<PAGE> 1
[NACO LOGO]
NACO
VARIABLE
ACCOUNT
[GRAPHIC]
ANNUAL REPORT
TO
PARTICIPANTS AND RETIRED PARTICIPANTS
DECEMBER 31, 1997
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
[NATIONWIDE LOGO]
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO OF PRESIDENT GASPER]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 1997 annual
report of the NACo Variable Account.
Equity markets ended a volatile season to record the third straight year of
gains topping the 20 percent mark. Additionally, returns on fixed income
investments were buoyed by declining inflation, steady Federal Reserve policy
and the positive outlook for lower budget deficits.
The U.S. economy continues to be strong into 1998. However, there is still much
uncertainty about what effect the Southeast Asian crisis will have on our
economy during this year. The obvious result, we believe, will be a slowing of
economic growth due to reduced exports, restrained pricing flexibility and lower
corporate profits. We expect the Federal Reserve will continue to stay on the
sidelines as the Southeast Asian economic turmoil plays out. At the same time,
low inflation and low interest rates should continue to provide a healthy
environment for financial assets.
We are committed to our customers as our most valuable asset. Our commitment to
you is to continue to add value to our products and services to help you achieve
your financial planning and retirement goals. As always, we welcome and
encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
3
<PAGE> 3
CONTENTS
HOW TO READ THE ANNUAL REPORT .............................................. 5
Explanation on how to read and understand
the various financial reports
FUND PERFORMANCES .......................................................... 6
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY ............... 8
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY ................................................. 10
NOTES TO FINANCIAL STATEMENTS .............................................. 18
INDEPENDENT AUDITORS' REPORT ............................................... 30
4
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HOW TO READ THE ANNUAL REPORT
This Annual Report is sent to all customers who own a Nationwide annuity with
all or some of the funds in the NACo Variable Account (the Account). The Account
is a separate account trust which offers investment options in twenty-eight
mutual funds from sixteen mutual fund houses.
The Annual Report has two major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, beginning on page 8, lists all the funds in the Account, the
number of shares owned, the amount paid for the shares (i.e., cost) and their
market value on December 31, 1997. The funds are presented in alphabetical
order. The market value of the assets change as the underlying mutual fund
shares change in value. As contract owners make exchanges between the funds, the
number of shares in each fund increases and decreases. When money is deposited
(withdrawn) by contract owners, shares of the mutual funds are bought (sold) by
the Account. The total market value of the funds is equal to the Total
investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares or reinvested dividend shares added to the contract owners'
accounts, but not yet added to Total investments. Total investments plus
Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 21.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 10, show the activity in the Account for the
periods stated herein.
The Investment activity section shows the changes in unrealized gain (loss) of
the mutual funds in the Account, realized gain (loss) as shares of the funds are
bought (sold), mortality, expense and administration charges which are assessed
through the daily unit value calculations, and dividends and capital gains
earnings from the underlying mutual funds.
The Equity transactions section illustrates the receipt of purchase payments by
the Account as new contracts are sold, existing contract owners deposit
additional funds; and deductions from the Account when money is withdrawn,
contracts are canceled, annuity benefits are paid, and annual contract
maintenance charges and contingent deferred sales charges are assessed.
Net change in contract owners' equity equals Investment activity plus Equity
transactions.
The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
As you review the following pages of the Annual Report, the Notes to Financial
Statements, beginning on page 18, will also help explain and clarify the various
statements and schedules.
5
<PAGE> 5
FUND PERFORMANCES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN: NON-STANDARDIZED ++
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------------------------------
YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
1997 1996 1/1/95- 1/1/93- 1/1/88-
FUNDS + 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH FUNDS
American Century: Twentieth Century Growth Fund* 28.06% 13.92% 20.26% 11.77% 14.29%
Mass. Investors Growth Stock Fund* 46.75% 21.67% 31.43% 18.92% 16.98%
Putnam Voyager Fund 24.79% 11.73% 24.63% 17.70% 17.92%
GROWTH FUNDS
American Century: Twentieth Century Ultra Fund 21.97% 12.77% 23.33% 16.66% 20.74%
Dreyfus Third Century Fund 28.15% 23.15% 28.52% 15.20% 15.09%
Fidelity Contrafund 21.84% 20.78% 25.71% 18.54% 21.86%
Fidelity Magellan(R) Fund 25.40% 10.63% 23.42% 17.69% 17.76%
Fidelity OTC Portfolio 8.87% 22.56% 22.25% 13.62% 16.80%
MFS(R) Growth Opportunities Fund* 22.12% 20.71% 25.23% 16.50% 13.71%
Nationwide(R) Growth Fund* 25.04% 15.59% 22.60% 15.35% 13.87%
Putnam Investors Fund 33.22% 20.25% 29.72% 19.57% 16.29%
Seligman Growth Fund, Inc. 16.99% 19.99% 21.34% 12.40% 13.64%
GROWTH AND INCOME FUNDS
Evergreen Income and Growth Fund* 24.40% 11.82% 19.51% 12.09% 11.21%
Fidelity Equity-Income Fund 28.76% 19.87% 26.31% 19.18% 15.58%
Fidelity Puritan(R) Fund 21.19% 14.06% 18.48% 15.09% 13.96%
Investment Company of America(R)** 28.58% 18.22% 25.29% 16.62% 15.26%
Nationwide(R) Fund 38.31% 22.75% 29.78% 18.16% 16.52%
Neuberger & Berman Guardian Fund 16.82% 16.76% 21.31% 15.05% 16.37%
INCOME FUNDS
Bond Fund of America(SM), Inc.** 8.20% 5.69% 10.23% 7.34% 8.71%
Fidelity Capital & Income Fund* 13.62% 10.34% 13.18% 11.13% 10.90%
MAS Funds - Fixed Income Portfolio 8.57% 6.34% 10.83% 7.56% 8.88%
MFS(R) High Income Fund 11.78% 11.48% 13.08% 10.53% 9.66%
INDEX
SEI Index Funds S&P 500 Index Portfolio 31.82% 21.46% 29.63% 18.84% 16.58%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) 1.73% 14.89% 8.85% 11.97% 9.58%
Templeton Foreign Fund 5.64% 16.88% 10.78% 12.87% 11.46%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund 6.12% 2.59% 6.99% 4.77% 6.52%
MONEY MARKET FUND
Nationwide(R) Money Market Fund 4.12% 3.98% 4.20% 3.39% 4.45%
U.S. TREASURY MONEY MARKET FUND
AIM STIT - Treasury Portfolio 4.54% 4.40% 4.63% 3.84% 4.90%
S&P 500 *** 33.36% 22.96% 31.15% 20.26% 18.05%
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
*** The S & P 500 is a stock market index which assumes investment in the 500
largest available stocks. This unmanaged index is normally used as a
comparison or benchmark against equity mutual funds.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able
to maintain a stable net asset value of $1 per share.
++ SEC and NASD regulations require that any reporting of product performance
be accompanied by standardized data and the disclosures are on the
following page. Please review this information and a product prospectus
before investing.
NOTE: The above illustration represents past performance based on a $1,000
hypothetical Investment and reflects the deduction of an actuarial risk fee
which is equivalent to 0.95% on an annualized basis. The results shown represent
past performance and should not be considered a representation of performance or
investor experience of the funds in the future. Investment returns and principal
are not guaranteed under these variable options. The unit values at the time of
redemption may be worth more or less than their original cost.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
Sources: Nationwide Advisory Services
Computer Directions Advisors, Inc.
6
<PAGE> 6
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN: STANDARDIZED
PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------------------------------
YEAR YEAR 3 YEARS 5 YEARS 10 YEARS
1997 1996 1/1/95- 1/1/93- 1/1/88-
FUNDS + 12/31/97 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH FUNDS
American Century: Twentieth Century Growth Fund* 24.06% 9.92% 19.33% 11.25% 14.17%
Mass. Investors Growth Stock Fund* 42.75% 17.67% 30.65% 18.51% 16.88%
Putnam Voyager Fund 20.79% 7.73% 23.76% 17.28% 17.83%
GROWTH FUNDS
American Century: Twentieth Century Ultra Fund 17.97% 8.77% 22.44% 16.23% 20.66%
Dreyfus Third Century Fund 24.15% 19.15% 27.71% 14.75% 14.98%
Fidelity Contrafund 17.84% 16.78% 24.86% 18.13% 21.80%
Fidelity Magellan(R) Fund 21.40% 6.63% 22.54% 17.27% 17.67%
Fidelity OTC Portfolio 4.87% 18.56% 21.35% 13.14% 16.70%
MFS(R) Growth Opportunities Fund* 18.12% 16.71% 24.37% 16.06% 13.59%
Nationwide(R) Growth Fund* 21.04% 11.59% 21.70% 14.90% 13.75%
Putnam Investors Fund 29.22% 16.25% 28.92% 19.17% 16.19%
Seligman Growth Fund, Inc. 12.99% 15.99% 20.43% 11.90% 13.51%
GROWTH AND INCOME FUNDS
Evergreen Income and Growth Fund* 20.40% 7.82% 18.56% 11.58% 11.06%
Fidelity Equity-Income Fund 24.76% 15.87% 25.47% 18.78% 15.47%
Fidelity Puritan(R) Fund 17.19% 10.06% 17.52% 14.63% 13.83%
Investment Company of America(R)** 24.58% 14.22% 24.44% 16.19% 15.14%
Nationwide(R) Fund 34.31% 18.75% 28.99% 17.75% 16.42%
Neuberger & Berman Fund Guardian Fund 12.82% 12.76% 20.39% 14.59% 16.27%
INCOME FUNDS
Bond Fund of America(SM), Inc.** 4.20% 1.69% 9.12% 6.73% 8.52%
Fidelity Capital & Income Fund* 9.62% 6.34% 12.13% 10.60% 10.74%
MAS Funds - Fixed Income Portfolio 4.57% 2.34% 9.73% 6.95% 8.70%
MFS(R) High Income Fund 7.78% 7.48% 12.03% 9.99% 9.48%
INDEX FUND
SEI Index Funds S&P 500 Index Portfolio 27.82% 17.46% 28.83% 18.44% 16.48%
INTERNATIONAL FUNDS
T. Rowe Price International Stock Fund(R) -2.27% 10.89% 7.71% 11.46% 9.41%
Templeton Foreign Fund 1.64% 12.88% 9.68% 12.37% 11.31%
GOVERNMENT BOND FUND
Federated U.S. Government Securities Fund 2.12% -1.41% 5.81% 4.10% 6.29%
MONEY MARKET FUND
Nationwide(R) Money Market Fund 0.12% -0.02% 2.96% 2.68% 4.17%
U.S. TREASURY MONEY MARKET FUND
AIM STIT - Treasury Portfolio 0.54% 0.40% 3.40% 3.14% 4.63%
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able
to maintain a stable net asset value of $1 per share.
NOTE: The above illustration represents past fund performance based on a $1,000
hypothetical Investment. The performance figures reflect the deduction of a
0.95% annual asset fee and the maximum contingent deferred sales charge that
would apply only in the event that this Variable Annuity contract is terminated
by your employer.
Investment principal and investment returns are not guaranteed under these
variable options. Unit values at the time of redemption may be worth more or
less than their original cost. The results shown above should not be considered
a representation of performance or investor experience of the funds in the
future.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
7
<PAGE> 7
NACO VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
4,291,370 shares (cost $88,601,874) ............................................................. $ 103,035,805
American Century: Twentieth Century Ultra Fund (ACTCUltra)
8,004,428 shares (cost $216,934,024) ............................................................ 218,520,874
The Bond Fund of America(SM), Inc. (BdFdAm)
1,062,195 shares (cost $14,617,410) ............................................................. 14,870,732
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
5,002,424 shares (cost $45,056,483) ............................................................. 52,575,475
Evergreen Income and Growth Fund - Class Y (EvIncGro)
168,957 shares (cost $3,368,230) ................................................................ 4,043,133
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
404,319 shares (cost $4,264,947) ................................................................ 4,297,907
Fidelity Capital & Income Fund (FidCapInc)
265,562 shares (cost $2,237,282) ................................................................ 2,658,279
Fidelity Contrafund (FidContr)
6,884,041 shares (cost $270,249,054) ............................................................ 321,002,831
Fidelity Equity-Income Fund (FidEqInc)
6,743,244 shares (cost $239,634,342) ............................................................ 353,413,444
Fidelity Magellan(R) Fund (FidMgln)
1,306,291 shares (cost $104,252,765) ............................................................ 124,450,301
Fidelity OTC Portfolio (FidOTC)
941,944 shares (cost $31,926,103) ............................................................... 31,508,034
Fidelity Puritan(R) Fund (FidPurtn)
1,634,297 shares (cost $28,386,708) ............................................................. 31,672,685
The Investment Company of America(R) (InvCoAm)
2,554,066 shares (cost $57,497,295) ............................................................. 72,152,374
MAS Funds - Fixed Income Portfolio (MASFIP)
226,135 shares (cost $2,700,953) ................................................................ 2,695,530
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,146,474 shares (cost $13,461,885) ............................................................. 15,958,923
MFS(R) High Income Fund - Class A (MFSHiInc)
2,601,403 shares (cost $14,193,356) ............................................................. 14,385,760
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,031,758 shares (cost $11,575,941) ............................................................. 12,814,439
Nationwide(R) Fund (NWFund)
3,363,858 shares (cost $68,052,739) ............................................................. 89,108,593
</TABLE>
8
<PAGE> 8
<TABLE>
<S> <C>
Nationwide(R) Growth Fund (NWGroFd)
523,849 shares (cost $6,208,414) ................................................................ 7,669,144
Nationwide(R) Money Market Fund (NWMyMkt)
44,019,657 shares (cost $44,019,657) ............................................................ 44,019,657
Neuberger & Berman Guardian Fund (NBGuard)
1,546,964 shares (cost $40,472,926) ............................................................. 40,066,366
Putnam Investors Fund - Class A (PutInvFd)
5,331,304 shares (cost $50,456,063) ............................................................. 59,923,856
Putnam Voyager Fund - Class A (PutVoyFd)
10,519,384 shares (cost $161,006,964) ........................................................... 200,394,263
SEI Index Funds - S&P 500 Index Portfolio (SEI500lx)
1,891,075 shares (cost $50,913,658) ............................................................. 57,961,448
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,596,635 shares (cost $9,021,423) .............................................................. 9,707,543
Short-Term Investments Trust - Treasury Portfolio - Institutional Class (AIMTreas)
4,160,006 shares (cost $4,160,006) .............................................................. 4,160,006
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
2,136,462 shares (cost $31,045,917) ............................................................. 28,671,326
Templeton Foreign Fund - Class I (TemForFd)
4,876,616 shares (cost $50,264,551) ............................................................. 48,522,327
-------------
Total investments ............................................................................ 1,970,261,055
Accounts receivable ................................................................................... 599,224
-------------
Total assets ................................................................................. 1,970,860,279
ACCOUNTS PAYABLE ......................................................................................... 66,032
-------------
CONTRACT OWNERS' EQUITY (NOTE 4) ......................................................................... $ 1,970,794,247
=============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 9
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACTCGRO
-------------- ------------- ----------- -----------
1997 1996 1997 1996
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 21,526,606 18,399,398 - 1,237,485
Mortality and expense charges (note 2) ............. (8,687,459) (6,124,188) (597,743) (773,702)
Administration charge (note 2)
Tier I ....................................... (3,835,645) (2,597,055) (241,160) (321,103)
Tier II ...................................... (1,270,800) (836,073) (106,219) (117,371)
Tier III ..................................... (639,538) (432,408) (42,450) (57,199)
Tier IV ...................................... (235,537) (589,120) (19,525) (69,950)
Tier V ....................................... (354,719) - (23,235) -
-------------- ------------- ----------- -----------
Net investment activity .......................... 6,502,908 7,820,554 (1,030,332) (101,840)
Proceeds from mutual fund shares sold .............. 390,188,601 129,158,279 76,437,716 21,718,951
Cost of mutual fund shares sold .................... (330,761,963) (119,175,064) (77,270,118) (19,610,019)
-------------- ------------- ----------- -----------
Realized gain (loss) on investments .............. 59,426,638 9,983,215 (832,402) 2,108,932
Change in unrealized gain (loss) on investments .... 133,294,095 79,007,949 13,050,693 15,963,893
-------------- ------------- ----------- -----------
Net gain (loss) on investments ................... 192,720,733 88,991,164 12,218,291 18,072,825
-------------- ------------- ----------- -----------
Reinvested capital gains ........................... 158,561,197 78,266,596 15,163,270 1,663,504
-------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 357,784,838 175,078,314 26,351,229 19,634,489
-------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 428,935,376 318,493,085 9,656,125 16,288,513
Transfers between funds ............................ - - (67,825,676) (26,081,481)
Redemptions ........................................ (222,355,417) (71,502,064) (15,764,285) (8,867,521)
Adjustments to maintain reserves ................... (104,195) (127,810) 1,467 (8,235)
-------------- ------------- ----------- -----------
Net equity transactions ........................ 206,475,764 246,863,211 (73,932,369) (18,668,724)
Net change in contract owners' equity .............. 564,260,602 421,941,525 (47,581,140) 965,765
Contract owners' equity beginning of period ........ 1,406,533,645 984,592,120 150,619,441 149,653,676
-------------- ------------- ----------- -----------
Contract owners' equity end of period .............. $1,970,794,247 1,406,533,645 103,038,301 150,619,441
============== ============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACTCULTRA BDFDAM
-------------- ------------ ----------- -----------
1997 1996 1997 1996
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 83,084 - 1,010,649 983,502
Mortality and expense charges (note 2) ............. (953,698) (648,777) (71,217) (68,410)
Administration charge (note 2)
Tier I ....................................... (405,576) (271,468) (32,333) (31,741)
Tier II ...................................... (141,718) (87,166) (10,968) (8,216)
Tier III ..................................... (62,578) (43,731) (5,391) (4,757)
Tier IV ...................................... (28,453) (66,121) (1,857) (5,977)
Tier V ....................................... (45,144) - (2,386) -
-------------- ------------ ----------- -----------
Net investment activity .......................... (1,554,083) (1,117,263) 886,497 864,401
Proceeds from mutual fund shares sold .............. 30,918,833 10,123,449 6,105,619 3,918,729
Cost of mutual fund shares sold .................... (20,795,085) (7,647,599) (5,779,601) (4,170,224)
-------------- ------------ ----------- -----------
Realized gain (loss) on investments .............. 10,123,748 2,475,850 326,018 (251,495)
Change in unrealized gain (loss) on investments .... (17,363,508) 5,194,710 (75,230) 120,398
-------------- ------------ ----------- -----------
Net gain (loss) on investments ................... (7,239,760) 7,670,560 250,788 (131,097)
-------------- ------------ ----------- -----------
Reinvested capital gains ........................... 44,171,059 8,455,551 - -
-------------- ------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 35,377,216 15,008,848 1,137,285 733,304
-------------- ------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 53,715,959 44,415,944 2,197,440 2,665,962
Transfers between funds ............................ 3,392,831 (123,456) (571,835) (1,815,612)
Redemptions ........................................ (23,610,763) (9,988,739) (1,874,029) (1,020,041)
Adjustments to maintain reserves ................... (32,791) 4,505 (934) (388)
-------------- ------------ ----------- -----------
Net equity transactions ........................ 33,465,236 34,308,254 (249,358) (170,079)
Net change in contract owners' equity .............. 68,842,452 49,317,102 887,927 563,225
Contract owners' equity beginning of period ........ 149,650,009 100,332,907 13,981,906 13,418,681
-------------- ------------ ----------- -----------
Contract owners' equity end of period .............. $ 218,492,461 149,650,009 14,869,833 13,981,906
============== ============ =========== ===========
</TABLE>
10
<PAGE> 10
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Dry3dCen EvincGro
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 91,287 58,249 195,572 230,814
Mortality and expense charges (note 2) ................... (221,903) (128,394) (21,028) (22,935)
Administration charge (note 2)
Tier I ............................................. (97,392) (55,900) (9,235) (9,315)
Tier II ............................................ (34,054) (16,664) (2,503) (2,088)
Tier III ........................................... (11,626) (7,707) (1,203) (1,899)
Tier IV ............................................ (7,396) (13,044) (764) (2,724)
Tier V ............................................. (9,978) - (1,117) -
------------ ------------ ------------ ------------
Net investment activity ................................ (291,062) (163,460) 159,722 191,853
Proceeds from mutual fund shares sold .................... 4,764,654 2,082,457 1,435,669 812,536
Cost of mutual fund shares sold .......................... (3,479,290) (1,902,636) (1,298,478) (810,548)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,285,364 179,821 137,191 1,988
Change in unrealized gain (loss) on investments .......... 5,489,938 1,051,717 361,146 299,106
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 6,775,302 1,231,538 498,337 301,094
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 4,107,891 4,062,877 250,452 -
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 10,592,131 5,130,955 908,511 492,947
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 9,531,871 4,367,438 219,542 263,265
Transfers between funds .................................. 6,920,263 1,020,985 (890,063) (690,152)
Redemptions .............................................. (4,743,489) (1,289,248) (615,031) (236,697)
Adjustments to maintain reserves ......................... (2,888) (1,444) (227) (57)
------------ ------------ ------------ ------------
Net equity transactions .............................. 11,705,757 4,097,731 (1,285,779) (663,641)
Net change in contract owners' equity .................... 22,297,888 9,228,686 (377,268) (170,694)
Contract owners' equity beginning of period .............. 30,274,825 21,046,139 4,420,173 4,590,867
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 52,572,713 30,274,825 4,042,905 4,420,173
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FedUSGvt FidCapInc
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 209,493 165,458 200,858 254,679
Mortality and expense charges (note 2) ............... (18,574) (15,988) (14,160) (15,511)
Administration charge (note 2)
Tier I ......................................... (7,959) (6,388) (5,604) (5,478)
Tier II ........................................ (2,671) (1,708) (1,301) (1,341)
Tier III ....................................... (799) (702) (1,998) (2,553)
Tier IV ........................................ (688) (2,234) (614) (1,397)
Tier V ......................................... (1,002) - (434) -
------------ ------------- ------------- -------------
Net investment activity ............................ 177,800 138,438 176,747 228,399
Proceeds from mutual fund shares sold ................ 3,311,692 1,121,910 708,617 402,846
Cost of mutual fund shares sold ...................... (3,290,687) (1,104,963) (510,739) (303,343)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 21,005 16,947 197,878 99,503
Change in unrealized gain (loss) on investments ...... 34,443 (74,664) (9,038) (32,719)
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 55,448 (57,717) 188,840 66,784
------------ ------------- ------------- -------------
Reinvested capital gains ............................. - - - -
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 233,248 80,721 365,587 295,183
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 845,763 917,785 13 79
Transfers between funds .............................. 373,832 (15,253) (236,823) (206,511)
Redemptions .......................................... (638,843) (302,046) (447,420) (151,301)
Adjustments to maintain reserves ..................... (213) (236) (261) (258)
------------ ------------- ------------- -------------
Net equity transactions .......................... 580,539 600,250 (684,491) (357,991)
Net change in contract owners' equity ................ 813,787 680,971 (318,904) (62,808)
Contract owners' equity beginning of period .......... 3,483,920 2,802,949 2,976,924 3,039,732
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 4,297,707 3,483,920 2,658,020 2,976,924
============ ============= ============= =============
</TABLE>
(Continued)
11
<PAGE> 11
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidContr FidEqInc
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,195,540 1,729,074 6,194,440 5,475,347
Mortality and expense charges (note 2) ................... (1,359,850) (798,784) (1,565,778) (1,122,012)
Administration charge (note 2)
Tier I ............................................. (616,290) (344,719) (659,522) (446,967)
Tier II ............................................ (203,894) (114,869) (215,189) (139,206)
Tier III ........................................... (95,933) (53,673) (143,887) (98,535)
Tier IV ............................................ (39,669) (73,089) (32,619) (114,864)
Tier V ............................................. (48,345) - (72,789) -
------------ ------------ ------------ ------------
Net investment activity ................................ (168,441) 343,940 3,504,656 3,553,763
Proceeds from mutual fund shares sold .................... 21,045,430 1,366,015 28,097,646 2,277,100
Cost of mutual fund shares sold .......................... (13,726,446) (1,138,648) (13,468,143) (1,372,592)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 7,318,984 227,367 14,629,503 904,508
Change in unrealized gain (loss) on investments .......... 19,495,166 16,820,570 46,925,897 25,291,931
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 26,814,150 17,047,937 61,555,400 26,196,439
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 27,727,162 12,840,593 13,064,496 10,075,492
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 54,372,871 30,232,470 78,124,552 39,825,694
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 80,513,062 56,201,369 50,674,836 37,458,833
Transfers between funds .................................. 17,826,645 10,119,538 11,399,955 1,709,515
Redemptions .............................................. (33,838,679) (8,109,140) (39,688,848) (9,799,106)
Adjustments to maintain reserves ......................... (25,668) (82,591) (5,107) (10,973)
------------ ------------ ------------ ------------
Net equity transactions .............................. 64,475,360 58,129,176 22,380,836 29,358,269
Net change in contract owners' equity .................... 118,848,231 88,361,646 100,505,388 69,183,963
Contract owners' equity beginning of period .............. 202,139,639 113,777,993 252,903,435 183,719,472
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $320,987,870 202,139,639 353,408,823 252,903,435
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidMgIn FidOTC
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................... $ 1,505,116 1,231,059 - 23,360
Mortality and expense charges (note 2) .................. (556,391) (470,560) (130,795) (45,939)
Administration charge (note 2)
Tier I ............................................ (265,730) (210,832) (56,929) (18,847)
Tier II ........................................... (82,339) (67,570) (17,458) (5,450)
Tier III .......................................... (40,641) (30,164) (8,619) (2,930)
Tier IV ........................................... (14,355) (40,626) (3,645) (5,320)
Tier V ............................................ (16,376) - (6,672) -
------------ ------------- ------------- -------------
Net investment activity ............................... 529,284 411,307 (224,118) (55,126)
Proceeds from mutual fund shares sold ................... 12,485,988 9,511,017 7,535,213 5,210,061
Cost of mutual fund shares sold ......................... (9,950,443) (9,021,392) (6,716,721) (4,935,771)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................... 2,535,545 489,625 818,492 274,290
Change in unrealized gain (loss) on investments ......... 15,085,951 (5,107,582) (488,087) 192,680
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................ 17,621,496 (4,617,957) 330,405 466,970
------------ ------------- ------------- -------------
Reinvested capital gains ................................ 6,362,186 13,496,407 2,202,654 1,432,109
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 24,512,966 9,289,757 2,308,941 1,843,953
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ....................................... 25,481,895 31,416,476 11,403,571 5,657,606
Transfers between funds ................................. (7,601,758) (21,447,207) 7,515,284 2,619,455
Redemptions ............................................. (13,965,007) (6,185,751) (3,842,544) (953,105)
Adjustments to maintain reserves ........................ (3,444) (3,719) (3,592) 2,639
------------ ------------- ------------- -------------
Net equity transactions ............................. 3,911,686 3,779,799 15,072,719 7,326,595
Net change in contract owners' equity ................... 28,424,652 13,069,556 17,381,660 9,170,548
Contract owners' equity beginning of period ............. 96,022,426 82,952,870 14,122,665 4,952,117
------------ ------------- ------------- -------------
Contract owners' equity end of period ................... $124,447,078 96,022,426 31,504,325 14,122,665
============ ============= ============= =============
</TABLE>
12
<PAGE> 12
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FIDPURTN INVCOAM
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,002,542 663,018 1,117,268 858,735
Mortality and expense charges (note 2) ................... (137,123) (92,533) (310,471) (201,765)
Administration charge (note 2)
Tier I ............................................. (66,667) (42,011) (147,489) (98,152)
Tier II ............................................ (21,034) (14,101) (56,789) (31,791)
Tier III ........................................... (8,864) (4,836) (20,464) (10,503)
Tier IV ............................................ (3,289) (8,068) (5,858) (14,185)
Tier V ............................................. (4,128) - (8,057) -
------------ ------------ ------------ ------------
Net investment activity ................................ 761,437 501,469 568,140 502,339
Proceeds from mutual fund shares sold .................... 3,662,742 962,001 4,672,687 675,337
Cost of mutual fund shares sold .......................... (2,886,331) (865,169) (2,891,566) (513,445)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 776,411 96,832 1,781,121 161,892
Change in unrealized gain (loss) on investments .......... 2,156,757 169,722 6,778,676 4,136,181
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 2,933,168 266,554 8,559,797 4,298,073
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 1,480,106 1,666,308 6,012,594 1,928,126
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 5,174,711 2,434,331 15,140,531 6,728,538
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 8,122,684 7,953,081 14,055,579 10,683,322
Transfers between funds .................................. 359,606 (1,017,005) 2,266,399 378,502
Redemptions .............................................. (3,573,534) (916,941) (7,025,850) (1,818,340)
Adjustments to maintain reserves ......................... (346) (2,681) (636) (1,655)
------------ ------------ ------------ ------------
Net equity transactions .............................. 4,908,410 6,016,454 9,295,492 9,241,829
Net change in contract owners' equity .................... 10,083,121 8,450,785 24,436,023 15,970,367
Contract owners' equity beginning of period .............. 21,589,381 13,138,596 47,716,024 31,745,657
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 31,672,502 21,589,381 72,152,047 47,716,024
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MASFIP MFSGROPP
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... $ 138,468 80,179 - -
Mortality and expense charges (note 2) ..................... (10,147) (5,596) (81,246) (74,504)
Administration charge (note 2)
Tier I ............................................... (5,562) (2,333) (36,299) (32,153)
Tier II .............................................. (1,154) (809) (11,776) (9,036)
Tier III ............................................. (317) (322) (6,917) (7,134)
Tier IV .............................................. (281) (582) (2,083) (6,237)
Tier V ............................................... (387) - (2,838) -
------------ ------------- ------------- -------------
Net investment activity .................................. 120,620 70,537 (141,159) (129,064)
Proceeds from mutual fund shares sold ...................... 1,286,155 507,874 2,859,690 1,150,785
Cost of mutual fund shares sold ............................ (1,260,770) (513,015) (2,016,264) (948,141)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ...................... 25,385 (5,141) 843,426 202,644
Change in unrealized gain (loss) on investments ............ (5,429) 991 547,661 996,452
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................... 19,956 (4,150) 1,391,087 1,199,096
------------ ------------- ------------- -------------
Reinvested capital gains ................................... 35,341 15,684 1,975,637 1,657,280
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 175,917 82,071 3,225,565 2,727,312
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 796,916 757,253 289,620 323,809
Transfers between funds .................................... 552,003 238,058 (778,278) (372,651)
Redemptions ................................................ (388,815) (51,714) (2,103,012) (840,556)
Adjustments to maintain reserves ........................... 122 (20) (13,012) (10,408)
------------ ------------- ------------- -------------
Net equity transactions ................................ 960,226 943,577 (2,604,682) (899,806)
Net change in contract owners' equity ...................... 1,136,143 1,025,648 620,883 1,827,506
Contract owners' equity beginning of period ................ 1,559,535 533,887 15,338,362 13,510,856
------------ ------------- ------------- -------------
Contract owners' equity end of period ...................... $ 2,695,678 1,559,535 15,959,245 15,338,362
============ ============= ============= =============
</TABLE>
(Continued)
13
<PAGE> 13
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MFSHIINC MFSGRSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,110,356 889,431 5,750 -
Mortality and expense charges (note 2) ................... (64,630) (52,543) (60,114) (48,355)
Administration charge (note 2)
Tier I ............................................... (27,160) (22,596) (25,523) (19,892)
Tier II .............................................. (8,510) (5,087) (8,400) (5,932)
Tier III ............................................. (4,958) (3,885) (5,187) (3,649)
Tier IV .............................................. (1,712) (5,842) (1,546) (5,102)
Tier V ............................................... (3,381) - (2,624) -
------------ ------------ ------------ ------------
Net investment activity ................................. 1,000,005 799,478 (97,644) (82,930)
Proceeds from mutual fund shares sold .................... 11,436,316 4,588,314 4,936,847 1,966,038
Cost of mutual fund shares sold .......................... (10,796,798) (4,584,436) (4,951,950) (1,887,331)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ...................... 639,518 3,878 (15,103) 78,707
Change in unrealized gain (loss) on investments .......... (181,828) 309,388 2,506,771 (849,763)
------------ ------------ ------------ ------------
Net gain (loss) on investments ........................... 457,690 313,266 2,491,668 (771,056)
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 1,959,714 2,673,340
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 1,457,695 1,112,744 4,353,738 1,819,354
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 2,868,284 1,750,588 1,918,046 1,557,760
Transfers between funds .................................. 346,011 (516,810) (3,240,441) 525,257
Redemptions .............................................. (1,335,492) (693,668) (1,447,659) (513,838)
Adjustments to maintain reserves ......................... 1,475 (1,252) 1,016 (695)
------------ ------------ ------------ ------------
Net equity transactions ................................ 1,880,278 538,858 (2,769,038) 1,568,484
Net change in contract owners' equity .................... 3,337,973 1,651,602 1,584,700 3,387,838
Contract owners' equity beginning of period .............. 11,049,325 9,397,723 11,230,813 7,842,975
------------ ------------ ------------ ------------
Contract owners' equity end of period ...................... $ 14,387,298 11,049,325 12,815,513 11,230,813
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NWFUND NWGROFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 858,226 665,218 60,952 73,925
Mortality and expense charges (note 2) ............... (330,998) (197,452) (38,660) (34,864)
Administration charge (note 2)
Tier I ........................................... (148,673) (83,411) (17,881) (14,949)
Tier II .......................................... (47,277) (30,586) (6,779) (6,067)
Tier III ......................................... (25,296) (11,762) (2,338) (1,259)
Tier IV .......................................... (9,148) (18,775) (622) (3,428)
Tier V ........................................... (12,503) - (1,460) -
------------ ------------- ------------- -------------
Net investment activity ............................ 284,331 323,232 (6,788) 13,358
Proceeds from mutual fund shares sold ................ 6,266,837 2,896,804 1,515,017 589,678
Cost of mutual fund shares sold ...................... (3,680,205) (2,273,962) (992,381) (443,098)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 2,586,632 622,842 522,636 146,580
Change in unrealized gain (loss) on investments ...... 13,332,389 4,317,064 283,755 350,942
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 15,919,021 4,939,906 806,391 497,522
------------ ------------- ------------- -------------
Reinvested capital gains ............................. 4,357,194 2,639,185 928,742 474,821
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 20,560,546 7,902,323 1,728,345 985,701
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 17,504,981 5,816,573 423,584 540,709
Transfers between funds .............................. 15,259,707 (221,892) (580,789) (505,058)
Redemptions .......................................... (8,674,178) (2,632,012) (1,098,214) (251,120)
Adjustments to maintain reserves ..................... (2,327) (1,901) (35) (308)
------------ ------------- ------------- -------------
Net equity transactions ............................ 24,088,183 2,960,768 (1,255,454) (215,777)
Net change in contract owners' equity ................ 44,648,729 10,863,091 472,891 769,924
Contract owners' equity beginning of period .......... 44,457,575 33,594,484 7,196,235 6,426,311
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 89,106,304 44,457,575 7,669,126 7,196,235
============ ============= ============= =============
</TABLE>
14
<PAGE> 14
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NWMYMKT NBGUARD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,538,526 2,149,385 219,518 196,669
Mortality and expense charges (note 2) ................... (254,376) (232,068) (170,400) (83,256)
Administration charge (note 2)
Tier I ............................................. (95,174) (78,586) (72,318) (33,390)
Tier II ............................................ (27,102) (26,094) (24,787) (11,620)
Tier III ........................................... (17,915) (14,966) (10,868) (5,748)
Tier IV ............................................ (10,690) (34,876) (4,336) (8,820)
Tier V ............................................. (17,451) - (9,033) -
------------ ------------ ------------ ------------
Net investment activity ................................ 2,115,818 1,762,795 (72,224) 53,835
Proceeds from mutual fund shares sold .................... 65,472,045 36,057,505 4,722,451 1,397,739
Cost of mutual fund shares sold .......................... (65,472,045) (36,057,505) (3,617,011) (1,206,162)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... - - 1,105,440 191,577
Change in unrealized gain (loss) on investments .......... - - (1,847,382) 1,430,910
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... - - (741,942) 1,622,487
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 5,284,078 1,002,975
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 2,115,818 1,762,795 4,469,912 2,679,297
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 10,477,258 5,939,190 14,909,263 10,662,720
Transfers between funds .................................. (10,384,252) 6,268,382 3,648,156 (308,504)
Redemptions .............................................. (8,399,390) (6,040,030) (4,870,821) (1,054,373)
Adjustments to maintain reserves ......................... (686) (3,204) (7,439) (951)
------------ ------------ ------------ ------------
Net equity transactions .............................. (8,307,070) 6,164,338 13,679,159 9,298,892
Net change in contract owners' equity .................... (6,191,252) 7,927,133 18,149,071 11,978,189
Contract owners' equity beginning of period .............. 50,815,017 42,887,884 21,909,962 9,931,773
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 44,623,765 50,815,017 40,059,033 21,909,962
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PUTINVFD PUTVOYFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 201,337 183,827 - -
Mortality and expense charges (note 2) .............. (245,470) (156,121) (845,606) (550,692)
Administration charge (note 2)
Tier I ........................................ (128,526) (80,822) (392,409) (249,007)
Tier II ....................................... (26,541) (17,637) (122,438) (74,066)
Tier III ...................................... (18,768) (8,805) (56,223) (37,901)
Tier IV ....................................... (4,493) (11,839) (24,210) (47,307)
Tier V ........................................ (8,093) - (30,696) -
------------ ------------- ------------- -------------
Net investment activity ........................... (230,554) (91,397) (1,471,582) (958,973)
Proceeds from mutual fund shares sold ............... 7,194,124 1,318,475 13,936,317 1,631,415
Cost of mutual fund shares sold ..................... (5,511,306) (1,244,147) (7,581,337) (906,797)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ............... 1,682,818 74,328 6,354,980 724,618
Change in unrealized gain (loss) on investments ..... 7,106,597 1,609,874 21,628,132 1,835,298
------------ ------------- ------------- -------------
Net gain (loss) on investments .................... 8,789,415 1,684,202 27,983,112 2,559,916
------------ ------------- ------------- -------------
Reinvested capital gains ............................ 5,186,816 3,982,924 11,805,197 8,602,740
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 13,745,677 5,575,729 38,316,727 10,203,683
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 9,952,027 5,272,327 49,543,414 40,603,066
Transfers between funds ............................. 6,647,199 928,922 (5,787,505) 17,094,396
Redemptions ......................................... (6,224,509) (1,529,851) (18,823,850) (5,623,714)
Adjustments to maintain reserves .................... (299) (656) (3,442) (728)
------------ ------------- ------------- -------------
Net equity transactions ......................... 10,374,418 4,670,742 24,928,617 52,073,020
Net change in contract owners' equity ............... 24,120,095 10,246,471 63,245,344 62,276,703
Contract owners' equity beginning of period ......... 35,803,162 25,556,691 137,145,381 74,868,678
------------ ------------- ------------- -------------
Contract owners' equity end of period ............... $ 59,923,257 35,803,162 200,390,725 137,145,381
============ ============= ============= =============
</TABLE>
(Continued)
15
<PAGE> 15
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SEI500IX SELGROFD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 496,400 28,314 - -
Mortality and expense charges (note 2) ................... (180,116) (13,423) (47,926) (35,287)
Administration charge (note 2)
Tier I ............................................. (81,570) (5,772) (22,236) (15,080)
Tier II ............................................ (23,893) (1,822) (5,696) (3,364)
Tier III ........................................... (14,809) (960) (2,991) (2,768)
Tier IV ............................................ (4,741) (1,252) (1,383) (3,885)
Tier V ............................................. (6,925) - (2,297) -
------------ ------------ ------------ ------------
Net investment activity ................................ 184,346 5,085 (82,529) (60,384)
Proceeds from mutual fund shares sold .................... 6,510,687 1,226,914 2,225,057 665,681
Cost of mutual fund shares sold .......................... (4,821,399) (1,131,438) (1,924,254) (685,474)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,689,288 95,476 300,803 (19,793)
Change in unrealized gain (loss) on investments .......... 6,582,190 465,601 129,162 689,754
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 8,271,478 561,077 429,965 669,961
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 382,784 131,859 1,117,389 620,965
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 8,838,608 698,021 1,464,825 1,230,542
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 25,239,383 4,620,835 1,994,573 1,441,227
Transfers between funds .................................. 21,078,872 5,546,852 (842,537) 573,792
Redemptions .............................................. (7,775,480) (282,950) (1,342,748) (322,865)
Adjustments to maintain reserves ......................... (8,585) (522) (659) 157
------------ ------------ ------------ ------------
Net equity transactions .............................. 38,534,190 9,884,215 (191,371) 1,692,311
Net change in contract owners' equity .................... 47,372,798 10,582,236 1,273,454 2,922,853
Contract owners' equity beginning of period .............. 10,582,236 - 8,433,505 5,510,652
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 57,955,034 10,582,236 9,706,959 8,433,505
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AIMTREAS TRINTSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 217,515 115,635 404,000 318,699
Mortality and expense charges (note 2) ............. (20,246) (11,332) (150,968) (95,586)
Administration charge (note 2)
Tier I ....................................... (6,730) (4,804) (63,120) (36,081)
Tier II ...................................... (1,889) (728) (21,402) (13,753)
Tier III ..................................... (1,303) (1,360) (11,121) (5,859)
Tier IV ...................................... (2,261) (1,127) (3,996) (11,415)
Tier V ....................................... (776) - (7,667) -
------------ ------------- ------------- -------------
Net investment activity .......................... 184,310 96,284 145,726 156,005
Proceeds from mutual fund shares sold .............. 22,350,432 4,232,659 29,556,434 6,973,759
Cost of mutual fund shares sold .................... (22,350,432) (4,232,659) (26,380,399) (5,889,819)
------------ ------------- ------------- -------------
Realized gain (loss) on investments .............. - - 3,176,035 1,083,940
Change in unrealized gain (loss) on investments .... - - (3,819,017) 922,999
------------ ------------- ------------- -------------
Net gain (loss) on investments ................... - - (642,982) 2,006,939
------------ ------------- ------------- -------------
Reinvested capital gains ........................... - - 1,111,001 354,110
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 184,310 96,284 613,745 2,517,054
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 976,012 820,514 10,320,079 9,239,961
Transfers between funds ............................ 1,160,637 260,363 (2,910,875) 3,932,941
Redemptions ........................................ (847,759) (197,508) (4,778,319) (946,866)
Adjustments to maintain reserves ................... 2,892 (255) 3,678 1,803
------------ ------------- ------------- -------------
Net equity transactions ........................ 1,291,782 883,114 2,634,563 12,227,839
Net change in contract owners' equity .............. 1,476,092 979,398 3,248,308 14,744,893
Contract owners' equity beginning of period ........ 2,686,515 1,707,117 25,426,682 10,681,789
------------ ------------- ------------- -------------
Contract owners' equity end of period .............. $ 4,162,607 2,686,515 28,674,990 25,426,682
============ ============= ============= =============
</TABLE>
16
<PAGE> 16
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TemForFd
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................... $ 1,469,709 787,336
Mortality and expense charges (note 2) ................. (227,825) (127,799)
Administration charge (note 2)
Tier I ............................................. (100,578) (55,258)
Tier II ............................................ (37,019) (21,931)
Tier III ........................................... (16,074) (6,841)
Tier IV ............................................ (5,303) (11,034)
Tier V ............................................. (8,925) -
------------ ------------
Net investment activity .............................. 1,073,985 564,473
Proceeds from mutual fund shares sold .................. 8,737,686 3,772,230
Cost of mutual fund shares sold ........................ (7,341,764) (3,774,731)
------------ ------------
Realized gain (loss) on investments .................. 1,395,922 (2,501)
Change in unrealized gain (loss) on investments ........ (4,411,710) 2,902,496
------------ ------------
Net gain (loss) on investments ....................... (3,015,788) 2,899,995
------------ ------------
Reinvested capital gains ............................... 3,875,434 489,746
------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 1,933,631 3,954,214
------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ...................................... 15,303,596 10,856,880
Transfers between funds ................................ 2,903,432 2,104,634
Redemptions ............................................ (4,616,849) (883,023)
Adjustments to maintain reserves ....................... (2,254) (3,777)
------------ ------------
Net equity transactions .............................. 13,587,925 12,074,714
NET CHANGE IN CONTRACT OWNERS' EQUITY .................... 15,521,556 16,028,928
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .............. 32,998,572 16,969,644
------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD .................... $ 48,520,128 32,998,572
============ ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 17
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the
Company) on September 7, 1988, and has been registered as a unit
investment trust under the Investment Company Act of 1940. The NACoVA
was introduced for exclusive use by Member Counties for deferred
compensation Plans adopted under the National Association of Counties
(NACo) Program.
The Company offers group flexible fund retirement contracts through the
NACoVA. The primary distribution for the contracts is through an
affiliated sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts (the Contract) are offered for
purchase in connection with deferred compensation Plans adopted by
Member Counties under the NACo Program. Participants in the contracts
may invest in any of the following fund sub-accounts:
American Century: Twentieth Century Growth Fund (ACTCGro)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
The Bond Fund of America(SM), Inc. (BdFdAm)
(only available for certain contracts issued beginning
January 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
Evergreen Income and Growth Fund - Class Y (EvIncGro) (formerly
The Evergreen Total Return Fund - Class Y) (not available for
contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares (FedUSGvt)
Fidelity Capital & Income Fund (FidCapInc)
(not available for contracts issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan(R) Fund (FidPurtn)
The Investment Company of America(R) (InvCoAm)
(only available for certain contracts issued beginning
July 1, 1994)
MAS Funds - Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp) (not
available for contracts issued on or after October 1, 1993)
MFS(R) High Income Fund - Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
18
<PAGE> 18
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an
affiliated investment advisor) (not available for contracts
issued on or after October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
SEI Index Funds - S&P 500 Index Portfolio (SEI500Ix)
Seligman Growth Fund, Inc. - Class A (SelGroFd)
Short-Term Investments Trust - Treasury Portfolio - Institutional
Class (AIMTreas)
T. Rowe Price International Funds, Inc. - International
Stock Fund(R) (TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
All of the above funds were being utilized as of December 31, 1997.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain expenses
(see note 2). The accompanying financial statements include only
contract owners' purchase payments pertaining to the variable portions
of their contracts and exclude any purchase payments for fixed dollar
benefits, the latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the NACoVA form a part of, and are taxed with, operations
of the Company, which is taxed as a life insurance company under the
Internal Revenue Code. The assets in this account are held pursuant to
contracts with entities which are exempt from federal income tax.
Because of this exemption, no taxes need be provided for investment
income or realized and unrealized capital gains. Annuity payouts and
withdrawal payments are taxable as wages when received by the
participants.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
year presentation.
19
<PAGE> 19
(2) EXPENSES
No deduction for a sales charge is made from the purchase payments for
these contracts. However, if an owner terminates the contract and directs
the Company to withdraw all or part of the contract value held in the
Account for less than sixteen (16) years, the Company will, with certain
exceptions, assess a contingent deferred sales charge by deducting an
amount from each participant's account. This charge will be equal to not
more than 4% in the first year, declining to 1% in the fifteenth year, of
the lesser of all purchase payments made on behalf of a participant prior
to the date of withdrawal, or the amount withdrawn. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company. Sales charges may be reduced or eliminated upon
negotiated conversion of the contracts to other investment programs offered
by the Company or its affiliates.
The following charges are deducted by the Company: a mortality risk charge,
an expense risk charge and an administration charge which are assessed
through the daily unit value calculation. The morality risk charge and the
expense risk charge are equal to an annual rate of 0.10% and 0.40%
respectively; and the administration charge prior to May 1, 1996 was 0.45%.
Beginning May 1, 1996, the administration charge is based upon the
aggregate balance of assets held under the Contract by each Member County,
as follows:
<TABLE>
<CAPTION>
Expense Administration
Tier Assets (Millions) Charge
<S> <C> <C>
I Up to $10 .45%
II Over $10 to $25 .40%
III Over $25 to $50 .30%
IV Over $50 to $150 .20%
V Over $150 .15%
</TABLE>
The administration charge is determined using the December 31 asset balance
and is effective at the next expense tier on the following May 1.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various
investment options for each participant's account. The number of transfers
allowed, and any administrative charges associated therewith, are subject
to negotiation between the contract owner and the Company.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
20
<PAGE> 20
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
TIER I (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 7,567,678 $ 5.842997 $ 44,217,920 28%
American Century: Twentieth Century
Ultra Fund ................................... 58,270,626 1.737833 101,264,617 22%
The Bond Fund of America(SM), Inc. ............. 3,075,422 2.332586 7,173,686 8%
The Dreyfus Third Century Fund, Inc. ........... 7,094,050 3.532278 25,058,157 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 776,076 2.422617 1,880,135 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 1,452,934 1.301886 1,891,554 6%
Fidelity Capital & Income Fund ................. 232,885 4.654233 1,083,901 14%
Fidelity Contrafund ............................ 82,151,064 1.935931 159,038,791 22%
Fidelity Equity-Income Fund .................... 23,161,038 6.900916 159,832,378 29%
Fidelity Magellan(R) Fund ...................... 35,656,191 1.804998 64,359,353 25%
Fidelity OTC Portfolio ......................... 8,056,286 1.829868 14,741,940 9%
Fidelity Puritan(R) Fund ....................... 10,750,214 1.596539 17,163,136 21%
The Investment Company of America(R) ........... 16,333,170 2.277283 37,195,250 29%
MAS Funds - Fixed Income Portfolio ............. 1,169,738 1.335173 1,561,803 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 834,685 9.012670 7,522,740 22%
MFS(R) High Income Fund - Class A .............. 1,054,064 6.168371 6,501,858 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 364,302 15.968069 5,817,199 47%
Nationwide(R) Fund ............................. 2,097,021 20.697282 43,402,635 38%
Nationwide(R) Growth Fund ...................... 959,417 3.854877 3,698,435 25%
Nationwide(R) Money Market Fund ................ 5,808,984 3.003821 17,449,148 4%
Neuberger & Berman Guardian Fund ............... 10,840,792 1.706116 18,495,649 17%
Putnam Investors Fund - Class A ................ 1,862,211 18.110411 33,725,407 33%
Putnam Voyager Fund - Class A .................. 26,549,651 3.837109 101,873,905 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 19,127,252 1.501834 28,725,957 32%
Seligman Growth Fund, Inc. - Class A. .......... 384,411 12.541848 4,821,224 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 1,270,880 1.222017 1,553,037 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 10,712,801 1.198954 12,844,156 2%
Templeton Foreign Fund - Class I ............... 18,596,589 1.284158 23,880,959 6%
========== ========= -----------
Sub-Total Tier I (December 31, 1995) ......... $ 946,774,930
===========
</TABLE>
(Continued)
21
<PAGE> 21
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ----------- ----------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,972,496 $ 5.847874 $ 17,382,782 28%
American Century: Twentieth Century
Ultra Fund ................................... 17,512,296 1.739283 30,458,839 22%
The Bond Fund of America(SM), Inc. ............. 838,935 2.334569 1,958,552 8%
The Dreyfus Third Century Fund, Inc. ........... 2,141,147 3.535226 7,569,439 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 164,209 2.424638 398,147 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 485,556 1.302984 632,672 6%
Fidelity Capital & Income Fund ................. 50,755 4.658156 236,425 14%
Fidelity Contrafund ............................ 23,258,606 1.937547 45,064,642 22%
Fidelity Equity-Income Fund .................... 6,412,368 6.906673 44,288,129 29%
Fidelity Magellan(R) Fund ...................... 9,967,418 1.806504 18,006,180 25%
Fidelity OTC Portfolio ......................... 2,364,115 1.831396 4,329,631 9%
Fidelity Puritan(R) Fund ....................... 2,540,462 1.597871 4,059,331 21%
The Investment Company of America(R) ........... 5,422,918 2.279183 12,359,823 29%
MAS Funds - Fixed Income Portfolio ............. 274,281 1.336288 366,518 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 235,276 9.020195 2,122,235 22%
MFS(R) High Income Fund - Class A .............. 244,788 6.173570 1,511,216 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 111,799 15.981395 1,786,704 47%
Nationwide(R) Fund ............................. 592,502 20.714549 12,273,412 38%
Nationwide(R) Growth Fund ...................... 360,606 3.858094 1,391,252 25%
Nationwide(R) Money Market Fund ................ 1,760,454 3.006353 5,292,546 4%
Neuberger & Berman Guardian Fund ............... 3,222,201 1.707540 5,502,037 17%
Putnam Investors Fund - Class A ................ 329,877 18.125525 5,979,194 33%
Putnam Voyager Fund - Class A .................. 7,200,296 3.840312 27,651,383 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,223,019 1.503085 7,850,642 32%
Seligman Growth Fund, Inc. - Class A. .......... 80,990 12.552317 1,016,612 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 203,199 1.223047 248,522 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 3,056,840 1.199955 3,668,070 2%
Templeton Foreign Fund - Class I ............... 5,823,447 1.285230 7,484,469 6%
========== ========= -----------
Sub-Total Tier II (December 31, 1995) ........ $ 270,889,404
===========
</TABLE>
22
<PAGE> 22
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 1,115,895 $5.844955 $ 6,522,356 28%
American Century: Twentieth Century
Ultra Fund .................................... 6,429,806 1.738415 11,177,671 22%
The Bond Fund of America(SM), Inc. .............. 463,715 2.333393 1,082,029 8%
The Dreyfus Third Century Fund, Inc. ............ 828,576 3.533462 2,927,742 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 104,407 2.423429 253,023 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 153,705 1.302328 200,174 6%
Fidelity Capital & Income Fund .................. 22,125 4.655810 103,010 14%
Fidelity Contrafund ............................. 8,810,458 1.936580 17,062,157 22%
Fidelity Equity-Income Fund ..................... 2,726,805 6.903229 18,823,759 29%
Fidelity Magellan(R) Fund ....................... 3,146,118 1.805603 5,680,640 25%
Fidelity OTC Portfolio .......................... 750,546 1.830482 1,373,861 9%
Fidelity Puritan(R) Fund ........................ 1,227,566 1.597074 1,960,514 21%
The Investment Company of America(R) ............ 1,973,413 2.278047 4,495,528 29%
MAS Funds - Fixed Income Portfolio .............. 39,766 1.335621 53,112 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 106,751 9.015691 962,434 22%
MFS(R) High Income Fund - Class A ............... 148,670 6.170461 917,362 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 38,917 15.973419 621,638 47%
Nationwide(R) Fund .............................. 180,761 20.704221 3,742,516 38%
Nationwide(R) Growth Fund ....................... 106,963 3.856169 412,467 25%
Nationwide(R) Money Market Fund ................. 472,514 3.004839 1,419,828 4%
Neuberger & Berman Guardian Fund ................ 1,051,558 1.706688 1,794,681 17%
Putnam Investors Fund - Class A ................. 157,603 18.116482 2,855,212 33%
Putnam Voyager Fund - Class A ................... 2,560,666 3.838394 9,828,845 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,203,420 1.502337 1,807,942 32%
Seligman Growth Fund, Inc. - Class A. ........... 42,594 12.546053 534,387 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 156,120 1.222431 190,846 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,203,031 1.199356 1,442,862 2%
Templeton Foreign Fund - Class I ................ 1,891,595 1.284589 2,429,922 6%
========= ======== ------------
Sub-Total Tier II (December 31, 1996) ......... $100,676,518
============
</TABLE>
(Continued)
23
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 1,491,035 $ 5.857641 $ 8,733,948 28%
American Century: Twentieth Century
Ultra Fund ................................... 9,471,388 1.742188 16,500,939 22%
The Bond Fund of America(SM), Inc. ............. 597,695 2.338535 1,397,731 8%
The Dreyfus Third Century Fund, Inc. ........... 917,688 3.541129 3,249,652 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 130,014 2.428687 315,763 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 241,356 1.305179 315,013 6%
Fidelity Capital & Income Fund ................. 120,784 4.666006 563,579 14%
Fidelity Contrafund ............................ 12,620,829 1.940782 24,494,278 22%
Fidelity Equity-Income Fund .................... 5,904,892 6.918202 40,851,236 29%
Fidelity Magellan(R) Fund ...................... 5,726,530 1.809520 10,362,271 26%
Fidelity OTC Portfolio ......................... 1,302,436 1.834455 2,389,260 9%
Fidelity Puritan(R) Fund ....................... 1,283,945 1.600539 2,055,004 21%
The Investment Company of America(R) ........... 2,356,594 2.282988 5,380,076 29%
MAS Funds - Fixed Income Portfolio ............. 94,434 1.338520 126,402 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 197,549 9.035263 1,784,907 22%
MFS(R) High Income Fund - Class A .............. 233,869 6.183974 1,446,240 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 78,577 16.008079 1,257,867 47%
Nationwide(R) Fund ............................. 355,149 20.749126 7,369,031 39%
Nationwide(R) Growth Fund ...................... 89,839 3.864536 347,186 25%
Nationwide(R) Money Market Fund ................ 1,219,186 3.011419 3,671,480 4%
Neuberger & Berman Guardian Fund ............... 1,596,621 1.710392 2,730,848 17%
Putnam Investors Fund - Class A ................ 233,708 18.155790 4,243,153 33%
Putnam Voyager Fund - Class A .................. 3,817,279 3.846728 14,684,034 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 3,491,065 1.505589 5,256,109 32%
Seligman Growth Fund, Inc. - Class A. .......... 61,083 12.573280 768,014 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 331,148 1.225108 405,692 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 1,722,849 1.201960 2,070,796 2%
Templeton Foreign Fund - Class I ............... 2,363,601 1.287377 3,042,846 6%
========== ========= ------------
Sub-Total Tier III (December 31, 1995) ....... $165,813,355
============
</TABLE>
24
<PAGE> 24
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 674,415 $ 5.851796 $ 3,946,539 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,660,957 1.740450 8,112,163 22%
The Bond Fund of America(SM), Inc. .............. 219,702 2.336182 513,264 8%
The Dreyfus Third Century Fund, Inc. ............ 406,041 3.537596 1,436,409 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 25,537 2.426264 61,960 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 61,181 1.303866 79,772 6%
Fidelity Capital & Income Fund .................. 14,865 4.661311 69,290 14%
Fidelity Contrafund ............................. 6,956,699 1.938846 13,487,968 22%
Fidelity Equity-Income Fund ..................... 2,138,680 6.911304 14,781,068 29%
Fidelity Magellan(R) Fund ....................... 2,856,554 1.807715 5,163,836 26%
Fidelity OTC Portfolio .......................... 658,565 1.832624 1,206,902 9%
Fidelity Puritan(R) Fund ........................ 860,797 1.598943 1,376,365 21%
The Investment Company of America(R) ............ 1,183,576 2.280712 2,699,396 29%
MAS Funds - Fixed Income Portfolio .............. 8,001 1.337185 10,699 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 63,570 9.026243 573,798 22%
MFS(R) High Income Fund - Class A ............... 67,909 6.177751 419,525 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 39,760 15.992105 635,846 47%
Nationwide(R) Fund .............................. 193,920 20.728440 4,019,659 39%
Nationwide(R) Growth Fund ....................... 119,317 3.860681 460,645 25%
Nationwide(R) Money Market Fund ................. 683,175 3.008389 2,055,256 4%
Neuberger & Berman Guardian Fund ................ 826,685 1.708685 1,412,544 17%
Putnam Investors Fund - Class A ................. 183,147 18.137679 3,321,861 33%
Putnam Voyager Fund - Class A ................... 1,982,897 3.842887 7,620,049 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,782,753 1.504092 2,681,425 32%
Seligman Growth Fund, Inc. - Class A. ........... 23,580 12.560735 296,182 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 28,293 1.223875 34,627 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,125,641 1.200760 1,351,625 2%
Templeton Foreign Fund - Class I ................ 1,989,093 1.286093 2,558,159 6%
========= ========= ------------
Sub-Total Tier III (December 31, 1996) ........ $ 80,386,832
============
</TABLE>
(Continued)
25
<PAGE> 25
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 672,795 $ 5.867425 $ 3,947,574 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,693,395 1.745098 8,190,434 22%
The Bond Fund of America(SM), Inc. .............. 293,584 2.342504 687,722 8%
The Dreyfus Third Century Fund, Inc. ............ 724,635 3.547042 2,570,311 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 90,044 2.432742 219,054 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 199,160 1.307377 260,377 6%
Fidelity Capital & Income Fund .................. 15,630 4.673860 73,052 14%
Fidelity Contrafund ............................. 6,919,494 1.944023 13,451,655 22%
Fidelity Equity-Income Fund ..................... 1,480,026 6.929751 10,256,212 29%
Fidelity Magellan(R) Fund ....................... 2,947,714 1.812541 5,342,852 26%
Fidelity OTC Portfolio .......................... 498,827 1.837520 916,605 9%
Fidelity Puritan(R) Fund ........................ 734,376 1.603211 1,177,360 21%
The Investment Company of America(R) ............ 1,186,761 2.286799 2,713,884 29%
MAS Funds - Fixed Income Portfolio .............. 84,398 1.340756 113,157 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 33,173 9.050357 300,227 22%
MFS(R) High Income Fund - Class A ............... 108,967 6.194384 674,983 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 28,741 16.034807 460,856 47%
Nationwide(R) Fund .............................. 218,220 20.783760 4,535,432 39%
Nationwide(R) Growth Fund ....................... 62,008 3.870989 240,032 25%
Nationwide(R) Money Market Fund ................. 1,244,833 3.016489 3,755,025 4%
Neuberger & Berman Guardian Fund ................ 828,370 1.713248 1,419,203 17%
Putnam Investors Fund - Class A ................. 93,488 18.186106 1,700,183 34%
Putnam Voyager Fund - Class A ................... 1,919,534 3.853154 7,396,260 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,436,973 1.508098 2,167,096 32%
Seligman Growth Fund, Inc. - Class A. ........... 29,833 12.594278 375,725 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 1,061,646 1.227171 1,302,821 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 867,768 1.203968 1,044,765 2%
Templeton Foreign Fund - Class I ................ 1,164,252 1.289527 1,501,334 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1995) ......... $ 76,794,191
============
</TABLE>
26
<PAGE> 26
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 791,919 $ 5.861569 $ 4,641,888 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,507,568 1.743357 7,858,300 22%
The Bond Fund of America(SM), Inc. .............. 124,227 2.340149 290,710 9%
The Dreyfus Third Century Fund, Inc. ............ 528,101 3.543503 1,871,327 29%
Evergreen Income and Growth Fund -
Class Y ....................................... 78,659 2.430315 191,166 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 88,325 1.306062 115,358 6%
Fidelity Capital & Income Fund .................. 51,553 4.669162 240,709 14%
Fidelity Contrafund ............................. 5,170,372 1.942084 10,041,297 22%
Fidelity Equity-Income Fund ..................... 1,223,287 6.922841 8,468,621 29%
Fidelity Magellan(R) Fund ....................... 1,539,847 1.810733 2,788,252 26%
Fidelity OTC Portfolio .......................... 781,703 1.835685 1,434,960 9%
Fidelity Puritan(R) Fund ........................ 379,214 1.601612 607,354 22%
The Investment Company of America(R) ............ 318,963 2.284519 728,677 29%
MAS Funds - Fixed Income Portfolio .............. 68,206 1.339418 91,356 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 84,709 9.041322 765,881 23%
MFS(R) High Income Fund - Class A ............... 51,594 6.188157 319,272 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 21,209 16.018807 339,743 47%
Nationwide(R) Fund .............................. 90,530 20.763040 1,879,678 39%
Nationwide(R) Growth Fund ....................... 19,388 3.867128 74,976 25%
Nationwide(R) Money Market Fund ................. 364,874 3.013456 1,099,532 4%
Neuberger & Berman Guardian Fund ................ 751,166 1.711539 1,285,650 17%
Putnam Investors Fund - Class A ................. 65,920 18.167964 1,197,632 34%
Putnam Voyager Fund - Class A ................... 1,809,222 3.849306 6,964,249 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,151,075 1.506599 1,734,208 32%
Seligman Growth Fund, Inc. - Class A. ........... 25,438 12.581713 320,054 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 102,438 1.225937 125,583 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 811,683 1.202766 976,265 2%
Templeton Foreign Fund - Class I ................ 990,793 1.288241 1,276,380 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1996) ......... $ 57,729,078
============
</TABLE>
(Continued)
27
<PAGE> 27
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2)* UNITS UNIT VALUE RETURN
---------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 2,223 $ 5.852797 $ 13,011 28%
American Century: Twentieth Century
Ultra Fund .................................... 39,473 1.740747 68,713 22%
The Bond Fund of America(SM), Inc. .............. 139 2.336617 325 8%
The Dreyfus Third Century Fund, Inc. ............ 4,553 3.538202 16,109 28%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 34,364 1.304091 44,814 6%
Fidelity Contrafund ............................. 51,788 1.939178 100,426 22%
Fidelity Equity-Income Fund ..................... 6,909 6.912488 47,758 29%
Fidelity Magellan(R) Fund ....................... 36,399 1.808025 65,810 26%
Fidelity OTC Portfolio .......................... 4,185 1.832937 7,671 9%
Fidelity Puritan(R) Fund ........................ 9,482 1.599217 15,164 21%
The Investment Company of America(R) ............ 3,811 2.281103 8,693 29%
MAS Funds - Fixed Income Portfolio .............. 438 1.337415 586 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 693 9.027786 6,256 22%
MFS(R) High Income Fund - Class A ............... 117 6.178817 723 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 353 15.994835 5,646 47%
Nationwide(R) Fund .............................. 2,085 20.731998 43,226 39%
Nationwide(R) Growth Fund ....................... 226 3.861342 873 25%
Nationwide(R) Money Market Fund ................. 5,303 3.008908 15,956 4%
Neuberger & Berman Guardian Fund ................ 19,355 1.708978 33,077 17%
Putnam Investors Fund - Class A ................. 2,047 18.140786 37,134 33%
Putnam Voyager Fund - Class A ................... 15,376 3.843542 59,098 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 29,469 1.504352 44,332 32%
Seligman Growth Fund, Inc. - Class A. ........... 406 12.562888 5,101 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 7,027 1.224087 8,602 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 6,790 1.200967 8,155 2%
Templeton Foreign Fund - Class I ................ 8,712 1.286315 11,206 6%
====== ========= ---------
Sub-Total Tier IV (December 31, 1996) ......... $ 668,465
=========
</TABLE>
*Tier includes certain Departments of a Member County that was previously
converted to Tier IV using the Asset Balance as of December 31, 1995.
28
<PAGE> 28
<TABLE>
<CAPTION>
ANNUAL
TIER V (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,322,606 $ 5.869391 $ 13,632,283 29%
American Century: Twentieth Century
Ultra Fund ................................... 19,969,711 1.745683 34,860,785 23%
The Bond Fund of America(SM), Inc. ............. 753,555 2.343312 1,765,814 9%
The Dreyfus Third Century Fund, Inc. ........... 2,219,012 3.548231 7,873,567 29%
Evergreen Income and Growth Fund -
Class Y ...................................... 297,366 2.433557 723,657 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 579,571 1.307818 757,973 7%
Fidelity Capital & Income Fund ................. 61,610 4.675440 288,054 14%
Fidelity Contrafund ............................ 19,667,377 1.944675 38,246,656 22%
Fidelity Equity-Income Fund .................... 8,086,997 6.932074 56,059,662 29%
Fidelity Magellan(R) Fund ...................... 6,992,191 1.813149 12,677,884 26%
Fidelity OTC Portfolio ......................... 2,776,451 1.838136 5,103,495 9%
Fidelity Puritan(R) Fund ....................... 2,031,661 1.603749 3,258,274 22%
The Investment Company of America(R) ........... 2,872,363 2.287566 6,570,720 29%
MAS Funds - Fixed Income Portfolio ............. 277,396 1.341206 372,045 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 212,160 9.053391 1,920,767 23%
MFS(R) High Income Fund - Class A .............. 418,967 6.196477 2,596,119 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 117,830 16.040180 1,890,014 47%
Nationwide(R) Fund ............................. 569,519 20.790728 11,840,715 39%
Nationwide(R) Growth Fund ...................... 269,417 3.872287 1,043,260 26%
Nationwide(R) Money Market Fund ................ 3,269,252 3.017508 9,864,994 5%
Neuberger & Berman Guardian Fund ............... 4,309,283 1.713822 7,385,344 17%
Putnam Investors Fund - Class A ................ 377,276 18.192202 6,863,481 34%
Putnam Voyager Fund - Class A .................. 6,307,757 3.854445 24,312,902 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,095,657 1.508603 7,687,323 32%
Seligman Growth Fund, Inc. - Class A. .......... 124,591 12.598501 1,569,660 18%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 238,580 1.227585 292,877 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 4,374,310 1.204372 5,268,296 2%
Templeton Foreign Fund - Class I ............... 4,910,891 1.289960 6,334,853 6%
========== ========= --------------
Sub-Total Tier V (December 31, 1996) ......... 271,061,474
==============
Total Contract Owners' Equity .................. $1,970,794,247
==============
</TABLE>
29
<PAGE> 29
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA * COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
<PAGE> 30
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of NACo Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of NACo Variable Account as of December 31, 1997, and
the related statements of operations and changes in contract owners' equity for
each of the years in the two year period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures include confirmation of securities owned as of December 31, 1997, by
correspondence with the transfer agents of the underlying mutual funds. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NACo Variable Account as of
December 31, 1997, and the results of its operations and its changes in
contract owners' equity for each of the years in the two year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
