit value - Dec. 31 8.942612 12.191058 2.667201 2.774433
Percentage increase (decrease)
in unit value*(a) 27% 29% 27% 5%
==========================================================================================
1994
Beginning unit value - Jan. 1 7.613442 9.502760 2.081399 2.583387
Reinvested capital gains
and dividends .717173 .927943 .079372 .096188
Unrealized gain (loss) (1.229319) (.873192) (.049054) .000000
Contract charges (.067148) (.089466) (.019708) (.024914)
Ending unit value - Dec. 31 7.034148 9.468045 2.092009 2.654661
Percentage increase (decrease)
in unit value*(a) (8)% 0% 1% 3%
==========================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
<PAGE> 14
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER I
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NBGUARD PUTINVFD PUTVOYFD SEI500IX
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $1.250781 11.305164 2.752130 1.000000
Reinvested capital gains
and dividends .081755 1.592658 .194543 .026831
Unrealized gain (loss) .140476 .815178 .156646 .119166
Contract charges (.012602) (.118499) (.028440) (.006666)
Ending unit value - Dec. 31 $1.460410 13.594501 3.074879 1.139331
Percentage increase (decrease)
in unit value*(a) 17% 20% 12% 14%(b)
================================================================================================
1995
Beginning unit value - Jan. 1 $ .955773 8.297318 1.982311 **
Reinvested capital gains
and dividends .054385 1.391197 .146629
Unrealized gain (loss) .251433 1.710170 .645332
Contract charges (.010810) (.093521) (.022142)
Ending unit value - Dec. 31 $1.250781 11.305164 2.752130
Percentage increase (decrease)
in unit value*(a) 31% 36% 39%
================================================================================================
1994
Beginning unit value - Jan. 1 $1.000000 8.652501 1.992379 **
Reinvested capital gains
and dividends .019568 .771381 .083642
Unrealized gain (loss) (.060786) (1.046752) (.075428)
Contract charges (.003009) (.079812) (.018282)
Ending unit value - Dec. 31 $ .955773 8.297318 1.982311
Percentage increase (decrease)
in unit value*(a) (4)%(b) (4)% (1)%
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SELGROFD AIMTREAS TRINTSTK TEMFORFD
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .806272 .060169 .031576 .050902
Unrealized gain (loss) 1.073420 .000000 .131644 .135281
Contract charges (.093989) (.010890) (.010515) (.010657)
Ending unit value - Dec. 31 10.720312 1.168909 1.178559 1.215580
Percentage increase (decrease)
in unit value*(a) 20% 4% 15% 17%
==========================================================================================================
1995
Beginning unit value - Jan. 1 7.020585 1.066889 .929695 .944596
Reinvested capital gains
and dividends .931537 .063099 .030917 .065652
Unrealized gain (loss) 1.057625 .000000 .074337 .039222
Contract charges (.075138) (.010358) (.009095) (.009416)
Ending unit value - Dec. 31 8.934609 1.119630 1.025854 1.040054
Percentage increase (decrease)
in unit value*(a) 27% 5% 10% 10%
==========================================================================================================
1994
Beginning unit value - Jan. 1 7.370495 1.034183 1.000000 1.000000
Reinvested capital gains
and dividends .708203 .042627 .057013 .067522
Unrealized gain (loss) (.990524) .000000 (.124310) (.119861)
Contract charges (.067589) (.009921) (.003008) (.003065)
Ending unit value - Dec. 31 7.020585 1.066889 .929695 .944596
Percentage increase (decrease)
in unit value*(a) (5)% 3% (7)%(b) (6)%(b)
==========================================================================================================
</TABLE>
- ------------
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
<PAGE> 15
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER II
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087834 .080940 .153274 .381035 .097041
Unrealized gain (loss) .510412 .093189 (.017408) .160941 .126149
Contract charges (.039315) (.012357) (.019094) (.022939) (.016687)
Ending unit value - Dec. 31 $4.564331 1.425323 2.156482 2.757360 1.948154
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212017 .204118 .149424 .106652 .087582
Unrealized gain (loss) (.060958) .119571 .024643 .181690 (.003070)
Contract charges (.012322) (.013763) (.011237) (.014846) (.010784)
Ending unit value - Dec. 31 $1.439922 1.681272 1.317785 1.771690 1.230172
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 6%
=====================================================================================================
NWGROFD NWMYMKT NBGUARD PUTINVFD PUTVOYFD
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752130
Reinvested capital gains
and dividends .234942 .137569 .081779 1.593150 .194604
Unrealized gain (loss) .208009 .000000 .140490 .814965 .156592
Contract charges (.026112) (.026179) (.012151) (.114228) (.027417)
Ending unit value - Dec. 31 $3.084040 2.885823 1.460899 13.599051 3.075909
Percentage increase (decrease)
in unit value* 16% 4% 17% 20% 12%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064282 .331792 .135300 .342492
Unrealized gain (loss) (.021804) .089634 .151738 .592577
Contract charges (.011063) (.036045) (.013145) (.044654)
Ending unit value - Dec. 31 1.227166 4.097872 1.589493 5.361485
Percentage increase (decrease)
in unit value* 3% 10% 21% 20%
===============================================================================================
MFSGROPP MFSHILNC MFSGRSTK NWFUND
- -----------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .796653 .454286 2.581814 1.119531
Unrealized gain (loss) .533950 .164222 (.548474) 1.782165
Contract charges (.062088) (.048235) (.091486) (.123368)
Ending unit value - Dec. 31 7.382705 5.520025 10.884466 14.969386
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
===============================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSTK TEMFORFD
- --------------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026838 .806490 .060222 .031586 .050915
Unrealized gain (loss) .119195 1.073413 .000000 .131635 .135292
Contract charges (.006322) (.090611) (.010548) (.010122) (.010274)
Ending unit value - Dec. 31 1.139711 10.723901 1.169304 1.178953 1.215987
Percentage increase (decrease)
in unit value* 14% 20% 4% 15% 17%
==============================================================================================================
</TABLE>
- ------------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
<PAGE> 16
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER III
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087890 .080992 .153287 .381270 .097072
Unrealized gain (loss) .510493 .093175 (.017364) .160833 .126189
Contract charges (.036395) (.011440) (.017665) (.021219) (.015454)
Ending unit value - Dec. 31 $4.567388 1.426278 2.157968 2.759207 1.949458
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- ----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212025 .204210 .149474 .106708 .087615
Unrealized gain (loss) (.060908) .119575 .024644 .181715 (.003065)
Contract charges (.011416) (.012733) (.010406) (.013741) (.009999)
Ending unit value - Dec. 31 $1.440886 1.682398 1.318667 1.772876 1.230995
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 6%
=====================================================================================================
NWGROFD NWMYMKT NBGUARD PUTINVFD PUTVOYFD
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752130
Reinvested capital gains
and dividends .235085 .137590 .081828 1.594134 .194729
Unrealized gain (loss) .207994 .000000 .140516 .814558 .156502
Contract charges (.024175) (.024251) (.011248) (.105700) (.025391)
Ending unit value - Dec. 31 $3.086105 2.887772 1.461877 13.608156 3.077970
Percentage increase (decrease)
in unit value* 16% 4% 17% 20% 12%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064289 .331849 .135343 .342626
Unrealized gain (loss) (.021782) .089680 .151789 .592722
Contract charges (.010263) (.033380) (.012175) (.041344)
Ending unit value - Dec. 31 1.227995 4.100640 1.590557 5.365074
Percentage increase (decrease)
in unit value* 3% 10% 21% 20%
=========================================================================================
MFSGROPP MFSHIINC MFSGRSTK NWFUND
- -----------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .797163 .454402 2.583466 1.120188
Unrealized gain (loss) .533743 .164251 (.549708) 1.782324
Contract charges (.057445) (.044652) (.084612) (.114166)
Ending unit value - Dec. 31 7.387651 5.523753 10.891758 14.979404
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
=========================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSTK TEMFORFD
- ------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026850 .806926 .060222 .031607 .050940
Unrealized gain (loss) .119236 1.073386 .000000 .131656 .135312
Contract charges (.005615) (.083839) (.009759) (.009375) (.009506)
Ending unit value - Dec. 31 1.140471 10.731082 1.170093 1.179742 1.216800
Percentage increase (decrease)
in unit value* 14% 20% 5% 15% 17%
=====================================================================================================
</TABLE>
- -----------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
<PAGE> 17
SCHEDULE I, CONTINUED
NACo VARIABLE ACCOUNT
TIER IV
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACTCGRO ACTCULTRA BDFDAM DRY3DCEN EVTOTRET
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 $4.005400 1.263551 2.039710 2.238323 1.741651
Reinvested capital gains
and dividends .087945 .081043 .153338 .381504 .097103
Unrealized gain (loss) .510579 .093156 (.017364) .160732 .126228
Contract charges (.033476) (.010516) (.016230) (.019505) (.014219)
Ending unit value - Dec. 31 $4.570448 1.427234 2.159454 2.761054 1.950763
Percentage increase (decrease)
in unit value* 14% 13% 6% 23% 12%
=====================================================================================================
FIDMGIN FIDOTC FIDPURTN INVCOAM MASFIP
- -----------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $1.301185 1.371346 1.154955 1.498194 1.156444
Reinvested capital gains
and dividends .212032 .204302 .149526 .106765 .087649
Unrealized gain (loss) (.060864) .119570 .024632 .181750 (.003055)
Contract charges (.010503) (.011693) (.009563) (.012646) (.009219)
Ending unit value - Dec. 31 $1.441850 1.683525 1.319550 1.774063 1.231819
Percentage increase (decrease)
in unit value* 11% 23% 14% 18% 7%
=====================================================================================================
NWGROFD NWMYMKL MBGUARD PUTINVFD PULVOYFD
- ------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 $2.667201 2.774433 1.250781 11.305164 2.752190
Reinvested capital gains
and dividends .235228 .137615 .081878 1.595118 .194853
Unrealized gain (loss) .207994 .000000 .140555 .814144 .156384
Contract charges (.022252) (.022328) (.010358) (.097159) (.023334)
Ending unit value - Dec. 31 $3.088171 2.889720 1.462856 13.617267 3.080033
Percentage increase (decrease) 16% 4% 17% 20% 12%
in unit value*
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEDUSGVT FIDCAPINC FIDCONTR FIDEQINC
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996**
Beginning unit value - Jan. 1 1.195751 3.712491 1.315600 4.471070
Reinvested capital gains
and dividends .064301 .331908 .135385 .342759
Unrealized gain (loss) (.021787) .089714 .151823 .592856
Contract charges (.009442) (.030706) (.011187) (.038020)
Ending unit value - Dec. 31 1.228823 4.103407 1.591621 5.368665
Percentage increase (decrease)
in unit value* 3% 11% 21% 20%
==========================================================================================
MFSGROPP MFSHIINC MFSGRSTK NWFUND
- ------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 6.114190 4.949752 8.942612 12.191058
Reinvested capital gains
and dividends .797673 .454488 2.585118 1.120845
Unrealized gain (loss) .533536 .164320 (.550938) 1.782490
Contract charges (.052798) (.041081) (.077737) (.104964)
Ending unit value - Dec. 31 7.392601 5.527479 10.899055 14.989429
Percentage increase (decrease)
in unit value* 21% 12% 22% 23%
==========================================================================================
SEI500IX SELGROFD AIMTREAS TRINTSIK TEMFORFD
- --------------------------------------------------------------------------------------------------------
1996**
Beginning unit value - Jan. 1 1.000000 8.934609 1.119630 1.025854 1.040054
Reinvested capital gains
and dividends .026663 .807363 .060226 .031627 .050965
Unrealized gain (loss) .119289 1.073355 .000000 .131676 .135346
Contract charges (.004921) (.077060) (.008973) (.008625) (.008750)
Ending unit value - Dec. 31 1.141231 10.738267 1.170883 1.180532 1.217615
Percentage increase (decrease)
in unit value* 14% 20% 5% 15% 17%
========================================================================================================
</TABLE>
- ---------
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** See Note 2.
See Note 3.
<PAGE> 43
NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
4,009,886 shares (cost $82,072,610) ....................... $103,214,470
American Century: Twentieth Century Ultra Fund (ACTCUltra)
5,857,879 shares (cost $148,509,978) ...................... 191,552,641
The Bond Fund of America(SM), Inc. (BdFdAm)
1,031,436 shares (cost $13,936,548) ....................... 14,244,126
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
4,452,422 shares (cost $37,839,634) ....................... 46,127,091
Evergreen Income and Growth Fund - Class Y (EvIncGro)
186,171 shares (cost $3,688,419) .......................... 4,287,527
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
347,877 shares (cost $3,654,874) .......................... 3,635,316
Fidelity Capital & Income Fund (FidCapInc)
301,370 shares (cost $2,461,407) .......................... 2,869,046
Fidelity Contrafund (FidContr)
6,037,029 shares (cost $223,738,176) ...................... 278,367,429
Fidelity Equity-Income Fund (FidEqInc)
6,608,854 shares (cost $219,025,257) ...................... 325,089,539
Fidelity Magellan(R) Fund (FidMgln)
1,229,623 shares (cost $94,765,144) ....................... 111,957,168
Fidelity OTC Portfolio (FidOTC)
783,802 shares (cost $25,358,118) ......................... 27,284,135
Fidelity Puritan(R) Fund (FidPurtn)
1,481,883 shares (cost $24,748,674) ....................... 28,629,972
The Investment Company of America(R) (InvCoAm)
2,262,158 shares (cost $47,593,414) ....................... 64,132,193
MAS Funds - Fixed Income Portfolio (MASFIP)
169,283 shares (cost $1,993,019) .......................... 2,031,398
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,108,729 shares (cost $12,629,445) ....................... 16,586,580
MFS(R) High Income Fund - Class A (MFSHiInc)
2,371,011 shares (cost $12,525,816) ....................... 12,827,170
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
912,394 shares (cost $9,974,162) .......................... 11,496,170
Nationwide(R) Fund (NWFund)
2,702,709 shares (cost $47,986,863) ....................... 66,919,070
</TABLE>
88 of 133
<PAGE> 44
<TABLE>
<S> <C>
Nationwide(R) Growth Fund (NWGroFd)
517,757 shares (cost $5,823,272) .............................................. 8,123,609
Nationwide(R) Money Market Fund (NWMyMkt)
51,828,736 shares (cost $51,828,736) .......................................... 51,828,736
Neuberger & Berman Guardian Fund (NBGuard)
1,200,775 shares (cost $30,070,310) ........................................... 34,726,415
Putnam Investors Fund - Class A (PutInvFd)
4,578,408 shares (cost $40,357,687) ........................................... 50,179,347
Putnam Voyager Fund - Class A (PutVoyFd)
9,511,547 shares (cost $136,633,418) .......................................... 170,732,263
SEI Index Funds - S&P 500 Index Portfolio (SEI500lx)
1,367,371 shares (cost $33,528,363) ........................................... 38,532,526
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,521,669 shares (cost $8,427,637) ............................................ 10,027,799
Short-Term Investments Trust - Treasury Portfolio - Institutional Class (AIMTreas)
4,198,508 shares (cost $4,198,508) ............................................ 4,198,508
T. Rowe Price International Funds, Inc. - International Stock Fund(R)(TRIntStk)
2,193,552 shares (cost $30,032,019) ........................................... 33,868,437
Templeton Foreign Fund - Class I (TemForFd)
4,276,163 shares (cost $42,456,779) ........................................... 49,261,395
--------------
Total investments .......................................................... 1,762,730,076
Accounts receivable ................................................................. 296,056
--------------
Total assets ............................................................... 1,763,026,132
ACCOUNTS PAYABLE ....................................................................... 24,899
--------------
CONTRACT OWNERS' EQUITY (NOTE 3) ....................................................... $1,763,001,233
==============
</TABLE>
89 of 133
<PAGE> 45
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Total ACTCGro
----------------------------------- ------------------------------
1997 1996 1997 1996
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 8,521,504 6,537,431 -- --
Mortality and expense charges ................. (3,928,317) (2,914,718) (331,683) (399,827)
Administration charge (note 2)
Tier I .................................. (1,547,806) (1,183,685) (121,056) (159,063)
Tier II ................................. (561,760) (392,419) (57,502) (59,403)
Tier III ................................ (299,893) (211,252) (24,570) (30,376)
Tier IV ................................. (188,537) (302,756) (16,560) (39,285)
Tier V .................................. (160,552) -- (12,885) --
--------------- -------------- ------------ ------------
Net investment activity ..................... 1,834,639 1,532,601 (564,256) (687,954)
Proceeds from mutual fund shares sold ......... 148,777,534 61,836,491 65,613,736 12,605,472
Cost of mutual fund shares sold ............... (143,091,400) (58,091,646) (68,069,453) (11,692,261)
--------------- -------------- ------------ ------------
Realized gain (loss) on investments ........... 5,686,134 3,744,845 (2,455,717) 913,211
Unrealized gain (loss) on investments ......... 194,485,796 50,200,225 19,758,622 9,682,574
--------------- -------------- ------------ ------------
Net gain (loss) on investments .............. 200,171,930 53,945,070 17,302,905 10,595,785
Reinvested capital gains ...................... 8,287,025 22,352,242 -- --
--------------- -------------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 210,293,594 77,829,913 16,738,649 9,907,831
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 206,770,431 154,494,603 (56,747,694) (6,060,304)
Redemptions ................................... (60,545,571) (34,247,716) (7,395,091) (5,026,368)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. (50,866) (83,128) 2,463 711
--------------- -------------- ------------ ------------
Net equity transactions ................... 146,173,994 120,163,759 (64,140,322) (11,085,961)
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 356,467,588 197,993,672 (47,401,673) (1,178,130)
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 ........... $ 1,763,001,233 1,182,585,792 103,217,768 148,475,546
=============== ============== ============ ============
<CAPTION>
ACTCUltra BdFdAm
------------------------------ ----------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 492,847 470,999
Mortality and expense charges ................. (423,190) (301,788) (34,958) (34,974)
Administration charge (note 2)
Tier I .................................. (164,385) (120,414) (14,226) (15,704)
Tier II ................................. (61,261) (40,288) (5,205) (4,149)
Tier III ................................ (28,761) (20,511) (2,812) (2,454)
Tier IV ................................. (19,733) (33,380) (1,703) (3,299)
Tier V .................................. (20,009) -- (1,110) --
------------ ------------ ----------- -----------
Net investment activity ..................... (717,339) (516,381) 432,833 410,419
Proceeds from mutual fund shares sold ......... 8,885,205 4,993,840 1,931,351 2,100,353
Cost of mutual fund shares sold ............... (6,607,023) (3,803,139) (1,851,996) (2,284,135)
------------ ------------ ----------- -----------
Realized gain (loss) on investments ........... 2,278,182 1,190,701 79,355 (183,782)
Unrealized gain (loss) on investments ......... 24,092,305 8,285,363 (20,974) (219,281)
------------ ------------ ----------- -----------
Net gain (loss) on investments .............. 26,370,487 9,476,064 58,381 (403,063)
Reinvested capital gains ...................... -- -- -- --
------------ ------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 25,653,148 8,959,683 491,214 7,356
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 23,934,245 24,230,834 298,748 48,205
Redemptions ................................... (7,685,227) (4,882,590) (513,512) (488,547)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. (15,444) 9,681 (129) 515
------------ ------------ ----------- -----------
Net equity transactions ................... 16,233,574 19,357,925 (214,893) (439,827)
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 41,886,722 28,317,608 276,321 (432,471)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 149,650,009 100,332,907 13,981,906 13,418,681
------------ ------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 191,536,731 128,650,515 14,258,227 12,986,210
============ ============ =========== ===========
</TABLE>
90 of 133
<PAGE> 46
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Dry3dCen EvincGro
----------------------------- --------------------------
1997 1996 1997 1996
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- 103,071 116,234
Mortality and expense charges ................. (94,641) (60,861) (10,775) (12,083)
Administration charge (note 2)
Tier I .................................. (37,799) (25,605) (4,050) (4,727)
Tier II ................................. (14,044) (7,754) (1,234) (1,064)
Tier III ................................ (5,231) (3,700) (722) (1,028)
Tier IV ................................. (4,878) (6,620) (646) (1,514)
Tier V .................................. (4,252) -- (574) --
------------ ----------- ---------- ----------
Net investment activity ..................... (160,845) (104,540) 85,070 95,818
Proceeds from mutual fund shares sold ......... 820,855 1,068,478 613,927 495,496
Cost of mutual fund shares sold ............... (701,417) (1,021,567) (581,697) (498,199)
------------ ----------- ---------- ----------
Realized gain (loss) on investments ........... 119,438 46,911 32,230 (2,703)
Unrealized gain (loss) on investments ......... 6,258,403 2,226,556 285,350 130,501
------------ ----------- ---------- ----------
Net gain (loss) on investments .............. 6,377,841 2,273,467 317,580 127,798
Reinvested capital gains ...................... -- -- -- --
------------ ----------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 6,216,996 2,168,927 402,650 223,616
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 10,820,817 1,532,282 (349,417) (266,730)
Redemptions ................................... (1,185,411) (614,569) (185,881) (156,342)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. (747) (36) (216) 499
------------ ----------- ---------- ----------
Net equity transactions ................... 9,634,659 917,677 (535,514) (422,573)
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 15,851,655 3,086,604 (132,864) (198,957)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 30,274,825 21,046,139 4,420,173 4,590,867
------------ ----------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 46,126,480 24,132,743 4,287,309 4,391,910
============ =========== ========== ==========
<CAPTION>
FedUSGvt FidCapInc
-------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 100,041 79,244 115,828 168,208
Mortality and expense charges ................. (9,051) (8,019) (7,307) (8,148)
Administration charge (note 2)
Tier I .................................. (3,290) (3,064) (2,381) (2,784)
Tier II ................................. (1,246) (813) (633) (714)
Tier III ................................ (382) (359) (1,029) (1,331)
Tier IV ................................. (632) (1,200) (570) (777)
Tier V .................................. (485) -- (220) --
---------- ---------- ---------- ----------
Net investment activity ..................... 84,955 65,789 103,688 154,454
Proceeds from mutual fund shares sold ......... 736,119 613,664 271,022 275,873
Cost of mutual fund shares sold ............... (731,544) (609,528) (201,584) (206,834)
---------- ---------- ---------- ----------
Realized gain (loss) on investments ........... 4,575 4,136 69,438 69,039
Unrealized gain (loss) on investments ......... (18,074) (93,553) (22,397) (100,960)
---------- ---------- ---------- ----------
Net gain (loss) on investments .............. (13,499) (89,417) 47,041 (31,921)
Reinvested capital gains ...................... -- -- -- --
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 71,456 (23,628) 150,729 122,533
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 260,915 384,418 (160,412) (136,545)
Redemptions ................................... (180,959) (144,920) (98,195) (109,162)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 38 (24) (23) (54)
---------- ---------- ---------- ----------
Net equity transactions ................... 79,994 239,474 (258,630) (245,761)
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 151,450 215,846 (107,901) (123,228)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 3,483,920 2,802,949 2,976,924 3,039,732
---------- ---------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 3,635,370 3,018,795 2,869,023 2,916,504
========== ========== ========== ==========
</TABLE>
91 of 133
<PAGE> 47
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FidContr FidEqinc
------------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- 3,276,338 2,582,493
Mortality and expense charges ................. (592,163) (359,009) (713,633) (544,146)
Administration charge (note 2)
Tier I .................................. (237,949) (148,038) (263,404) (206,965)
Tier II ................................. (86,925) (51,240) (95,338) (66,338)
Tier III ................................ (43,247) (24,637) (67,270) (49,087)
Tier IV ................................. (30,663) (35,765) (31,963) (59,778)
Tier V .................................. (21,115) -- (32,930) --
------------- ------------ ------------ ------------
Net investment activity ..................... (1,012,062) (618,689) 2,071,800 1,656,179
Proceeds from mutual fund shares sold ......... 532,205 383,413 2,570,367 844,012
Cost of mutual fund shares sold ............... (411,280) (329,814) (1,390,698) (516,769)
------------- ------------ ------------ ------------
Realized gain (loss) on investments ........... 120,925 53,599 1,179,669 327,243
Unrealized gain (loss) on investments ......... 23,370,642 5,084,232 39,211,076 11,525,883
------------- ------------ ------------ ------------
Net gain (loss) on investments .............. 23,491,567 5,137,831 40,390,745 11,853,126
Reinvested capital gains ...................... 3,576,229 6,242,812 2,983,969 2,613,023
------------- ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 26,055,734 10,761,954 45,446,514 16,122,328
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 57,607,805 33,599,824 35,349,056 20,590,474
Redemptions ................................... (7,425,375) (3,221,013) (8,608,887) (4,824,630)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. (17,713) (73,920) (3,095) (390)
------------- ------------ ------------ ------------
Net equity transactions ................... 50,164,717 30,304,891 26,737,074 15,765,454
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 76,220,451 41,066,845 72,183,588 31,887,782
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 202,139,639 113,777,993 252,903,435 183,719,472
------------- ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 278,360,090 154,844,838 325,087,023 215,607,254
============= ============ ============ ============
<CAPTION>
FidMgin FidOTC
----------------------------- ---------------------------
1997 1996 1997 1996
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 887,068 525,152 -- --
Mortality and expense charges ................. (254,515) (238,887) (51,137) (18,203)
Administration charge (note 2)
Tier I .................................. (110,567) (101,597) (20,099) (6,924)
Tier II ................................. (36,983) (34,129) (6,451) (2,193)
Tier III ................................ (19,013) (15,868) (3,504) (1,166)
Tier IV ................................. (11,625) (22,757) (2,286) (2,329)
Tier V .................................. (7,405) -- (2,756) --
------------ ----------- ----------- ----------
Net investment activity ..................... 446,960 111,914 (86,233) (30,815)
Proceeds from mutual fund shares sold ......... 4,087,385 2,667,817 1,567,135 2,677,355
Cost of mutual fund shares sold ............... (3,578,760) (2,521,535) (1,410,503) (2,571,613)
------------ ----------- ----------- ----------
Realized gain (loss) on investments ........... 508,625 146,282 156,632 105,742
Unrealized gain (loss) on investments ......... 12,080,439 (11,669,605) 1,856,000 476,569
------------ ----------- ----------- ----------
Net gain (loss) on investments .............. 12,589,064 (11,523,323) 2,012,632 582,311
Reinvested capital gains ...................... 1,726,827 13,496,407 -- --
------------ ----------- ----------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 14,762,851 2,084,998 1,926,399 551,496
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 5,252,830 10,486,626 12,106,280 4,078,111
Redemptions ................................... (4,080,718) (3,045,130) (871,308) (373,167)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 452 1,111 (1,388) 2,982
------------ ----------- ----------- ----------
Net equity transactions ................... 1,172,564 7,442,607 11,233,584 3,707,926
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 15,935,415 9,527,605 13,159,983 4,259,422
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 96,022,426 82,952,870 14,122,665 4,952,117
------------ ----------- ----------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 111,957,841 92,480,475 27,282,648 9,211,539
============ =========== =========== ==========
</TABLE>
92 of 133
<PAGE> 48
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FidPurtn InvCoAm
----------------------------- ----------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 446,477 271,253 513,868 384,457
Mortality and expense charges ................. (62,424) (42,786) (137,856) (94,238)
Administration charge (note 2)
Tier I .................................. (26,473) (18,571) (59,716) (44,582)
Tier II ................................. (9,533) (6,519) (24,852) (14,648)
Tier III ................................ (4,249) (2,305) (9,323) (5,010)
Tier IV ................................. (3,080) (4,064) (5,268) (7,217)
Tier V .................................. (1,894) -- (3,520) --
------------ ----------- ----------- -----------
Net investment activity ..................... 338,824 197,008 273,333 218,762
Proceeds from mutual fund shares sold ......... 814,338 324,252 447,709 266,291
Cost of mutual fund shares sold ............... (684,522) (285,857) (312,271) (209,220)
------------ ----------- ----------- -----------
Realized gain (loss) on investments ........... 129,816 38,395 135,438 57,071
Unrealized gain (loss) on investments ......... 2,752,077 541,147 8,662,376 2,206,848
------------ ----------- ----------- -----------
Net gain (loss) on investments .............. 2,881,893 579,542 8,797,814 2,263,919
Reinvested capital gains ...................... -- -- -- --
------------ ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 3,220,717 776,550 9,071,147 2,482,681
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 4,546,283 4,718,306 9,116,425 5,675,975
Redemptions ................................... (726,234) (318,097) (1,771,273) (808,850)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 90 (1,630) 1,016 206
------------ ----------- ----------- -----------
Net equity transactions ................... 3,820,139 4,398,579 7,346,168 4,867,331
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 7,040,856 5,175,129 16,417,315 7,350,012
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 21,589,381 13,138,596 47,716,024 31,745,657
------------ ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 28,630,237 18,313,725 64,133,339 39,095,669
============ =========== =========== ===========
<CAPTION>
MASFip MFSGrOpp
-------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 28,745 15,657 -- --
Mortality and expense charges ................. (4,490) (2,231) (39,467) (37,876)
Administration charge (note 2)
Tier I .................................. (2,070) (888) (15,316) (15,836)
Tier II ................................. (531) (331) (5,520) (4,505)
Tier III ................................ (197) (135) (3,570) (3,661)
Tier IV ................................. (225) (242) (1,999) (3,419)
Tier V .................................. (191) -- (1,381) --
---------- ---------- ----------- -----------
Net investment activity ..................... 21,041 11,830 (67,253) (65,297)
Proceeds from mutual fund shares sold ......... 720,110 263,026 1,092,617 687,068
Cost of mutual fund shares sold ............... (718,408) (264,293) (840,448) (596,731)
---------- ---------- ----------- -----------
Realized gain (loss) on investments ........... 1,702 (1,267) 252,169 90,337
Unrealized gain (loss) on investments ......... 38,374 (4,013) 2,007,758 1,617,482
---------- ---------- ----------- -----------
Net gain (loss) on investments .............. 40,076 (5,280) 2,259,927 1,707,819
Reinvested capital gains ...................... -- -- -- --
---------- ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 61,117 6,550 2,192,674 1,642,522
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 506,339 588,317 (476,894) (109,740)
Redemptions ................................... (95,593) (17,850) (454,230) (455,157)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 1,846 35 (13,391) (19,461)
---------- ---------- ----------- -----------
Net equity transactions ................... 412,592 570,502 (944,515) (584,358)
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 473,709 577,052 1,248,159 1,058,164
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,559,535 533,887 15,338,362 13,510,856
---------- ---------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 2,033,244 1,110,939 16,586,521 14,569,020
========== ========== =========== ===========
</TABLE>
93 of 133
<PAGE> 49
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MFSHiinc MFSGrStk
---------------------------- ---------------------------
1997 1996 1997 1996
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ......................... $ 530,400 422,030 -- --
Mortality and expense charges ................ (30,533) (26,308) (29,157) (22,828)
Administration charge (note 2)
Tier I ................................. (11,807) (10,827) (11,082) (9,068)
Tier II ................................ (3,895) (2,435) (3,796) (2,721)
Tier III ............................... (2,381) (1,939) (2,578) (1,724)
Tier IV ................................ (1,318) (3,201) (1,449) (2,591)
Tier V ................................. (1,585) -- (1,253) --
------------ ---------- ----------- ----------
Net investment activity .................... 478,881 377,320 (49,315) (38,932)
Proceeds from mutual fund shares sold ........ 3,835,668 2,432,993 3,942,610 850,601
Cost of mutual fund shares sold .............. (3,591,928) (2,516,717) (4,232,530) (830,961)
------------ ---------- ----------- ----------
Realized gain (loss) on investments .......... 243,740 (83,724) (289,920) 19,640
Unrealized gain (loss) on investments ........ (72,879) 42,423 2,790,280 1,046,377
------------ ---------- ----------- ----------
Net gain (loss) on investments ............. 170,861 (41,301) 2,500,360 1,066,017
Reinvested capital gains ..................... -- -- -- --
------------ ---------- ----------- ----------
Net increase (decrease) in contract owners
equity resulting from operations ....... 649,742 336,019 2,451,045 1,027,085
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds .... 1,605,127 249,442 (1,620,023) 556,525
Redemptions .................................. (476,935) (327,745) (565,608) (234,518)
Annual contract maintenance charge (note 2) .. -- -- -- --
Adjustments to maintain reserves ............. (1,282) (310) 1,095 (358)
------------ ---------- ----------- ----------
Net equity transactions .................. 1,126,910 (78,613) (2,184,536) 321,649
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 1,776,652 257,406 266,509 1,348,734
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .... 11,049,325 9,397,723 11,230,813 7,842,975
------------ ---------- ----------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD .......... $ 12,825,977 9,655,129 11,497,322 9,191,709
============ ========== =========== ==========
<CAPTION>
NWFund NWGroFd
---------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ......................... 391,657 320,547 36,526 38,398
Mortality and expense charges ................ (134,628) (96,054) (18,751) (17,691)
Administration charge (note 2)
Tier I ................................. (54,194) (38,934) (7,463) (7,285)
Tier II ................................ (19,167) (14,768) (3,142) (3,048)
Tier III ............................... (10,580) (5,878) (1,226) (678)
Tier IV ................................ (6,584) (9,815) (885) (1,863)
Tier V ................................. (4,908) -- (682) --
----------- ----------- ---------- ----------
Net investment activity .................... 161,596 155,098 4,377 7,833
Proceeds from mutual fund shares sold ........ 463,376 1,465,637 458,787 290,151
Cost of mutual fund shares sold .............. (317,660) (1,195,215) (331,745) (223,377)
----------- ----------- ---------- ----------
Realized gain (loss) on investments .......... 145,716 270,422 127,042 66,774
Unrealized gain (loss) on investments ........ 11,208,743 2,813,056 1,123,363 367,326
----------- ----------- ---------- ----------
Net gain (loss) on investments ............. 11,354,459 3,083,478 1,250,405 434,100
Reinvested capital gains ..................... -- -- -- --
----------- ----------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ....... 11,516,055 3,238,576 1,254,782 441,933
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds .... 12,861,126 2,394,563 (163,482) 35,255
Redemptions .................................. (1,915,548) (1,386,387) (163,907) (124,853)
Annual contract maintenance charge (note 2) .. -- -- -- --
Adjustments to maintain reserves ............. (297) 106 (18) 44
----------- ----------- ---------- ----------
Net equity transactions .................. 10,945,281 1,008,282 (327,407) (89,554)
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 22,461,336 4,246,858 927,375 352,379
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .... 44,457,575 33,594,484 7,196,235 6,426,311
----------- ----------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD .......... 66,918,911 37,841,342 8,123,610 6,778,690
=========== =========== ========== ==========
</TABLE>
94 of 133
<PAGE> 50
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NWMyMkt NBGuard
----------------------------- ----------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,285,365 1,029,181 74,402 63,007
Mortality and expense charges ................. (132,444) (116,798) (71,430) (36,936)
Administration charge (note 2)
Tier I .................................. (45,551) (37,864) (26,911) (14,001)
Tier II ................................. (13,422) (12,222) (10,120) (5,289)
Tier III ................................ (9,728) (7,888) (4,969) (2,606)
Tier IV ................................. (7,237) (18,521) (3,272) (4,170)
Tier V .................................. (9,225) -- (3,725) --
------------ ----------- ----------- -----------
Net investment activity ..................... 1,067,758 835,888 (46,025) 5
Proceeds from mutual fund shares sold ......... 27,822,416 18,028,552 1,088,005 379,398
Cost of mutual fund shares sold ............... (27,822,416) (18,028,552) (856,213) (316,186)
------------ ----------- ----------- -----------
Realized gain (loss) on investments ........... -- -- 231,792 63,212
Unrealized gain (loss) on investments ......... -- -- 3,215,283 412,640
------------ ----------- ----------- -----------
Net gain (loss) on investments .............. -- -- 3,447,075 475,852
Reinvested capital gains ...................... -- -- -- --
------------ ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,067,758 835,888 3,401,050 475,857
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 3,974,271 321,487 10,526,570 6,205,069
Redemptions ................................... (3,746,518) (3,523,754) (1,111,061) (366,760)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 257 (2,408) (3,228) (278)
------------ ----------- ----------- -----------
Net equity transactions ................... 228,010 (3,204,675) 9,412,281 5,838,031
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 1,295,768 (2,368,787) 12,813,331 6,313,888
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 50,815,017 42,887,884 21,909,962 9,931,773
------------ ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 52,110,785 40,519,097 34,723,293 16,245,661
============ =========== =========== ===========
<CAPTION>
PutinvFd PutVoyFd
---------------------------- ------------------------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- -- --
Mortality and expense charges ................. (105,733) (73,856) (373,376) (241,523)
Administration charge (note 2)
Tier I .................................. (50,794) (37,133) (157,449) (106,159)
Tier II ................................. (10,729) (8,255) (52,799) (32,133)
Tier III ................................ (8,627) (4,376) (25,838) (16,978)
Tier IV ................................. (3,997) (5,995) (17,450) (22,042)
Tier V .................................. (3,454) -- (13,723) --
----------- ----------- ------------ ------------
Net investment activity ..................... (183,334) (129,615) (640,635) (418,835)
Proceeds from mutual fund shares sold ......... 1,164,187 654,524 2,056,638 375,701
Cost of mutual fund shares sold ............... (1,028,827) (646,943) (1,218,328) (203,252)
----------- ----------- ------------ ------------
Realized gain (loss) on investments ........... 135,360 7,581 838,310 172,449
Unrealized gain (loss) on investments ......... 7,460,464 2,765,618 16,339,677 9,609,437
----------- ----------- ------------ ------------
Net gain (loss) on investments .............. 7,595,824 2,773,199 17,177,987 9,781,886
Reinvested capital gains ...................... -- -- -- --
----------- ----------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 7,412,490 2,643,584 16,537,352 9,363,051
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds ..... 8,512,659 2,883,915 22,596,211 26,439,235
Redemptions ................................... (1,548,901) (816,552) (5,546,604) (2,087,968)
Annual contract maintenance charge (note 2) ... -- -- -- --
Adjustments to maintain reserves .............. 386 749 4,484 3,379
----------- ----------- ------------ ------------
Net equity transactions ................... 6,964,144 2,068,112 17,054,091 24,354,646
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 14,376,634 4,711,696 33,591,443 33,717,697
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 35,803,162 25,556,691 137,145,381 74,868,678
----------- ----------- ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 50,179,796 30,268,387 170,736,824 108,586,375
=========== =========== ============ ============
</TABLE>
95 of 133
<PAGE> 51
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEI500ix SelGroFd
-------------------------- ---------------------------
1997 1996 1997 1996
------------ -------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ......................... $ 148,745 -- -- --
Mortality and expense charges ................ (58,724) (317) (23,196) (16,304)
Administration charge (note 2)
Tier I ................................. (22,520) (170) (9,202) (6,816)
Tier II ................................ (7,679) (33) (2,574) (1,532)
Tier III ............................... (4,794) (8) (1,672) (1,281)
Tier IV ................................ (3,443) (29) (1,295) (1,872)
Tier V ................................. (2,252) -- (1,119) --
------------ -------- ----------- ----------
Net investment activity .................... 49,333 (557) (39,058) (27,805)
Proceeds from mutual fund shares sold ........ 256,727 16,228 750,304 296,818
Cost of mutual fund shares sold .............. (201,940) (16,264) (701,943) (319,740)
------------ -------- ----------- ----------
Realized gain (loss) on investments .......... 54,787 (36) 48,361 (22,922)
Unrealized gain (loss) on investments ........ 4,538,562 7,391 1,043,205 699,702
------------ -------- ----------- ----------
Net gain (loss) on investments ............. 4,593,349 7,355 1,091,566 676,780
Reinvested capital gains ..................... -- -- -- --
------------ -------- ----------- ----------
Net increase (decrease) in contract owners
equity resulting from operations ....... 4,642,682 6,798 1,052,508 648,975
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds .... 24,716,948 870,470 929,648 708,225
Redemptions .................................. (1,409,295) (5,173) (387,786) (111,772)
Annual contract maintenance charge (note 2) .. -- -- -- --
Adjustments to maintain reserves ............. (2,562) (616) (407) 448
------------ -------- ----------- ----------
Net equity transactions .................. 23,305,091 864,681 541,455 596,901
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 27,947,773 871,479 1,593,963 1,245,876
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .... 10,582,236 -- 8,433,505 5,510,652
------------ -------- ----------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD .......... $ 38,530,009 871,479 10,027,468 6,756,528
============ ======== =========== ==========
<CAPTION>
AIMTreas TRintStk
-------------------------- ----------------------------
1997 1996 1 997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ......................... 90,126 50,571 -- --
Mortality and expense charges ................ (8,847) (5,146) (72,592) (40,607)
Administration charge (note 2)
Tier I ................................. (2,900) (2,152) (24,520) (14,746)
Tier II ................................ (772) (306) (10,010) (5,959)
Tier III ............................... (539) (722) (5,512) (2,443)
Tier IV ................................ (1,016) (468) (4,667) (5,081)
Tier V ................................. (367) -- (3,595) --
---------- ---------- ----------- -----------
Net investment activity .................... 75,685 41,777 (120,896) (68,836)
Proceeds from mutual fund shares sold ........ 6,179,448 1,705,995 7,588,473 2,833,710
Cost of mutual fund shares sold .............. (6,179,448) (1,705,995) (6,430,207) (2,375,419)
---------- ---------- ----------- -----------
Realized gain (loss) on investments .......... -- -- 1,158,266 458,291
Unrealized gain (loss) on investments ........ -- -- 2,391,991 891,824
---------- ---------- ----------- -----------
Net gain (loss) on investments ............. -- -- 3,550,257 1,350,115
Reinvested capital gains ..................... -- -- -- --
---------- ---------- ----------- -----------
Net increase (decrease) in contract owners '
equity resulting from operations ....... 75,685 41,777 3,429,361 1,281,279
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds .... 1,805,822 346,584 6,077,634 7,174,324
Redemptions .................................. (369,513) (86,735) (1,065,254) (338,384)
Annual contract maintenance charge (note 2) .. -- -- -- --
Adjustments to maintain reserves ............. 2,955 (71) (5,667) (1,687)
---------- ---------- ----------- -----------
Net equity transactions .................. 1,439,264 259,778 5,006,713 6,834,253
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 1,514,949 301,555 8,436,074 8,115,532
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .... 2,686,515 1,707,117 25,426,682 10,681,789
---------- ---------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD .......... 4,201,464 2,008,672 33,862,756 18,797,321
========== ========== =========== ===========
</TABLE>
96 of 133
<PAGE> 52
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
TemForFd
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ - -
Mortality and expense charges.......... (101,616) (57,274)
Administration charge (note 2)
Tier I .......................... (40,632) (23,768)
Tier II ......................... (16,397) (9,630)
Tier III ........................ (7,569) (3,103)
Tier IV ......................... (4,093) (5,462)
Tier V .......................... (3,937) -
------------ ------------
Net investment activity.............. (174,244) (99,237)
Proceeds from mutual fund shares sold.. 2,466,814 2,239,773
Cost of mutual fund shares sold........ (2,086,611) (2,301,530)
------------ ------------
Realized gain (loss) on investments.... 380,203 (61,757)
Unrealized gain (loss) on investments.. 4,135,130 1,854,688
------------ ------------
Net gain (loss) on investments....... 4,515,333 1,792,931
Reinvested capital gains............... - -
------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations. 4,341,089 1,693,694
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners - net of transfers between funds 12,882,594 6,949,456
Redemptions............................ (960,747) (350,723)
Annual contract maintenance charge (note 2) - -
Adjustments to maintain reserves....... (341) (2,351)
------------ ------------
Net equity transactions............ 11,921,506 6,596,382
NET CHANGE IN CONTRACT OWNERS' EQUITY.... 16,262,595 8,290,076
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 32,998,572 16,969,644
------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD.... $ 49,261,167 25,259,720
============ ============
</TABLE>
See accompanying notes to financial statements.
97 of 133
<PAGE> 53
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the
Company) on September 7, 1988, and has been registered as a unit
investment trust under the Investment Company Act of 1940. The NACoVA
was introduced for exclusive use by Member Counties for deferred
compensation Plans adopted under the National Association of Counties
(NACo) Program.
The Company offers group flexible fund retirement contracts through the
NACoVA. The primary distribution for the contracts is through an
affiliated sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts (the Contract) are offered for
purchase in connection with deferred compensation Plans adopted by
Member Counties under the NACo Program. Participants in the contracts
may invest in any of the following fund sub-accounts:
American Century: Twentieth Century Growth Fund (ACTCGro)
(formerly Twentieth Century Investors, Inc. - Growth Investors)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
(formerly Twentieth Century Investors, Inc. - Ultra Investors)
The Bond Fund of America(SM), Inc. (BdFdAm) (only available for
certain contracts issued beginning January 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
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)
98 of 133
<PAGE> 54
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
(not available for contracts issued on or after October 1, 1993)
MFS(R) High Income Fund - Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an
affiliated investment advisor)
(not available for contracts issued on or after October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
SEI Index Funds - S&P 500 Index Portfolio (SEI500Ix)
Seligman Growth Fund, Inc. - Class A (SelGroFd)
Short-Term Investments Trust - Treasury Portfolio - Institutional
Class (AIMTreas)
T. Rowe Price International Funds, Inc. - International Stock
Fund(R) (TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
All of the above funds were being utilized as of June 30, 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 June 30, 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.
99 of 133
<PAGE> 55
(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:
Expense Administration
Tier Assets (Millions) Charge
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%
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.
100 of 133
<PAGE> 56
(3) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at June 30, 1997.
<TABLE>
<CAPTION>
TIER I (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE
-------------------------------------- --------- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 7,796,355 $ 5.342551 $ 41,652,424
American Century: Twentieth Century Ultra Fund 50,831,311 1.650897 83,917,259
The Bond Fund of America(SM), Inc. 2,911,519 2.232512 6,500,001
The Dreyfus Third Century Fund, Inc. 6,463,696 3.222516 20,829,364
Evergreen Income and Growth Fund - Class Y 845,980 2.144336 1,814,065
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 1,210,756 1.250714 1,514,309
Fidelity Capital & Income Fund 245,243 4.317074 1,058,732
Fidelity Contrafund 72,679,652 1.758952 127,840,019
Fidelity Equity-Income Fund 21,606,647 6.261622 135,292,656
Fidelity Magellan(R) Fund 32,926,152 1.660474 54,673,019
Fidelity OTC Portfolio 6,723,900 1.780206 11,969,927
Fidelity Puritan(R) Fund 9,253,357 1.494647 13,830,502
The Investment Company of America(R) 14,937,794 2.080978 31,085,221
MAS Funds - Fixed Income Portfolio 899,697 1.271592 1,144,048
MFS(R) Growth Opportunities Fund - Class A 851,871 8.472605 7,217,566
MFS(R) High Income Fund - Class A 951,189 5.812741 5,529,015
Massachusetts Investors Growth Stock Fund - Class A 356,212 13.672832 4,870,427
Nationwide(R) Fund 1,658,868 18.380924 30,491,527
Nationwide(R) Growth Fund 995,484 3.637361 3,620,935
Nationwide(R) Money Market Fund 6,920,929 2.942520 20,364,972
Neuberger & Berman Guardian Fund 9,056,558 1.644389 14,892,504
Putnam Investors Fund - Class A 1,684,407 16.101629 27,121,697
Putnam Voyager Fund - Class A 24,056,392 3.407862 81,980,864
SEI Index Funds - S&P 500 Index Portfolio 12,332,643 1.367218 16,861,411
Seligman Growth Fund, Inc. - Class A. 376,768 12.019665 4,528,625
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 1,181,427 1.194507 1,411,223
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 9,982,453 1.312425 13,101,221
Templeton Foreign Fund - Class I 16,610,997 1.345339 22,347,422
========== ======== ----------
Sub-Total Tier I (December 31, 1995) $ 787,460,955
==============
</TABLE>
101 of 133
<PAGE> 57
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER II (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE
--------------------------------------- ----- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 3,083,137 $ 5.345664 $ 16,481,414
American Century: Twentieth Century Ultra Fund 15,679,946 1.651860 25,901,076
The Bond Fund of America(SM), Inc. 737,070 2.233841 1,646,497
The Dreyfus Third Century Fund, Inc. 1,978,649 3.224393 6,379,942
Evergreen Income and Growth Fund - Class Y 179,337 2.145585 384,783
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 320,605 1.251450 401,221
Fidelity Capital & Income Fund 51,423 4.319613 222,127
Fidelity Contrafund 20,891,123 1.759977 36,767,896
Fidelity Equity-Income Fund 6,131,750 6.265268 38,417,057
Fidelity Magellan(R) Fund 9,268,883 1.661441 15,399,702
Fidelity OTC Portfolio 1,931,574 1.781244 3,440,605
Fidelity Puritan(R) Fund 2,420,561 1.495517 3,619,990
The Investment Company of America(R) 5,050,921 2.082190 10,516,977
MAS Funds - Fixed Income Portfolio 167,594 1.272333 213,235
MFS(R) Growth Opportunities Fund - Class A 237,342 8.477543 2,012,077
MFS(R) High Income Fund - Class A 227,650 5.816160 1,324,049
Massachusetts Investors Growth Stock Fund - Class A 112,293 13.680799 1,536,258
Nationwide(R) Fund 504,517 18.391626 9,278,888
Nationwide(R) Growth Fund 365,078 3.639480 1,328,694
Nationwide(R) Money Market Fund 1,798,289 2.944251 5,294,614
Neuberger & Berman Guardian Fund 2,791,802 1.645348 4,593,486
Putnam Investors Fund - Class A 272,406 16.111009 4,388,736
Putnam Voyager Fund - Class A 6,555,611 3.409849 22,353,644
SEI Index Funds - S&P 500 Index Portfolio 3,583,783 1.368013 4,902,662
Seligman Growth Fund, Inc. - Class A. 82,743 12.026668 995,123
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 219,207 1.195210 261,998
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 3,131,447 1.313190 4,112,185
Templeton Foreign Fund - Class I 5,490,611 1.346122 7,391,032
========= ======== ---------
Sub-Total Tier II (December 31, 1995) $ 229,565,968
=============
</TABLE>
102 of 133
<PAGE> 58
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER II (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE
--------------------------------------- ----- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 1,143,946 $ 5.342996 $ 6,112,099
American Century: Twentieth Century Ultra Fund 5,781,351 1.651035 9,545,213
The Bond Fund of America(SM), Inc. 435,287 2.232716 971,872
The Dreyfus Third Century Fund, Inc. 747,129 3.222784 2,407,835
Evergreen Income and Growth Fund - Class Y 109,076 2.144515 233,915
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 122,938 1.250820 153,773
Fidelity Capital & Income Fund 22,572 4.317438 97,453
Fidelity Contrafund 7,958,871 1.759099 14,000,442
Fidelity Equity-Income Fund 2,582,067 6.262144 16,169,275
Fidelity Magellan(R) Fund 2,952,662 1.660613 4,903,229
Fidelity OTC Portfolio 600,574 1.780355 1,069,235
Fidelity Puritan(R) Fund 1,149,623 1.494772 1,718,424
The Investment Company of America(R) 1,868,658 2.081152 3,888,961
MAS Funds - Fixed Income Portfolio 25,890 1.271698 32,924
MFS(R) Growth Opportunities Fund - Class A 108,321 8.473311 917,838
MFS(R) High Income Fund - Class A 153,690 5.813231 893,435
Massachusetts Investors Growth Stock Fund - Class A 39,327 13.673971 537,756
Nationwide(R) Fund 146,679 18.382456 2,696,320
Nationwide(R) Growth Fund 104,965 3.637664 381,827
Nationwide(R) Money Market Fund 518,650 2.942768 1,526,267
Neuberger & Berman Guardian Fund 936,168 1.644527 1,539,554
Putnam Investors Fund - Class A 133,603 16.102971 2,151,405
Putnam Voyager Fund - Class A 2,326,713 3.408146 7,929,778
SEI Index Funds - S&P 500 Index Portfolio 880,551 1.367332 1,204,006
Seligman Growth Fund, Inc. - Class A. 39,967 12.020667 480,430
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 191,780 1.194608 229,102
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 1,389,759 1.312535 1,824,107
Templeton Foreign Fund - Class I 1,792,914 1.345451 2,412,278
========= ======== ---------
Sub-Total Tier II (December 31, 1996) $ 86,028,753
============
</TABLE>
103 of 133
<PAGE> 59
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER III (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE
---------------------------------------- ----- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 1,661,418 $ 5.351896 $ 8,891,736
American Century: Twentieth Century Ultra Fund 8,801,890 1.653785 14,556,434
The Bond Fund of America(SM), Inc. 624,068 2.236499 1,395,727
The Dreyfus Third Century Fund, Inc. 871,813 3.228151 2,814,344
Evergreen Income and Growth Fund - Class Y 184,872 2.148086 397,121
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 140,217 1.252922 175,681
Fidelity Capital & Income Fund 127,465 4.324693 551,247
Fidelity Contrafund 12,223,579 1.762029 21,538,301
Fidelity Equity-Income Fund 5,949,627 6.272568 37,319,440
Fidelity Magellan(R) Fund 5,544,159 1.663378 9,222,032
Fidelity OTC Portfolio 1,346,062 1.783321 2,400,461
Fidelity Puritan(R) Fund 1,274,683 1.497260 1,908,532
The Investment Company of America(R) 2,335,996 2.084617 4,869,657
MAS Funds - Fixed Income Portfolio 111,080 1.273816 141,495
MFS(R) Growth Opportunities Fund - Class A 231,366 8.487429 1,963,702
MFS(R) High Income Fund - Class A 230,423 5.823000 1,341,753
Massachusetts Investors Growth Stock Fund - Class A 86,345 13.696746 1,182,646
Nationwide(R) Fund 294,742 18.413050 5,427,099
Nationwide(R) Growth Fund 111,035 3.643721 404,581
Nationwide(R) Money Market Fund 1,214,459 2.947713 3,579,877
Neuberger & Berman Guardian Fund 1,624,589 1.647265 2,676,129
Putnam Investors Fund - Class A 231,550 16.129787 3,734,852
Putnam Voyager Fund - Class A 3,814,246 3.413826 13,021,172
SEI Index Funds - S&P 500 Index Portfolio 2,503,528 1.369603 3,428,839
Seligman Growth Fund, Inc. - Class A. 76,036 12.040687 915,526
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 403,865 1.196616 483,271
T. Rowe Price International Funds, Inc. -
International Stock Fund (R) 1,907,527 1.314721 2,507,866
Templeton Foreign Fund - Class I 2,499,425 1.347691 3,368,453
========= ======== ---------
Sub-Total Tier III (December 31, 1995) $ 150,217,974
=============
</TABLE>
104 of 133
<PAGE> 60
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER III (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE
---------------------------------------- ----- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 714,374 $ 5.346555 $ 3,819,440
American Century: Twentieth Century Ultra Fund 4,155,836 1.652135 6,866,002
The Bond Fund of America(SM), Inc. 199,965 2.234248 446,771
The Dreyfus Third Century Fund, Inc. 371,572 3.224931 1,198,294
Evergreen Income and Growth Fund - Class Y 27,197 2.145943 58,363
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 63,410 1.251661 79,368
Fidelity Capital & Income Fund 23,338 4.320342 100,828
Fidelity Contrafund 6,438,032 1.760271 11,332,681
Fidelity Equity-Income Fund 2,047,412 6.266313 12,829,724
Fidelity Magellan(R) Fund 2,717,144 1.661718 4,515,127
Fidelity OTC Portfolio 488,881 1.781541 870,962
Fidelity Puritan(R) Fund 828,954 1.495767 1,239,922
The Investment Company of America(R) 1,096,585 2.082538 2,283,680
MAS Funds - Fixed Income Portfolio 6,219 1.272546 7,914
MFS(R) Growth Opportunities Fund - Class A 64,774 8.478956 549,216
MFS(R) High Income Fund - Class A 61,306 5.817140 356,626
Massachusetts Investors Growth Stock Fund - Class A 38,811 13.683078 531,054
Nationwide(R) Fund 162,572 18.394693 2,990,462
Nationwide(R) Growth Fund 125,589 3.640086 457,155
Nationwide(R) Money Market Fund 800,467 2.944747 2,357,173
Neuberger & Berman Guardian Fund 738,337 1.645622 1,215,024
Putnam Investors Fund - Class A 175,671 16.113697 2,830,709
Putnam Voyager Fund - Class A 1,852,631 3.410417 6,318,244
SEI Index Funds - S&P 500 Index Portfolio 1,492,028 1.368241 2,041,454
Seligman Growth Fund, Inc. - Class A. 22,233 12.028674 267,434
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 28,810 1.195412 34,440
T. Rowe Price International Funds, Inc. -
International Stock Fund (R) 1,294,407 1.313409 1,700,086
Templeton Foreign Fund - Class I 1,955,241 1.346347 2,632,433
========= ======== ---------
Sub-Total Tier III (December 31, 1996) $ 69,930,586
============
</TABLE>
105 of 133
<PAGE> 61
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER IV (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE
--------------------------------------- --------- ---------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 1,642,583 $ 5.358136 $ 8,801,183
American Century: Twentieth Century Ultra Fund 9,029,714 1.655714 14,950,624
The Bond Fund of America(SM), Inc. 669,966 2.239157 1,500,159
The Dreyfus Third Century Fund, Inc. 1,287,672 3.231914 4,161,645
Evergreen Income and Growth Fund - Class Y 221,358 2.150589 476,050
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 448,948 1.254393 563,157
Fidelity Capital & Income Fund 77,306 4.329774 334,718
Fidelity Contrafund 15,260,969 1.764082 26,921,601
Fidelity Equity-Income Fund 4,634,296 6.279877 29,102,809
Fidelity Magellan(R) Fund 6,185,804 1.665316 10,301,318
Fidelity OTC Portfolio 1,135,855 1.785400 2,027,956
Fidelity Puritan(R) Fund 1,948,566 1.499005 2,920,910
The Investment Company of America(R) 2,689,271 2.087045 5,612,630
MAS Funds - Fixed Income Portfolio 174,580 1.275301 222,642
MFS(R) Growth Opportunities Fund - Class A 161,432 8.497326 1,371,740
MFS(R) High Income Fund - Class A 185,405 5.829840 1,080,881
Massachusetts Investors Growth Stock Fund - Class A 65,903 13.712711 903,709
Nationwide(R) Fund 372,261 18.434499 6,862,445
Nationwide(R) Growth Fund 244,505 3.647967 891,946
Nationwide(R) Money Market Fund 2,069,488 2.951176 6,107,423
Neuberger & Berman Guardian Fund 1,772,312 1.649185 2,922,870
Putnam Investors Fund - Class A 242,699 16.148586 3,919,246
Putnam Voyager Fund - Class A 3,960,894 3.417808 13,537,575
SEI Index Funds - S&P 500 Index Portfolio 3,116,152 1.371194 4,272,849
Seligman Growth Fund, Inc. - Class A. 86,318 12.054722 1,040,539
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 891,537 1.198021 1,068,080
T. Rowe Price International Funds, Inc. -
International Stock Fund (R) 3,102,578 1.316253 4,083,778
Templeton Foreign Fund - Class I 2,818,070 1.349261 3,802,312
========= ======== ---------
Sub-Total Tier IV (December 31, 1995) $ 159,762,795
=============
</TABLE>
106 of 133
<PAGE> 62
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER IV (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE
--------------------------------------- --------- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 829,130 $ 5.352788 $ 4,438,157
American Century: Twentieth Century Ultra Fund 3,978,227 1.654061 6,580,230
The Bond Fund of America(SM), Inc. 114,425 2.236906 255,958
The Dreyfus Third Century Fund, Inc. 509,877 3.228689 1,646,234
Evergreen Income and Growth Fund - Class Y 82,079 2.148444 176,342
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 41,337 1.253133 51,801
Fidelity Capital & Income Fund 51,706 4.325421 223,650
Fidelity Contrafund 4,673,310 1.762322 8,235,877
Fidelity Equity-Income Fund 1,181,735 6.273614 7,413,749
Fidelity Magellan(R) Fund 1,437,104 1.663655 2,390,845
Fidelity OTC Portfolio 614,934 1.783618 1,096,807
Fidelity Puritan(R) Fund 338,365 1.497510 506,705
The Investment Company of America(R) 293,909 2.084964 612,790
MAS Funds - Fixed Income Portfolio 32,017 1.274029 40,791
MFS(R) Growth Opportunities Fund - Class A 84,740 8.488844 719,345
MFS(R) High Income Fund - Class A 46,446 5.823980 270,501
Massachusetts Investors Growth Stock Fund - Class A 20,864 13.699027 285,816
Nationwide(R) Fund 65,299 18.416120 1,202,554
Nationwide(R) Growth Fund 19,454 3.644328 70,897
Nationwide(R) Money Market Fund 323,829 2.948209 954,716
Neuberger & Berman Guardian Fund 569,283 1.647540 937,917
Putnam Investors Fund - Class A 50,552 16.132477 815,529
Putnam Voyager Fund - Class A 1,652,019 3.414395 5,640,645
SEI Index Funds - S&P 500 Index Portfolio 850,173 1.369831 1,164,593
Seligman Growth Fund, Inc. - Class A. 24,787 12.042695 298,502
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 102,273 1.196817 122,402
T. Rowe Price International Funds, Inc. -
International Stock Fund (R) 824,780 1.314940 1,084,536
Templeton Foreign Fund - Class I 834,029 1.347916 1,124,201
======= ======== ---------
Sub-Total Tier IV (December 31, 1996) $ 48,362,090
============
</TABLE>
107 of 133
<PAGE> 63
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER IV (DECEMBER 31, 1996, SEE NOTE 2)* UNITS UNIT VALUE
---------------------------------------- --------- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 2,020 $ 5.344777 $ 10,796
American Century: Twentieth Century Ultra Fund 34,497 1.651585 56,975
The Bond Fund of America(SM), Inc. 104 2.233530 232
The Dreyfus Third Century Fund, Inc. 2,714 3.223859 8,750
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 29,424 1.251241 36,817
Fidelity Contrafund 49,300 1.759686 86,753
Fidelity Equity-Income Fund 4,909 6.264233 30,751
Fidelity Magellan(R) Fund 28,056 1.661166 46,606
Fidelity OTC Portfolio 3,856 1.780948 6,867
Fidelity Puritan(R) Fund 14,934 1.495271 22,330
The Investment Company of America(R) 3,001 2.081846 6,248
MAS Funds - Fixed Income Portfolio 438 1.272123 557
MFS(R) Growth Opportunities Fund - Class A 486 8.476135 4,119
MFS(R) High Income Fund - Class A 101 5.815190 587
Massachusetts Investors Growth Stock Fund - Class A 295 13.678527 4,035
Nationwide(R) Fund 512 18.388587 9,415
Nationwide(R) Growth Fund 175 3.638875 637
Nationwide(R) Money Market Fund 3,673 2.943760 10,812
Neuberger & Berman Guardian Fund 16,809 1.645075 27,652
Putnam Investors Fund - Class A 410 16.108344 6,604
Putnam Voyager Fund - Class A 16,420 3.409282 55,980
SEI Index Funds - S&P 500 Index Portfolio 9,031 1.367788 12,352
Seligman Growth Fund, Inc. - Class A. 352 12.024677 4,233
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 12,441 1.195011 14,867
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 8,905 1.312973 11,692
Templeton Foreign Fund - Class I 6,284 1.345900 8,458
===== ======== -----
Sub-Total Tier IV (December 31, 1996) $ 485,125
=========
<FN>
*Tier includes certain Departments of a Member County that was previously converted to Tier IV using the Asset Balance as
of December 31, 1995.
</TABLE>
108 of 133
<PAGE> 64
Contract owners' equity - continued
<TABLE>
<CAPTION>
TIER V (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE
-------------------------------------- --------- ----------
<S> <C> <C> <C>
American Century: Twentieth Century Growth Fund 2,427,978 $ 5.358582 $ 13,010,519
American Century: Twentieth Century Ultra Fund 17,612,032 1.655852 29,162,918
The Bond Fund of America(SM), Inc. 688,147 2.239361 1,541,010
The Dreyfus Third Century Fund, Inc. 2,066,737 3.232183 6,680,072
Evergreen Income and Growth Fund - Class Y 347,164 2.150769 746,670
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares 525,503 1.254499 659,243
Fidelity Capital & Income Fund 64,725 4.330138 280,268
Fidelity Contrafund 17,932,197 1.764230 31,636,520
Fidelity Equity-Income Fund 7,724,279 6.280400 48,511,562
Fidelity Magellan(R) Fund 6,308,164 1.665455 10,505,963
Fidelity OTC Portfolio 2,464,132 1.785549 4,399,828
Fidelity Puritan(R) Fund 1,909,722 1.499130 2,862,922
The Investment Company of America(R) 2,518,745 2.087220 5,257,175
MAS Funds - Fixed Income Portfolio 180,051 1.275408 229,638
MFS(R) Growth Opportunities Fund - Class A 215,452 8.498034 1,830,918
MFS(R) High Income Fund - Class A 348,030 5.830331 2,029,130
Massachusetts Investors Growth Stock Fund - Class A 119,997 13.713853 1,645,621
Nationwide(R) Fund 431,774 18.436035 7,960,201
Nationwide(R) Growth Fund 265,040 3.648271 966,938
Nationwide(R) Money Market Fund 4,037,011 2.951424 11,914,931
Neuberger & Berman Guardian Fund 3,588,234 1.649323 5,918,157
Putnam Investors Fund - Class A 322,665 16.149933 5,211,018
Putnam Voyager Fund - Class A 5,821,646 3.418092 19,898,922
SEI Index Funds - S&P 500 Index Portfolio 3,384,972 1.371309 4,641,843
Seligman Growth Fund, Inc. - Class A. 124,178 12.055727 1,497,056
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class 480,820 1.198122 576,081
T. Rowe Price International Funds, Inc. -
International Stock Fund (R) 4,130,536 1.316363 5,437,285
Templeton Foreign Fund - Class I 4,575,883 1.349374 6,174,578
========= ======== ---------
Sub-Total Tier V (December 31, 1996) 231,186,987
===========
Total Contract Owners' Equity 1,763,001,233
==============
</TABLE>
See accompanying notes to financial statements.
109 of 133
<PAGE> 65
<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) as of December 31,
1996 and 1995, 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, 1996. 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and 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 ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers throughout the
United States. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded
in the consolidated financial statements. 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 is 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> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is 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.
(2) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, 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 to
Nationwide Corp. 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
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. 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 for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
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 13 for a
complete discussion of the reinsurance agreements. NLIC 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
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC 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 NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) 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 (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each 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.
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 for
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, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 are 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.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. 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.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(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 agency 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. For traditional life 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. 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 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. 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 6.
Future policy benefits and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred but
unreported claims. The impact of reserve discounting is not
material. Future policy benefits and claims on other group health
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with 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. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
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.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded at
amortized cost. The effect as of January 1, 1994 has been recorded as a
direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, 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
cost fair value
--------------- --------------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 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
$3,535.
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 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 $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</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>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, 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 as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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
$240,451 and $245,255 as of December 31, 1996 and 1995, 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 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</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, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(SFAS 107) requires disclosure of fair value information about existing
on and off-balance sheet financial instruments. SFAS 107 defines the
fair value of a financial instrument 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 based on estimates 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. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, 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:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: 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.
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.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MORTGAGE LOANS ON REAL ESTATE: 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 mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: 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 analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
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.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their 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 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) Additional Financial Instruments Disclosures
--------------------------------------------
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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 $327,456 extending into
1997 were outstanding as of December 31, 1996.
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 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) 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 thousand hours of service within a twelve-month period and who have
met certain age requirements. 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.
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. 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, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) 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; 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,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. 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, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
---------------------------------------------------------------------
Each insurance company'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 each of its
insurance company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory 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 stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, 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 $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, 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
intercompany 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 $15,111 and $1,186 as of December 31, 1996 and 1995,
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 1996 and
1995 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> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts 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
NLIC'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 NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC'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. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
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 $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. NLIC transferred fixed maturity securities and cash with
a fair value of $155,000 to WSC on December 28, 1994, which resulted in
a realized loss of $19,239 on the disposition of the securities. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share home
office, other facilities, equipment and common management and
administrative services with WSC. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 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.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) 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.
(16) Segment Information
-------------------
The Company has three primary 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 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, 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.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 25
<TABLE>
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Summary of Investments -
Other Than Investments in Related Parties
As of December 31, 1996
($000's omitted)
<CAPTION>
- --------------------------------------------------------------- --------------- -------------- -----------------
Column A Column B Column C Column D
- --------------------------------------------------------------- --------------- -------------- -----------------
Amount at which
shown in the
consolidated
Type of Investment Cost Market value balance sheet
- --------------------------------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 3,757,887 3,834,762 3,834,762
States, municipalities and political subdivisions 6,242 6,690 6,690
Foreign governments 100,656 101,940 101,940
Public utilities 1,798,736 1,843,938 1,843,938
All other corporate 6,307,357 6,517,309 6,517,309
--------------- -------------- -----------------
Total fixed maturity securities available-for-sale 11,970,878 12,304,639 12,304,639
--------------- -------------- -----------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 43,501 50,405 50,405
Non-redeemable preferred stock 389 8,726 8,726
--------------- -------------- -----------------
Total equity securities available-for-sale 43,890 59,131 59,131
--------------- -------------- -----------------
Mortgage loans on real estate, net 5,327,317 5,272,119 (1)
Real estate, net:
Investment properties 253,383 217,611 (1)
Acquired in satisfaction of debt 57,933 48,148 (1)
Policy loans 371,816 371,816
Other long-term investments 27,370 28,668 (2)
Short-term investments 4,789 4,789
--------------- ----------------
Total investments $18,057,376 18,306,921
=============== ================
<FN>
- ----------
(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 5 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains of investments
in limited partnerships.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplemental Insurance Information
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
- ----------------------------------- -------------- ------------------ ----------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- ------------------ ----------------- ----------------- ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
acquisition claims and Unearned premiums benefits payable Premium
Segment costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- ------------------ ----------------- ---------------- --------------
<C> <C> <C> <C> <C> <C>
1996: Variable Annuities $ 791,611 - - -
Fixed Annuities 242,421 14,952,877 687 24,030
Life Insurance 414,417 1,995,802 395,739 174,612
Corporate and Other (81,940) 230,381 25,048 -
-------------- ------------------ ---------------- --------------
Total $1,366,509 17,179,060 421,474 198,642
============== ================== ================ ==============
1995: Variable Annuities 571,283 - - -
Fixed Annuities 221,111 14,221,622 455 32,774
Life Insurance 366,876 1,898,641 383,983 166,332
Corporate and Other (138,914) 238,351 28,886 -
-------------- ------------------ ---------------- --------------
Total $1,020,356 16,358,614 413,324 199,106
============== ================== ================ ==============
1994: Variable Annuities 395,397 - - -
Fixed Annuities 198,639 12,633,253 240 20,134
Life Insurance 327,079 1,806,762 371,984 156,524
Corporate and Other 74,445 233,569 26,927 -
-------------- ------------------ ---------------- --------------
Total $ 995,560 14,673,584 399,151 176,658
============== ================== ================ ==============
<CAPTION>
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Net Amortization Other
investment Benefits, claims, of deferred operating
income losses and policy expenses Premiums
Segment (3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- ------------------- ----------------- ----------------- --------------
1996: Variable Annuities $ (21,449) 4,624 57,412 132,357
Fixed Annuities 1,050,557 838,533 38,635 79,737
Life Insurance 174,002 211,386 37,347 78,965
Corporate and Other 154,649 106,037 - 51,335
-------------- ------------------- ----------------- -----------------
Total $1,357,759 1,160,580 133,394 342,394
============== =================== ================= =================
1995: Variable Annuities (17,640) 2,881 26,264 109,089
Fixed Annuities 1,002,718 804,980 29,499 80,260
Life Insurance 171,255 201,986 31,021 68,832
Corporate and Other 137,700 105,646 (4,089) 14,773
-------------- ------------------- ----------------- -----------------
Total $1,294,033 1,115,493 82,695 272,954
============== =================== ================= =================
1994: Variable Annuities (13,415) 2,277 22,135 83,701
Fixed Annuities 903,572 702,082 29,849 69,975
Life Insurance 166,329 191,006 29,495 69,861
Corporate and Other 154,325 97,302 4,089 17,115
-------------- ------------------- ----------------- -----------------
Total $1,210,811 992,667 85,568 240,652
============== =================== ================= =================
<FN>
- ----------
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the Balance Sheet captions, Policyholders'
dividend accumulations and Other policyholder funds.
(3) Allocations of net investment income and certain general expenses are based
on a number of assumptions and estimates, and reported operating results
would change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Column A Column B Column C Column D Column E Column F
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
----------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
Life insurance in force $47,071,264 6,633,567 288,593 40,726,290 0.7%
================= ================= ================ ================ ===============
Premiums:
Life insurance 225,615 29,282 2,309 198,642 1.2%
Accident and health insurance 291,871 305,789 13,918 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 517,486 335,071 16,227 198,642 8.2%
================= ================= ================ ================ ===============
1995:
Life Insurance in force $41,087,025 8,935,743 391,174 32,542,456 1.2%
================= ================= ================ ================ ===============
Premiums:
Life insurance 221,257 24,360 2,209 199,106 1.1%
Accident and health insurance 298,058 313,036 14,978 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 519,315 337,396 17,187 199,106 8.6%
================= ================= ================ ================ ===============
1994:
Life Insurance in force $35,926,633 7,550,623 829,742 29,205,752 2.8%
================= ================= ================ ================ ===============
Premiums:
Life insurance 198,705 24,912 2,865 176,658 1.6%
Accident and health insurance 303,435 321,696 18,261 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 502,140 346,608 21,126 176,658 12.0%
================= ================= ================ ================ ===============
<FN>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on invesment products and universal life insurance
products.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1996:
Valuation allowances - mortgage loans on real
estate $49,128 4,497 - 2,587 51,038
Valuation allowances - real estate 25,819 (10,600) - - 15,219
------------ ------------ -------------- ------------ -------------
Total $74,947 (6,103) - 2,587 66,257
============ ============ ============== ============ =============
1995:
Valuation allowances - fixed maturity securities - 8,908 - 8,908 -
Valuation allowances - mortgage loans on real
estate 46,381 7,433 - 4,686 49,128
Valuation allowances - real estate 27,330 (1,511) - - 25,819
------------ ------------ -------------- ------------ -------------
Total $73,711 14,830 - 13,594 74,947
============ ============ ============== ============ =============
1994:
Valuation allowances - fixed maturity securities 4,800 (4,800) - - -
Valuation allowances - mortgage loans on real
estate 42,150 20,445 - 16,214 46,381
Valuation allowances - real estate 31,357 (4,027) - - 27,330
------------ ------------ -------------- ------------ -------------
Total $78,307 11,618 - 16,214 73,711
============ ============ ============== ============ =============
<FN>
- ----------
(1) Amounts represent direct write-downs charged against the valuation allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 66
<PAGE> 1
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(Unaudited)
(in millions of dollars)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 1997 1996
------ ----------------- ----------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $12,313.6 in 1997; $11,970.9 in 1996) $12,738.7 12,304.6
Equity securities (cost $60.8 in 1997; $43.9 in 1996) 73.8 59.1
Mortgage loans on real estate, net 5,135.4 5,272.1
Real estate, net 305.1 265.8
Policy loans 403.9 371.8
Other long-term investments 23.0 28.7
Short-term investments 431.8 4.8
----------------- ----------------
19,111.7 18,306.9
----------------- ----------------
Cash 100.7 43.8
Accrued investment income 221.3 210.2
Deferred policy acquisition costs 1,570.0 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 394.6 426.5
Assets held in Separate Accounts 36,791.6 26,926.7
----------------- ----------------
$58,189.9 47,766.3
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $17,817.8 17,179.1
Policyholders' dividend accumulations 369.4 361.4
Other policyholder funds 59.7 60.1
Accrued federal income tax:
Current 46.3 30.2
Deferred 207.1 162.2
----------------- ----------------
253.4 192.4
----------------- ----------------
Dividend payable - 485.7
Other liabilities 536.2 423.0
Liabilities related to Separate Accounts 36,791.6 26,926.7
----------------- ----------------
55,828.1 45,628.4
----------------- ----------------
Shareholder's equity:
Capital shares, $1.00 par value. Authorized 5.0 million shares, issued and
outstanding 3.8 million shares 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,229.9 1,432.6
Unrealized gains on securities available-for-sale, net 213.4 173.6
----------------- ----------------
2,361.8 2,137.9
----------------- ----------------
$58,189.9 47,766.3
================= ================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(Unaudited)
(in millions of dollars)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Investment product and universal life insurance product
policy charges $143.3 102.3 393.4 288.8
Life insurance premiums 50.2 47.2 155.9 150.3
Net investment income 355.3 339.9 1,047.6 1,009.6
Realized gains (losses) on investments (4.8) (5.1) 4.3 4.3
Other income 12.4 9.9 38.2 28.5
------------- ------------- ------------- -------------
556.4 494.2 1,639.4 1,481.5
------------- ------------- ------------- -------------
Benefits and expenses:
Interest credited 256.0 245.6 756.9 732.9
Other benefits and claims 41.8 51.5 134.3 139.4
Provision for policyholders' dividends on participating policies 9.1 8.7 31.3 31.5
Amortization of deferred policy acquisition costs 43.7 25.7 126.7 96.8
Other operating expenses 97.9 91.8 286.0 239.9
------------- ------------- ------------- -------------
448.5 423.3 1,335.2 1,240.5
------------- ------------- ------------- -------------
Income from continuing operations before federal
income tax expense 107.9 70.9 304.2 241.0
------------- ------------- ------------- -------------
Federal income tax expense (benefit):
Current 28.2 35.3 83.4 93.9
Deferred 9.5 (10.0) 23.5 (9.4)
------------- ------------- ------------- -------------
37.7 25.3 106.9 84.5
------------- ------------- ------------- -------------
Income from continuing operations 70.2 45.6 197.3 156.5
Income from discontinued operations (less federal income
tax expense of $1.0 and $5.0 in 1996) - 2.3 - 9.6
------------- ------------- ------------- -------------
Net income $ 70.2 47.9 197.3 166.1
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(Unaudited)
Nine Months Ended September 30, 1997 and 1996
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
------------- ------------- ---------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
1996:
Balance, January 1, 1996 $3.8 657.1 1,583.3 384.3 2,628.5
Dividends to shareholder - (79.3) (356.3) (28.6) (464.2)
Net income - - 166.1 - 166.1
Unrealized losses on securities
available-for-sale, net - - - (249.8) (249.8)
------------- ------------- ---------------- ------------------- -------------------
Balance, September 30, 1996 $3.8 577.8 1,393.1 105.9 2,080.6
============= ============= ================ =================== ===================
1997:
Balance, January 1, 1997 3.8 527.9 1,432.6 173.6 2,137.9
Capital contributions - 836.8 - - 836.8
Dividends to shareholder - (450.0) (400.0) - (850.0)
Net income - - 197.3 - 197.3
Unrealized gains on securities
available-for-sale, net - - - 39.8 39.8
------------- ------------- ---------------- ------------------- -------------------
Balance, September 30, 1997 $3.8 914.7 1,229.9 213.4 2,361.8
============= ============= ================ =================== ===================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, 1997 and 1996
(in millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 197.3 166.1
Adjustments to reconcile net income to net cash provided by operating activities:
Capitalization of deferred policy acquisition costs (358.2) (313.7)
Amortization of deferred policy acquisition costs 126.7 96.8
Amortization and depreciation (0.5) 5.2
Realized gains on investments, net (4.3) (4.3)
Deferred federal income tax 23.5 15.1
Increase in accrued investment income (11.1) (2.5)
Decrease (increase) in other assets 31.4 (36.0)
Increase in policyholder account balances 58.2 233.3
Increase in policyholders' dividend accumulations 8.0 10.0
Increase (decrease) in accrued federal income tax payable 16.1 (0.6)
Increase in other liabilities 113.2 176.6
Other, net (3.9) (19.3)
-------------- --------------
Net cash provided by operating activities 196.4 326.7
-------------- --------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 640.8 917.4
Proceeds from sale of securities available-for-sale 248.7 223.3
Proceeds from repayments of mortgage loans on real estate 296.1 191.1
Proceeds from sale of real estate 23.2 16.1
Proceeds from repayments of policy loans and sale of other invested assets 19.8 18.6
Cost of securities available-for-sale acquired (1,732.1) (1,047.9)
Cost of mortgage loans on real estate acquired (552.2) (721.7)
Cost of real estate acquired (24.3) (4.8)
Policy loans issued and other invested assets acquired (48.2) (43.1)
Short-term investments, net (428.2) (62.3)
-------------- --------------
Net cash used in investing activities (1,556.4) (513.3)
-------------- --------------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 -
Increase in investment product and universal life insurance product account balances 2,343.1 1,851.3
Decrease in investment product and universal life insurance product account balances (1,763.0) (1,597.0)
-------------- --------------
Net cash provided by financing activities 1,416.9 254.3
-------------- --------------
Net increase in cash 56.9 67.7
Cash, beginning of period 43.8 9.4
-------------- --------------
Cash, end of period $ 100.7 77.1
============== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended September 30, 1997
(1) Organization and Basis of Presentation
--------------------------------------
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
a wholly owned subsidiary of Nationwide Corporation (Nationwide Corp.).
On January 27, 1997, Nationwide Corp. contributed the common stock of
NLIC to Nationwide Financial Services, Inc. (NFS). NFS was formed by
Nationwide Corp. in November 1996 as a holding company for members of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. NLIC and its subsidiaries are
collectively referred to as "the Company."
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with generally accepted
accounting principles, which differ from statutory accounting practices
prescribed or permitted by regulatory authorities, for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial information
included herein reflects all adjustments (all of which are normal and
recurring in nature) which are, in the opinion of management, necessary
for a fair presentation of financial position and results of
operations. Operating results for all periods presented are not
necessarily indicative of the results that may be expected for the full
year. All significant intercompany balances and transactions have been
eliminated. The accompanying unaudited consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and related notes for the year ended December 31,
1996 included in the Company's annual report on Form 10-K.
Certain items in the prior period consolidated financial statements
have been reclassified to conform to the current period presentation.
(2) Dividends and Capital Contributions
-----------------------------------
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the common stock of certain subsidiaries
classified as discontinued operations. As of and during the year ended
December 31, 1996, these previously wholly owned subsidiaries of NLIC
were classified as discontinued operations since they do not offer or
distribute long-term savings and retirement products. The dividend was
paid by NLIC on January 1, 1997.
On February 24, 1997, NLIC paid a dividend to NFS, which made an
equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. NLIC recognized a
gain of $14.4 million on the transfer of securities.
On March 10, 1997 and March 11, 1997, NFS made cash capital
contributions to NLIC totaling $836.8 million.
<PAGE> 67
Part C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) Financial Statements:
(1) Financial statements and schedule included in Prospectus
(Part A):
Condensed Financial Information
(2) Financial statements and schedule included in Part B:
Those financial statements and schedule 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.
Statement of Assets, Liabilities and Contract Owners' Equity
as of December 31, 1996.
Statement of Operations and Changes in Contract Owners'
Equity for the years ended December 31, 1996, 1995,and 1994.
Notes to Financial Statements.
Schedules of Changes in Unit Value.
Statements of Assets, Liabilities and Contract Owners' Equity
as of June 30, 1997 (unaudited).
Statements of Operations and Changes in Owners' Equity,
Six Month period ended June 30, 1997 and 1996 (unaudited).
Notes to Financial Statements as of June 30, 1997
and 1996 (unaudited).
Nationwide Life Insurance Company:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Shareholder's Equity for the years
ended December 31, 1996,1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Consolidated Balance Sheets (unaudited) for nine months ended
September 30, 1997 and 1996.
Consolidated Statements of Income (unaudited) for three and
nine months ended September 30, 1997.
Consolidated Statements of Shareholder's Equity (unaudited)
for nine months ended September 30, 1997 and 1996.
Consolidated Statements of Cash Flows (unaudited) for nine
months ended September 30, 1997 and 1996.
Notes to Unaudited Consolidated Financial Statements for nine
months ended September 30, 1997.
</TABLE>
110 of 133
<PAGE> 68
<TABLE>
<S> <C>
Schedule I - Consolidated Summary of Investments -
Other Than Investments in Related Parties.
Schedule III - Supplementary Insurance Information.
Schedule IV - Reinsurance.
Schedule V - Valuation and Qualifying Accounts.
</TABLE>
111 of 133
<PAGE> 69
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.
112 of 133
<PAGE> 70
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
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main 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
Henry S. Holloway Chairman of the Board
1247 Stafford Road and Director
Darlington, MD 21034
Dimon Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
113 of 133
<PAGE> 71
<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
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
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
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
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
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
114 of 133
<PAGE> 72
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Marketing, Innovation and Compliance
Columbus, OH 43215
Ronald L. Eppley Vice President -
One Nationwide Plaza Applications 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 Vice President -
One Nationwide Plaza Product and Market Compliance
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
115 of 133
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware 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
California Cash Management Company California Investment Securities Agent
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies
placed through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
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 Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency Texas Insurance Broker
of Texas, Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative
and Claims Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
** Employers Life Insurance Wisconsin Life Insurance Company
Company of Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
</TABLE>
116 of 133
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
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 York Workers Compensation Claims
New York, Inc. Administration
Gates, McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New York Life Insurance Agency
New 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 Michigan Insurance Company
National Casualty Company of Great Britain Insurance Company
America, Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment
Manager and Administrator
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 Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within
Redevelopment Corporation the City of Columbus, Ohio
</TABLE>
117 of 133
<PAGE> 75
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
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 Development Company Ohio Owns, leases and manages commercial real
estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation Michigan Investment Company
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 Develops and operates Managed Care
Delivery System
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio 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 of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
</TABLE>
118 of 133
<PAGE> 76
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
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 Investor Services, Delaware Life Insurance Agency
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
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 Administrators Deferred
Corporation Compensation 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 Excess and surplus lines 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
</TABLE>
119 of 133
<PAGE> 77
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
(SEE ATTACHED
STATE CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
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>
120 of 133
<PAGE> 78
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED 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
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Life 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-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 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 Variable Account-II 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
* 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>
121 of 133
<PAGE> 79
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (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 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |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% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $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 CALIFORNIA | | | 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% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (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 |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| 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 | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | 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 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--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 | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
(Center)
<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 | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| 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 | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| 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: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Partnership Interest -- Dotted Line
March 6, 1997
Page 2
</TABLE>
<PAGE> 85
Item 27. Number of Contract Owners
The number of Owners of Contracts as of February 28, 1997 was 2726.
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 Investing
Foundation II and Nationwide Asset Allocation Trust, 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 Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
</TABLE>
124 of 133
<PAGE> 86
<TABLE>
<S> <C>
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President - General
One Nationwide Plaza Manager and Acting Treasurer
Columbus, OH 43215
Edwin P. McCausland Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Charles Bath Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Rae M. Pollina 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
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
<S> <C>
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
</TABLE>
125 of 133
<PAGE> 87
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.
126 of 133
<PAGE> 88
- --------------------------------------------------------------------------------
PROSPECTUS
-------------------------------------------------------------------------------
[LOGO] 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
- --------------------------------------------------------------------------------
127 of 133
<PAGE> 89
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' 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 31, 1997, included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, 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 22, 1997
128 of 133
<PAGE> 90
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 27th
day of February, 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 27th day of February, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------------------
Lewis J. Alphin
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/Chief Operating Officer and Director
- ------------------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- -----------------------------------------
Henry S. Holloway
DIMON RICHARD MCFERSON Chairman and Chief Executive Officer - Nationwide Insurance
- ------------------------------------------ Enterprise and Director
Dimon Richard McFerson
DAVID O. MILLER Director
- ------------------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-Chief Financial Officer
- ------------------------------------------
Robert A. Oakley
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>
129 of 133
<PAGE> 91
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B,
Nationwide VA Separate Account-C and Nationwide VA Separate Account-Q; and the
registration of fixed interest rate options subject to a market value adjustment
offered under some or all of the aforementioned individual Variable Annuity
Contracts in connection with Nationwide Multiple Maturity Separate Account and
Nationwide Multiple Maturity Separate Account-A, and the registration of Group
Flexible Fund Retirement Contracts in connection with Nationwide DC Variable
Account, Nationwide DCVA-II, and NACo Variable Account; and the registration of
Group Common Stock Variable Annuity Contracts in connection with Separate
Account No. 1; and the registration of variable life insurance policies in
connection with Nationwide VLI Separate Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4,
Nationwide VL Separate Account-A, Nationwide VL Separate Account-B, and
Nationwide VL Separate Account-C, and hereby constitutes and appoints Dimon R.
McFerson, Joseph J. Gasper, W. Sidney Druen, Mark R. Thresher, and Joseph P.
Rath, and each of them with power to act without the others, his/her attorney,
with full power of substitution and resubstitution, for and in his/her name,
place and stead, in any and all capacities, to approve, and sign such
Registration Statements and any and all amendments thereto, with power to affix
the corporate seal of said corporation thereto and to attest said seal and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the U.S. Securities and Exchange Commission, hereby granting
unto said attorneys, and each of them, full power and authority to do and
perform all and every act and thing requisite to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming that which
said attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 22nd day of July, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President - Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
