<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act Registration No. 33-33425
'40 Act Registration No. 811-5999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 17 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18 [X]
NACo VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus and the Statement of Additional Information.
It is Proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1999, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
================================================================================
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<PAGE> 2
NACo VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
Item 1. Cover page............................................................ 3
Item 2. Definitions........................................................... 5
Item 3. Synopsis or Highlights................................................ 13
Item 4. Condensed Financial Information....................................... 12
Item 5. General Description of Registrant, Depositor,14
and Portfolio Companies............................................... 14
Item 6. Deductions and Expenses............................................... 15
Item 7. General Description of the Variable Annuity Contract.................. 17
Item 8. Annuity Period........................................................ 21
Item 9. Death Benefit......................................................... 24
Item 10. Purchases and Contract Value.......................................... 18
Item 11. Redemptions........................................................... 20
Item 12. Taxes................................................................. 24
Item 13. Legal Proceedings..................................................... 26
Item 14. Table of Contents of the Statement of Additional Information.......... 33
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page............................................................ 75
Item 16. Table of Contents..................................................... 75
Item 17. General Information and History....................................... 75
Item 18. Services.............................................................. 75
Item 19. Purchase of Securities Being Offered.................................. 76
Item 20. Underwriters.......................................................... 76
Item 21. Calculation of Performance............................................ 76
Item 22. Annuity Payments...................................................... 77
Item 23. Financial Statements.................................................. 78
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..................................... 125
Item 25. Directors and Officers of the Depositor............................... 127
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant...................................... 129
Item 27. Number of Contract Owners............................................. 140
Item 28. Indemnification....................................................... 140
Item 29. Principal Underwriters................................................ 140
Item 30. Location of Accounts and Records...................................... 142
Item 31. Management Services................................................... 142
Item 32. Undertakings.......................................................... 142
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its NACo Variable Account
The date of this prospectus is May 1, 1999.
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
- - - American Century: Income & Growth - Investor Class
- - - American Century: Twentieth Century International Discovery Fund -
Investor Class
- - - American Century: Twentieth Century Ultra
- - - Dreyfus Appreciation Fund, Inc.
- - - Dreyfus Premier Midcap Stock Fund - Class A
- - - The Dreyfus Third Century Fund, Inc.
- - - Federated Bond Fund - Class F
- - - Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares
- - - Fidelity Advisor Growth Opportunities Fund - Class A
- - - Fidelity Advisor High Yield Fund - Class T
- - - Fidelity Equity - Income Fund
- - - Fidelity OTC Portfolio
- - - Fidelity Puritan Fund
- - - INVESCO Dynamics Fund
- - - INVESCO Total Return Fund
- - - LifeDesigns Series
- - - The Aggressive Portfolio
- - - The Moderately Aggressive Portfolio
- - - The Moderate Portfolio
- - - The Moderately Conservative Portfolio
- - - The Conservative Portfolio
- - - MAS Funds Fixed Income Portfolio
- - - MFS(R) High Income Fund - Class A
- - - Morgan Stanley Institutional Fund, Inc. - Equity Growth Portfolio -
Class B
- - - Nationwide(R) Fund - Class D
- - - Nationwide Money Market Fund
- - - Nationwide S&P 500(R)Index Fund - Class Y
- - - Nationwide Separate Account Trust - Nationwide Small Company Fund
- - - Neuberger & Berman Guardian Fund, Inc.
- - - Neuberger & Berman Partners Trust
- - - Oppenheimer Global Fund - Class A
- - - Prestige Balanced Fund - Class Y
- - - Prestige International Fund - Class Y
- - - Prestige Large Cap Growth Fund - Class Y
- - - Prestige Large Cap Value Fund - Class Y
- - - Prestige Small Cap Fund - Class Y
- - - Putnam Investors Fund - Class A
- - - Putnam Voyager Fund - Class A
- - - SEI Index Funds - S&P 500 Index Portfolio
- - - Seligman Growth Fund, Inc. - Class A
- - - Short-Term Investments Trust - Treasury Portfolio - Institutional Class
- - - T. Rowe Price International Stock Fund(R)
- - - Templeton Foreign Fund - Class I
- - - Warburg Pincus Emerging Growth Fund - Common Class
NOT AVAILABLE FOR NEW PLANS ESTABLISHED ON OR AFTER JUNE 30, 1998
- - - Fidelity Contrafund
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1997
- - - Fidelity Magellan(R) Fund
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER MAY 1, 1997
- - - American Century: Twentieth Century Growth
- - - Massachusetts Investors Growth Stock Fund - Class A
1
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<PAGE> 4
MAY NOT BE AVAILABLE TO ALL CONTRACTS ISSUED ON OR AFTER JULY 1, 1994
- - - The Bond Fund of America(SM), Inc.
- - - The Investment Company of America(R), Inc.
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1993
- - - Evergreen Income and Growth Fund
- - - MFS(R) Growth Opportunities Fund - Class A
- - - Nationwide(R) Growth Fund - Class D
NOT AVAILABLE FOR OWNERS WHOSE PREDECESSOR NATIONWIDE DC VARIABLE ACCOUNT
CONTRACT WAS ISSUED ON OR AFTER JANUARY 1, 1987
- - - Fidelity Capital & Income Fund
The Statement of Additional Information ( May 1, 1999) which contains additional
information about the contracts and the NACo Variable Account is filed with the
U.S. Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The table of contents for the Statement of Additional Information is
on page 31.
For general information or to obtain FREE copies of the:
- - - Statement of Additional Information
- - - prospectus for any underlying mutual fund
- - - required Nationwide forms,
call: 1-800-545-4730
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 16766
COLUMBUS, OHIO 43216
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
This annuity is NOT:
- - - a bank deposit - federally insured
- - - endorsed by a bank - available in
or government agency every state
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
Guarantees under the contracts are the sole responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit used to calculate the contract value
allocated to the variable account before the annuitization date.
ALLOCATED CONTRACT- Contract under which Nationwide maintains individual
accounts on behalf of each participant.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
MEMBER COUNTY- A county which is a member of the National Association of
Counties ("NACo") or an entity approved by the President of NACo for
participation under the NACo program.
NACo PROGRAM- The deferred compensation program established and administered
pursuant to Section 457 of the Internal Revenue Code for the benefit of member
counties.
NATIONWIDE- Nationwide Life Insurance Company.
PARTICIPANT ACCOUNT YEAR- For each participant, the participant account year is
each one-year period starting with either the date accumulation units were first
credited to the participant's account, or an anniversary of that date.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
UNALLOCATED CONTRACT- A contract where Nationwide maintains one single plan
contract, as opposed to maintaining individual participant accounts.
VALUATION PERIOD- Each day the New York Stock Exchange is open.
VARIABLE ACCOUNT- NACo Variable Account, a separate account of Nationwide that
contains variable account allocations. The variable account is divided into
sub-accounts, each of which invests in shares of a separate underlying mutual
fund.
3
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<PAGE> 6
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.........................3
SUMMARY OF STANDARD CONTRACT
EXPENSES.....................................5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES............6
EXAMPLE...........................................8
CONDENSED FINANCIAL INFORMATION..................10
FINANCIAL STATEMENTS.............................10
SYNOPSIS OF THE CONTRACTS........................11
NATIONWIDE LIFE INSURANCE COMPANY................12
NATIONWIDE INVESTMENT SERVICES CORPORATION...... 12
INVESTING IN THE CONTRACT........................12
The Variable Account and Underlying Mutual Funds
STANDARD CHARGES AND DEDUCTIONS..................13
Participant Account Maintenance Charge
Variable Account Annual Expense Fee
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT RIGHTS..................................15
OPERATION OF THE CONTRACT........................16
Minimum Purchase Payments
Application of Purchase Payments
Allocation of Purchase Payments
Value of an Accumulation Unit
Determining the Account Value
Exchange Privilege
Experience Credits
MODIFICATION OF THE CONTRACT.....................18
CONTRACT SUSPENSION AND TERMINATION..............18
REDEMPTION OF PARTICIPANT ACCOUNTS...............18
RETIREMENT PERIOD................................19
Additional Purchase Payment Before Beginning
Retirement Income Payments
Retirement Income Payments
Election of Retirement Income Form and Date
Retirement Income Forms
Determination of Life Income Payments
Alternate Assumed Investment Rate
DEATH OF PARTICIPANT.............................22
Participant Death Before Retirement
Death of Retired Participant
FEDERAL TAX CONSIDERATIONS.......................22
Contracts Issued under the New York Model
Plan
STATEMENTS AND REPORTS...........................23
YEAR 2000 COMPLIANCE ISSUES......................23
LEGAL PROCEEDINGS................................24
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY..25
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION......................................31
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS............................................32
APPENDIX B: CONDENSED FINANCIAL
INFORMATION.................................41
4
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
All charges are subject to negotiation therefore the expenses described below
vary from contract to contract. Please refer to the appropriate prospectus
provision for more details.
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments) ..............................5%
MAXIMUM PARTICIPANT ACCOUNT
MAINTENANCE CHARGE..............................$50
MAXIMUM VARIABLE ACCOUNT ANNUAL
EXPENSE FEE(1)
(as a percentage of average account value)
...........................0.95% per annum
(1) The maximum Variable Account Annual Expense Fee does not include:
- premium taxes that may be imposed by the state in which the contract
was issued; or
- deductions for management fees and other expenses made by the
underlying mutual funds.
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<PAGE> 8
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
--------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Income & Growth - Investor Class
--------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth
--------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International
Discovery Fund - Investor Class
--------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra
--------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc.
--------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund, Inc.
--------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Midcap Stock Fund - Class A
--------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc.
--------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund
--------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F
--------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares
--------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth Opportunities Fund - Class A
--------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield Fund - Class T
--------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund
--------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund
--------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund
--------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
--------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio
--------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund
--------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund
--------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund
--------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R), Inc.
--------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Aggressive Portfolio
--------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Aggressive
Portfolio
--------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderate Portfolio
--------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Conservative
Portfolio
--------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Conservative Portfolio
--------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio
--------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A
--------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A
--------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A
--------------------------------------------------------------------------------------------------------------------
Morgan Stanley Institutional Fund, Inc. - Equity
Growth Portfolio - Class B
--------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund - Class D
--------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund - Class D
--------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund
--------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small
Company Fund
--------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc.
--------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Trust
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
--------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Global Fund - Class A
--------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A
--------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A
--------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 Index Portfolio
--------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A
--------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
--------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R)
--------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I
--------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund - Common Class
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federated Bond Fund - Class F
--------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares
--------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund
--------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class Y
--------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 Index Portfolio
--------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
--------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund - Common Class
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 10
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under the contracts assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects the 5 year CDSC schedule and the maximum
Variable Account Annual Expense Fee (0.95%). Deductions for premium taxes are
not reflected but may apply. The example reflects the Contract Maintenance
Charge, expressed as a percentage of average account value. Since the average
contract value is greater than $1,000, the expense effect of the Contract
Maintenance Charge is reduced accordingly.
For those contracts that have a different CDSC schedule or a lower Variable
Account Annual Expense Fee, the expenses would be reduced.
The summary of contract expenses and example are to help contract owners
understand expenses associated with the contracts.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
time period
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- - --------------------------------------------------------------------------------------------------------------------------
American Century: Income &
Growth - Investor Class
- - --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth
Century Growth
- - --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth
Century International
Discovery Fund - Investor
Class
- - --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth
Century Ultra
- - --------------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM),
Inc.
- - --------------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund,
Inc.
- - --------------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Midcap Stock
Fund - Class A
- - --------------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century
Fund, Inc.
- - --------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth
Fund
- - --------------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F
- - --------------------------------------------------------------------------------------------------------------------------
Federated U.S. Government
Securities Fund: 2-5 Years -
Institutional Shares
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth
Opportunities Fund - Class A
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield
Fund - Class T
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
time period
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund
- - --------------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund
- - --------------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund
- - --------------------------------------------------------------------------------------------------------------------------
The Investment Company of
America(R), Inc.
- - --------------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The
Aggressive Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The
Moderately Aggressive
Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The
Moderate Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The
Moderately Conservative
Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The
Conservative Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income
Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors
Growth Stock Fund - Class A
- - --------------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities
Fund - Class A
- - --------------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund -
Class A
- - --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Institutional
Fund, Inc. - Equity Growth
Portfolio - Class B
- - --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund - Class D
- - --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund -
Class D
- - --------------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund
- - --------------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index
Fund - Class Y
- - --------------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account
Trust - Nationwide Small
Company Fund
- - --------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian
Fund, Inc.
- - --------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners
Trust
- - --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund -
Class A
- - --------------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund -
Class Y
- - --------------------------------------------------------------------------------------------------------------------------
Prestige International Fund -
Class Y
- - --------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth
Fund - Class Y
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
time period
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- - --------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund
- - - Class Y
- - --------------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund -
Class Y
- - --------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class
A
- - --------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A
- - --------------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500
Index Portfolio
- - --------------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. -
Class A
- - --------------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust
- - - Treasury Portfolio -
Institutional Class
- - --------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International
Stock Fund(R)
- - --------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund -
Class I
- - --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging
Growth Fund - Common Class
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONDENSED FINANCIAL INFORMATION
The accumulation unit value for each underlying mutual fund reflects changes in
the value of the underlying mutual fund and the deduction of the Variable
Account Annual Expense Fee. For specific accumulation unit value information for
each class of the underlying mutual funds, please refer to Appendix B.
FINANCIAL STATEMENTS
Financial Statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number located on page 2 of this prospectus.
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<PAGE> 13
SYNOPSIS OF THE CONTRACTS
The contracts are group flexible fund retirement contracts. The contracts are
designed for use in deferred compensation plans adopted by member counties under
the NACo program. The plans qualify for favorable tax treatment under Section
457 of the Internal Revenue Code.
Nationwide issues a single group contract to the contract owner, which covers
all present and future participating employees. Nationwide will provide a
certificate to the contract owner to deliver to each retired participant or
other person for whom a Retirement Income Form is purchased. The certificate
will set forth the benefits to which the recipient is entitled. Additionally, if
legally required, Nationwide will provide a certificate to the contract owner
for delivery to any other person required by law to receive a certificate.
Nationwide establishes an account for each participant under the contract. The
account contains values and reflects activity for each participant. Plan
participants generally receive tax deferral on amounts deposited into the plan
and are taxed when amounts are distributed from the plan.
Purchase payments are normally submitted monthly, but the schedule may be
adjusted to fit the contract owner's payroll practices. Purchase payments made
by or on behalf of each participant must be at least $20 per month.
The contract strives to provide each participant with:
- - - an initial Retirement Income Payment, which will reflect cost of living
changes during pre-retirement years (without requiring increased purchase
payments to keep pace with cost of living increases during those years),
and
- - - subsequent Retirement Income Payments which will vary with the cost of
living changes during his or her retired lifetime.
Nationwide will apply purchase rates set forth in the contract to accumulated
amounts in participant accounts. These accumulated amounts will reflect the
investment performance of the underlying mutual funds selected by the
participant. Consequently, a participant's Retirement Income Payments will be
directly affected by his or her investment choices under the contract.
Historically, the value of a diversified portfolio of common stocks held for an
extended period of time has tended to rise during periods of inflation. However,
there is no exact correlation and for some periods, the prices of securities
have declined while the cost of living was rising.
MINIMUM PURCHASE PAYMENTS
Purchase payments for each participant must be at least $20 per month.
CHARGES AND EXPENSES
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a Contingent Deferred Sales
Charge if any amount is withdrawn from the contract. This CDSC reimburses
Nationwide for sales expenses. The amount of the CDSC will not exceed the lesser
of:
(1) 5% of the total purchase payments; or
(2) 5% of the total of all purchase payments made before of the surrender
date.
Nationwide may assess a Participant Account Maintenance Charge. This charge
varies from contract to contract and will not be assessed unless specifically
agreed upon by the contract owner and Nationwide. The maximum Participant
Account Maintenance Charge is $50 (see "Participant Account Maintenance
Charge").
Nationwide can deduct a Variable Account Annual Expense Fee at a maximum rate of
0.95% of average account value. Nationwide can assess this fee in return for
bearing certain risks and administrative expenses. The Variable Account Annual
Expense Fee is negotiable and
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<PAGE> 14
varies from contract to contract to reflect unique plan characteristics. This
fee does not reflect deductions made by the underlying mutual funds (see
"Variable Account Annual Expense Fee").
The CDSC, Participant Account Maintenance Charge, and Variable Account Annual
Expense Fee, when negotiated, may be decreased upon notice to the contract owner
(see "Modification of the Contract").
RETIREMENT INCOME PAYMENTS
Retirement income payments begin on the annuitzation date. Payments are based on
the retirement income form chosen (see "Retirement Income Payments" and
"Retirement Income Forms").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929. Nationwide is a member of the "Nationwide Insurance Enterprise" with its
home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a
provider of life insurance, annuities and retirement products. It is admitted to
do business in all states, the District of Columbia and Puerto Rico.
NATIONWIDE INVESTMENT SERVICES CORPORATION
The contracts are underwritten and distributed by Nationwide Investment Services
Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. NISC is a
wholly owned subsidiary of Nationwide Life Insurance Company.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
The variable account is a separate account that invests in the underlying mutual
funds listed in Appendix A. Nationwide established the variable account on
September 7, 1988, pursuant to Ohio law. Although the variable account is
registered with the SEC as a unit investment trust pursuant to the Investment
Company Act of 1940 ("1940 Act"), the SEC does not supervise it or the
management of Nationwide.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of
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issues requiring the shareholders' vote as soon as possible before the
shareholder meeting. Notification will contain proxy materials and a form with
which to give Nationwide voting instructions. Nationwide will vote shares for
which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
STANDARD CHARGES AND DEDUCTIONS
The charges and fees described in this section vary from contract to contract,
depending on plan characteristics and the particular needs and preferences of
contract owners. Generally, the charges and fees are negotiable. This
flexibility allows Nationwide and the contract owner to custom design a charge
structure that meets the financial goals of both the contract owners and
Nationwide.
While a contract is in effect, a circumstance may arise that would require a
renegotiation of the contract terms. In this situation, charges and fees will
not be higher than those in effect before the re-negotiation. In other words,
the charges and fees of a renegotiated contract may decrease, but under no
circumstances will they increase.
PARTICIPANT ACCOUNT MAINTENANCE CHARGE
Nationwide may assess a Participant Account Maintenance Charge to reimburse it
for administrative expenses involved in issuing and maintaining the contracts.
The maximum Participant Account Maintenance Charge is $50. Nationwide will not
assess this charge unless it is negotiated and contractually agreed upon by
Nationwide and the contract owner.
Generally, by negotiating a higher Participant Account Maintenance Charge, a
contract owner can expect to lower other charges that are assessed in connection
with the contract. Conversely, a contract owner that negotiates a lower
Participant Account Maintenance Charge can expect to incur higher charges
elsewhere in the expense structure.
If a Participant Account Maintenance Charge is negotiated, it will be assessed
against each applicable participant in the plan. Nationwide will deduct the
charge from each participant's
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account on the participant anniversary, which is the anniversary of the date
accumulation units were first credited to the participant's account. Each year's
deduction will compensate Nationwide for expenses incurred during the previous
year. The deduction will occur during both the accumulation and annuity payment
periods.
The Participant Account Maintenance Charge is made by canceling a number of
accumulation units during both the accumulation and annuity periods, equal in
value to the applicable charge. If a participant account includes more than one
sub-account, the deduction will be allocated among sub-accounts on the basis of
relative values at the time the deduction is made.
On the date that a full withdrawal is taken from a participant's account,
Nationwide will deduct a pro-rated Participant Account Maintenance Charge. The
amount of the charge will be 1/12 of the applicable Participant Account
Maintenance Charge, multiplied by the number of whole or partial months between
the last participant anniversary (or participant effective date during the first
year of a participant account) and the withdrawal date.
The deduction for the Participant Account Maintenance Charge will be taken
proportionately from each sub-account based on relative value at the time the
deduction is made.
This contract may be used by a plan in conjunction with other investment
options, such as Nationwide's Group Fixed Fund Retirement Contract. In this
case, the deduction for the Participant Account Maintenance Charge may be
reduced so that the combined total of the Participant Account Maintenance Charge
and any similar charges imposed under other investment options does not exceed
the Participant Account Maintenance Charge negotiated for this contract. The
charge will be deducted proportionately from the sub-accounts and amounts held
in the other investment options based on the relative values at the time the
deduction is made.
THE PARTICIPANT ACCOUNT MAINTENANCE CHARGE WILL NOT BE ASSESSED UNLESS
NEGOTIATED BETWEEN NATIONWIDE AND THE CONTRACT OWNER.
VARIABLE ACCOUNT ANNUAL EXPENSE FEE
Nationwide can deduct a Variable Account Annual Expense Fee up to a maximum rate
of 0.95% of average account value in exchange for assuming various risks and
administrative expenses associated with the contracts. This fee is subject to
negotiation and can vary for each contract to reflect unique plan
characteristics.
The following factors may be considered in negotiating the amount of this fee:
1) plan size;
2) the number of eligible employees;
3) the number of plan participants;
4) demographics of the plan participants;
5) general economic conditions;
6) the varying costs associated with the underlying mutual funds that are
offered in the contract;
7) the type of contract (e.g. allocated vs. unallocated);
8) distribution costs;
9) other factors that Nationwide deems relevant.
CONTINGENT DEFERRED SALES CHARGE
No sales charge is deducted from purchase payments when amounts are deposited
into the contracts. However, if any part of the contract is surrendered,
Nationwide will deduct a CDSC when applicable. The CDSC is used to cover sales
expenses, including commissions, production of sales material, and other
promotional expenses. If expenses are greater than the CDSC, Nationwide will
make up any shortfall from its general account.
Regardless of the CDSC schedule chosen, no CDSC will be assessed against
distributions paid as:
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- - - a life income payment option;
- - - a designated period payment option of 5 or more years for a participant
who has a minimum of 5 participant account years before the beginning
of the benefit payments; and
- - - a single-sum or periodic payment resulting from a participant's death.
Contracts Issued Between July 1, 1985 and May 1, 1998
If the contract owner terminates the contract in accordance with the section
entitled "Suspension and Termination" and directs Nationwide to withdraw all or
part of the contract value, Nationwide will assess a CDSC from each
participant's account as indicated below. For purposes of calculating the CDSC,
withdrawals are considered to come first from the oldest purchase payment made
to the contract, then the next oldest purchase payment, and so forth.
The following CDSC schedule applies to contracts issued from July 1, 1985
through the later of May 1, 1998 or the date on which state insurance
authorities approve contract modifications.
<TABLE>
<CAPTION>
------------------------- -------------------------
Number of Completed
Years of Participation
CDSC Percentage (Beginning July 1,
1985)*
------------------------- -------------------------
<S> <C> <C>
4% 1 through 12
------------------------- -------------------------
3% 13
------------------------- -------------------------
2% 14
------------------------- -------------------------
1% 15
------------------------- -------------------------
0% 16 and after
------------------------- -------------------------
</TABLE>
*The "Number of Completed Years of Participation" is determined beginning with
the participant's first deferral into the contract.
In any event, no CDSC will be assessed against withdrawals taken on or after
January 1, 2001.
When a CDSC of less than 4% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced marketing
expenses.
Contracts Issued On or After May 1, 1998
For contracts issued on or after the later of May 1, 1998 or the date on which
state insurance authorities approve contract modifications, a CDSC may be
negotiated and assessed. The CDSC will not exceed the lesser of:
1) 5% of the total of all purchase payments made on behalf of the
surrendering participant or the withdrawing contract owner before the
surrender request; or
2) 5% of the amount surrendered.
The total CDSC assessed to any participant will never exceed 5% (or a lesser
percentage, if applicable) of the total purchase payments made on behalf of the
participant for the 16 years before the surrender date.
When a CDSC of less than 5% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced marketing
expenses.
PREMIUM TAXES
Nationwide may charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
CONTRACT RIGHTS
The contract owner owns the contract for the exclusive benefit of the plan's
participants and beneficiaries. Contractual rights may be exercised by the
contract owner subject to those rights specifically reserved in the plan
documents for participants, either as a group or as individuals. The contract
owner may not take any action inconsistent with the rights of the plan's
participants. The contract may not be assigned.
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OPERATION OF THE CONTRACT
MINIMUM PURCHASE PAYMENTS
Purchase payments for each participant must be at least $20 per month. Payments
must be made no less frequently than monthly, unless Nationwide agrees
otherwise.
APPLICATION OF PURCHASE PAYMENTS
Initial purchase payments allocated to sub-accounts will be priced no later than
2 business days after receipt of an order to purchase if the application and all
necessary information are complete. If the application is not complete,
Nationwide may retain a purchase payment for up to 5 business days while
attempting to complete it. If the application is not completed within 5 business
days, the participant will be informed of the reason for the delay. The purchase
payment will be returned unless the participant specifically allows Nationwide
to hold the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received.
Purchase payments will not be priced on the following nationally recognized
holidays:
- - - New Year's Day - Independence
Day
- - - Martin Luther King, Jr. - Labor Day
Day
- - - Presidents Day - Thanksgiving
- - - Good Friday - Christmas
- - - Memorial Day
When permissible under state insurance law, Nationwide may credit up to 8% of an
initial transfer into the contract. An initial transfer is the amount
transferred into the contract from a non-Nationwide investment product. It
serves as the initial purchase payment under the contract. This credit will
reimburse the contract owner for any exit penalty assessed by the previous
provider. Nationwide will recover this credit by reducing service agent and/or
broker compensation or through the negotiation of an increased Participant
Account Maintenance Charge or Variable Account Annual Expense Fee.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to each participant's account as
instructed by the contract owner. Shares of the sub-accounts are purchased at
net asset value, then converted into accumulation units. The contract owner, or
the participant if the plan so permits, may change allocations among
sub-accounts for future purchase payments. However, no change may be made that
would result in an amount less than 1% being allocated to any sub-account for
any participant. Nationwide will accept these changes as frequently as permitted
by the plan. An allocation change will not affect the allocation of purchase
payments before the change.
VALUE OF AN ACCUMULATION UNIT
Purchase payments or transfers are allocated to the sub-account in the form of
accumulation units. Nationwide calculates accumulation unit values each day the
New York Stock Exchange is open for trading.
The accumulation unit value for a valuation period is determined by multiplying
the accumulation unit value for each sub-account for the immediately preceding
valuation period by a net investment factor.
The net investment factor is calculated by dividing (a) by (b), and then
subtracting (c) from the result, where:
(a) is the net of:
(1) the net asset value of the underlying mutual fund as of the
end of the current valuation period; and
(2) the per share amount of any dividend or income distributions
made by the underlying mutual fund (if the ex-dividend date
occurs during the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period.
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(c) is a factor representing the daily Variable Account Annual Expense Fee,
as negotiated under the contract.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease from valuation period to valuation period. Changes in the
net investment factor may not be directly proportional to changes in the net
asset value of underlying mutual fund shares because of the deduction of
variable account charges.
DETERMINING THE ACCOUNT VALUE
A participant's account value is equal to the sum of the value of all
accumulation units credited to the participant's account. The number of
accumulation units credited to each participant account for each sub-account is
determined by dividing the amount allocated to that sub-account for that
participant by the accumulation unit value for that sub-account for the
valuation period the purchase payment was received.
The value of a participant's account on any day can be determined by multiplying
the total number of accumulation units credited to the participant's account for
each sub-account by the current accumulation unit value for that sub-account.
Each participant and the contract owner will be advised periodically of the
number of accumulation units credited to his or her account for each
Sub-Account, the current accumulation unit values, and the total value of his or
her account. These reports are for informational purposes only and do not mean
that a participant has any rights in his or her account beyond those provided
for in the plan.
EXCHANGE PRIVILEGE
The contract owner, or the participant if the plan so provides, may exchange
amounts among the sub-accounts as frequently as permitted by the plan, subject
to the limits and rules set by each underlying mutual fund. If the contract
owner elects an exchange privilege, there is no charge for exchanges.
For those plans funded by this contract and Nationwide's Group Fixed Fund
Retirement Contract, the contract owner, or the participant if the plan so
provides, may exchange values between any sub-account and the Group Fixed Fund
Retirement Contract. Exchanges from the Nationwide Group Fixed Fund Retirement
Contract to any sub-account will be subject to the limitations of the Nationwide
Group Fixed Fund Retirement Contract. Exchanges will be effective when received
in good order at Nationwide's home office.
If Nationwide receives the exchange request before the end of a valuation date,
the exchange will receive the accumulation unit values of that date. However, if
Nationwide receives the exchange request after the close of business on a
valuation date, the exchange will receive the next valuation date's accumulation
unit value.
TRANSFER REQUESTS
In addition to submitting exchange requests in writing, the participant may also
make exchanges by telephone and the internet, provided that the contract owner
executes documents agreeing to certain restrictions applicable to these
privileges. Telephone and internet exchange requests must be received by
Nationwide by the close of the New York Stock Exchange in order to receive that
day's closing sub-account price.
Nationwide will use reasonable procedures to confirm that telephone and internet
instructions are genuine. Nationwide's failure to follow these procedures will
result in its liability for fraudulent or unauthorized transfers. However,
Nationwide will not be liable for following telephone or internet instructions
that it reasonably believed to be genuine. Nationwide may withdraw the telephone
and/or internet exchange privilege upon 30 days written notice to contract
owners and participants.
EXPERIENCE CREDITS
Depending on the state in which the contract was issued, the contracts are
either participating or non-participating. Contract owners of participating
contracts have the right to receive any surplus distributed by Nationwide. A
surplus distribution will occur if Nationwide's Board of Directors determines
that charges and fees assessed under
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the contracts were higher than necessary to maintain the contracts. Nationwide
will distribute any surplus by purchasing additional accumulation units and
crediting them to participant accounts. To date, Nationwide has not made any
surplus distributions to participant accounts and Nationwide does not guarantee
that there will be a surplus distribution in the future. Non-participating
contracts do not have the right to receive surplus distributions.
MODIFICATION OF THE CONTRACT
The following charges may be decreased if negotiated, upon notice to the
contract owner:
- - - Contingent Deferred Sales Charge
- - - Participant Account Maintenance Charge
- - - Variable Account Annual Expense Fee
Nationwide may change any other provision of the contract by giving notice to
contract owners not less than 90 days before the change is to be effective.
CONTRACT SUSPENSION AND TERMINATION
Nationwide may suspend the contract at any time upon written notice to contract
owners if:
a) the contract owner fails to remit to Nationwide any purchase payment
specified in the plan;
b) Nationwide rejects a plan amendment submitted by the contract owner
that Nationwide determines would adversely affect the contract's
financial experience.
The contract owner may suspend the contract at any time upon 90 days written
notice to Nationwide. Suspension will become effective on the 91st day after
Nationwide receives the notice. If a contract is suspended, Nationwide will not
accept new purchase payments, except by mutual consent. All other contract terms
will continue to apply.
Once the suspension is effective, the contract owner may, upon 30 days written
notice to Nationwide, terminate the contract. Termination will become effective
on the 31st day after Nationwide receives the notice. Upon termination,
Nationwide will pay to the contract owner:
1) the redemption value of participant accounts, less any applicable CDSC;
and
2) the balance of the annual payment amounts in Nationwide's General
Account transferred to make Retirement Income Payments under Retirement
Income Forms B1 and B2.
REDEMPTION OF PARTICIPANT ACCOUNTS
The contract owner's right to redeem participant accounts, either fully or
partially, will be governed by the terms of the plan.
If the plan so permits, the contract owner may redeem a participant account,
fully or partially, at any time before Retirement Income Payments begin under
Option B1 or B2. A partial redemption will not affect requirements to make
future purchase payments to that participant account or that participant's
retirement date.
For partial redemptions, Nationwide will cancel accumulation units from the
sub-accounts. The requested dollar amount cannot exceed available accumulation
unit value. The contract owner must instruct Nationwide how the redemption
should be taken from the sub-accounts. If no instruction is given, the
redemption will be taken proportionately from each sub-account based on the
value of each sub-account at the time of the redemption.
Instead of a lump sum distribution of a full or partial redemption, the contract
owner (or participant, if permitted by the plan) may elect to have the
redemption paid pursuant to Retirement Income Form A1 or A2, subject to the
minimums applicable to these options.
If the contract owner terminates the contract, all participant accounts under
that contract will be
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redeemed as permitted by the plan. A CDSC may apply. However, absent contract
termination, no CDSC will apply to full or partial redemptions.
Nationwide will pay all redemption amounts to the contract owner. The contract
owner is obligated to distribute these amounts to the participant. The contract
owner and Nationwide may agree to have Nationwide pay these amounts directly to
the participant.
Nationwide will pay any redemption amounts within 7 days of receiving the
redemption request. However, Nationwide may suspend or postpone payment when:
(1) the New York Stock Exchange is closed;
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency is declared by the SEC making disposal or valuation of
securities held in the variable account impracticable; or
(4) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Participant account value upon full surrender may be more or less than the total
of all purchase payments.
RETIREMENT PERIOD
ADDITIONAL PURCHASE PAYMENT BEFORE BEGINNING RETIREMENT INCOME PAYMENTS
The contract owner may make one additional purchase payment to each
participant's account in order to increase Retirement Income Payments. The
contract owner must notify Nationwide of this election in the documentation
electing the Retirement Income Form and retirement date (see "Election of
Retirement Income Form and Date"). The purchase payment must be made by the last
business day before Retirement Income Payments begin. This purchase payment is
subject to any applicable premium taxes.
The annuity rates under the contract apply to the entire value, including any
such additional purchase payment that does not exceed 5 times the purchase
payments allocated to a participant's account before the date of notice is
given. Any amount in excess of this amount may be applied at annuity rates
currently offered to this type of contract.
RETIREMENT INCOME PAYMENTS
The distribution period is the period during which a participant account is paid
out in installments. Since the distribution period usually occurs after a
participant retires, it is also referred to as the retirement period.
Nationwide will pay all retirement distributions to the contract owner. The
contract owner is obligated to distribute these amounts to the participant. The
contract owner and Nationwide may agree to have Nationwide pay these amounts
directly to the participant.
Upon retirement, a participant's account value can be used to purchase either a
fixed dollar annuity, a variable payment annuity, or an available combination of
both.
Nationwide is obligated to make payments under a variable payment annuity.
However, the amount of each payment is not guaranteed. Variable payment amounts
will reflect the investment performance of the sub-accounts, but will not be
affected by adverse mortality experience or by increased expenses.
A fixed dollar annuity provides for payments that are guaranteed as to dollar
amount during the distribution period. Upon retirement, the participant's
account value is used to purchase a contract fund by Nationwide's general
account. Once this contract has been purchased, the participant's account will
no longer vary with the investment performance of the underlying mutual funds.
To determine the amount of the first fixed dollar annuity payment, the value is
applied to the applicable annuity table based on the distribution schedule
elected. The fixed payment annuity can be distributed in any of the forms listed
under the
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provision "Retirement Income Forms." Specifically, they can be distributed as:
1) payments for a designated period;
2) payments of a designated amount;
3) life income with payment certain; or
4) joint and survivor life income.
Fixed dollar annuities are available under a plan upon the contract owner's
election.
ELECTION OF RETIREMENT INCOME FORM AND DATE
The contract provides for Retirement Income Payments to begin on the date and
under the retirement options set forth in the plan. At least one month before
Retirement Income Payments are set to begin, the contract owner may elect one of
the retirement income options set forth in this prospectus. Nationwide must
receive this election in writing. The plan may restrict changes in the
retirement income option elected.
If, at retirement, the present value of a participant's account is less than
$3,500, Nationwide may make a lump sum distribution instead of periodic
payments.
RETIREMENT INCOME FORMS
Retirement distributions may take any of the following forms, as permitted by
the plan:
Amount and Period Certain Options
OPTION A1: PAYMENTS FOR A DESIGNATED PERIOD
Payments will be made monthly for a set number of years not to exceed 30
years. The amount of each payment will vary with the performance of the
underlying mutual funds in which the participant account invests.
Nationwide calculates each payment by multiplying (a) by (b), where:
(a) is the accumulation unit value on the day the payment is made;
and
(b) is the number of accumulation units applied under this option
divided by the number of payments selected.
Once the amount of the payment is calculated, Nationwide will cancel
available accumulation units to equal the dollar amount of that payment.
Exchanges between the investment options are permitted subject to the
limitations set forth in the Group Fixed Fund Retirement Contract.
Exchanges may cause the number of accumulation units to change,
necessitating a recalculation of the payment amount.
If the period selected under this option is less than 5 years, and the
participant has less than 5 participant account years, a CDSC will be
assessed against each payment.
OPTION A2: PAYMENTS OF A DESIGNATED AMOUNT
Payments will be made monthly in equal installments of a set amount (not
less than $25 per month) until no accumulation units remain in the
participant account. The participant's account is adjusted each valuation
date to reflect investment results. Nationwide will cancel accumulation
units up to the designated dollar amount of the payment.
Exchanges between the investment options are permitted subject to the
limitations set forth in the Group Fixed Fund Retirement Contract.
If election of this option results in a payment period of less than 5
years, and the participant has less than 5 Participant Account Years, a
CDSC will be assessed against each payment.
Life Income Options
For the following options, payments will be determined annually and will remain
level throughout the year. Each year, on the anniversary of the beginning of
Retirement Income Payments, a new monthly payment will be determined. That new
payment will remain level for that year.
Nationwide will use the retired participant's adjusted age to determine each
year's set monthly payment. This adjusted age may not be the same as the retired
participant's actual age.
Life income options are based on:
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- - - the mortality tables specified in the contract;
- - - the adjusted age of the retired participant;
- - - the type of Retirement Income Payment option(s) selected; and
- - - in the case of variable payments, the investment performance of the
specific sub-accounts elected.
OPTION B1: LIFE INCOME WITH PAYMENT CERTAIN
Payments will be made monthly during an individual's lifetime for a set period
of 60, 120, 180, 240, 300 or 360 months, as elected. If the individual dies
before the end of the selected period, level payments will continue to the
beneficiary during the remainder of the selected period. Unless prohibited by
the plan, the beneficiary may elect at any time to receive the present value of
the remaining number of payments in a single payment, calculated using the same
assumed investment rate used previously.
Nationwide will cancel accumulation units up to the designated dollar amount of
each payment.
OPTION B2: JOINT AND SURVIVOR LIFE INCOME
Payments will be made monthly during the joint lifetime of the participant and a
beneficiary. Payments will be made as long as either of the two is living. If
the participant predeceases the beneficiary, payments will continue to be paid
to the beneficiary at 100%, 75%, 66 2/3% or 50% of the original payment amount
as elected until the beneficiary's death. If the beneficiary predeceases the
participant, payments will continue at 100% to the participant.
Nationwide will cancel accumulation units up to the designated dollar amount of
each payment.
Other Options
Alternate distribution methods may be used with Nationwide's consent.
Frequency of Payment
The retired participant, with the contract owner's consent, may receive payments
under any option annually, semi-annually, or quarterly instead of monthly. Any
change in frequency of payments must be on the anniversary of the beginning of
Retirement Income Payments.
Withdrawal
If allowed by the plan, any amount remaining under option A1 or A2 may be
withdrawn. If that amount is at least $5,000, the withdrawn amount may be
applied to option B1 or B2, subject to minimum payment requirements.
DETERMINATION OF LIFE INCOME PAYMENTS
First Year Payments
To determine the monthly payment that will be distributed monthly for the first
year after retirement, Nationwide first determines the participant's account
value as of the retirement date. This value is found by multiplying the number
of accumulation units in each sub-account for that participant's account by the
accumulation unit value for that sub-account on the last business day of the
second calendar week before the date the first payment will be made.
Based on the participant's account value, Nationwide then determines the amount
of each monthly payment. The monthly payment amount is found by dividing the
accumulation unit value of that sub-account in the participant's account by the
amount required to provide $1 per month (the purchase rate). This payment amount
will remain level throughout the year.
Once the monthly payment amount is found, Nationwide multiplies the payment by
12 to get the total payment for the year. Then Nationwide cancels the number of
accumulation units from the participant's account to equal the total payments
for the year. The accumulation units will be canceled from each sub-account in
the same
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proportion that new purchase payments are allocated. The value is then
transferred to Nationwide's general account from which monthly payments are
made.
The total annual amount is calculated so that if there are no partial
redemptions, and no underlying mutual fund dividends are taken in cash, the
monthly payments will be level as long as the net investment factor equals the
assumed investment rate plus an amount equal to the annual administrative
charge. Payments in subsequent years will vary depending on how the
sub-accounts' performance compares to the assumed investment rate.
Subsequent Years' Payments
On each anniversary of the beginning of Retirement Income Payments, the next
year's monthly payment amount will be calculated. The calculation will be
performed in the same manner as the first year's payment, except that the
current participant account value will be used. Similarly, accumulation units
will be cancelled and the value will be transferred to Nationwide's general
account, from which monthly payments will be made.
ALTERNATE ASSUMED INVESTMENT RATE
A 3.5% per annum assumed investment rate is built into the purchase rate basis
in the contracts. If not prohibited by law, a contract owner may, at contract
issuance, elect an alternate assumed investment rate of 5% per annum. The choice
of assumed investment rate affects the pattern of Retirement Income Payments. A
higher assumption would mean a higher initial payment but more slowly rising or
rapidly falling subsequent payments. A lower assumption would have the opposite
effect.
The contract aims to provide level payments when the economy is relatively
stable. Higher payments should reflect only increased investment results from
inflation or increased productivity. The success of this goal depends on the
validity of the assumption that the net investment result equals the assumed
investment rate during stable economic periods.
DEATH OF PARTICIPANT
PARTICIPANT DEATH BEFORE RETIREMENT
If a participant dies before beginning Retirement Income Payments, a death
benefit equal to the participant's account value is payable as set forth in the
plan. The death benefit will be paid when Nationwide:
1) receives and verifies the participant's death; and
2) verifies beneficiary designations.
If the plan so provides, the beneficiary may receive the death benefit:
1) as a lump sum; or
2) in the form of a Retirement Income Form contained in the contract,
subject to applicable minimums. Retirement Income Payments may be
fixed, variable, or a combination of both.
DEATH OF RETIRED PARTICIPANT
If a retired participant dies while receiving payments, any payment due will be
determined according to the Retirement Income Form elected. The calculation of
the net present value of any remaining payments under a period certain option
will be based on the same assumed investment rated used in determining the
payments before the retired participant's death.
The participant account will be reduced by the number of accumulation units not
required to provide further payments during the remainder of a period certain,
if any, or to a contingent retired participant. Depending on Nationwide's
obligation under the contract, the accumulation units will either remain in the
variable account or be transferred to Nationwide's general account.
FEDERAL TAX CONSIDERATIONS
Consult a financial adviser, legal counsel or tax advisor to discuss in detail
the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the
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contracts. The contracts are treated as a trust under rules similar to Internal
Revenue Code Section 401(f).
Under existing federal income tax law, Nationwide is not required to pay taxes
on the variable account's investment income when it is credited to contract
owners. Nationwide is taxed as a life insurance company under Part One,
Subchapter L of the Internal Revenue Code.
Contract owners would normally be taxed on income and capital gains earned under
the contract, whether or not taken in cash. However, the contracts are issued
only to organizations exempt from federal income tax.
Distributions will normally contain purchase payments that were not previously
included in the participant's gross income. Upon distribution, these amounts
should be included in the gross income of the recipient.
The contract owner is responsible for ensuring that the plan is established and
administered in accordance with the provisions set forth in the Internal Revenue
Code.
CONTRACTS ISSUED UNDER THE NEW YORK MODEL PLAN
In order to sell the contracts to governmental employers in the state of New
York, the following amendments must be made to the contract:
- - - References to "annuity" payments throughout the prospectus are modified to
mean "benefit" payments.
- - - The "Suspension and Termination" provision is amended to allow a
participant to "freeze" his or her account and maintain the account on
deposit with Nationwide even though the contract was terminated. The
contract owner will continue to own the account, subject to the claims of
its general creditors.
- - - All references to Life Income Options B1 and B2 throughout this prospectus
are deleted.
- - - All references to "CDSC" and "Contingent Deferred Sales Charge" throughout
this prospectus are deleted.
STATEMENTS AND REPORTS
Semi-annually, Nationwide (or a designee) will provide each participant a
Statement of Assets, Liabilities and Contract Owners' Equity and a Statement of
Operations and Changes in Contract Owners' Equity for the variable account.
Additionally, each participant and retired participant will receive periodic
reports on the value of his or her account.
Participants should review these reports carefully. All errors or corrections
must be reported to Nationwide immediately to assure proper crediting to the
contract. Unless Nationwide is notified within 30 days of receipt of the report,
Nationwide will assume all transactions are correct.
Nationwide will provide contract owners with the variable account's prospectus
to make available to participants. The contract owner may, under the terms of
the plan, be required to provide additional information to participants, such as
changes in the plan, changes in the tax status of the plan, or the financial
condition of the contract owner as it relates to obligations under the plan.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999.
Like many organizations, Nationwide is required to renovate or replace computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has developed a plan to renovate or replace all applications that were
identified as not Year 2000 compliant.
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As of the end of July 1998, Nationwide has renovated 97% of all applications
that required renovation. Testing of the renovated programs is in process,
including running each application with the date moved forward to Year 2000.
Nationwide expects to complete the testing of all renovated applications by the
end of 1998. For applications being replaced, Nationwide anticipates all
replacement systems to be in place and functioning by the end of 1998.
Contingency plans are substantially completed which identify actions to be taken
if Nationwide's renovation and replacement strategies fall behind schedule.
Nationwide is also completing an inventory and assessment of all vendor
products. As of the end of July 1998, 83% of products had been assessed and 69%
were Year 2000 compliant. Nationwide is certifying that each vendor product is
Year 2000 compliant. At the end of July 1998, 24% of vendor products that were
identified as Year 2000 compliant had been certified. Nationwide anticipates
having all vendor products assessed and certified by the end of 1998. Any vendor
products that cannot be certified as Year 2000 compliant will be replaced or
eliminated.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
working with all business partners to assess Year 2000 issues associated with
the exchange of electronic data. Nationwide has completed an inventory and
assessment of all interfaces with business partners and is in the process of
testing those interfaces. Nationwide has also initiated plans to survey producer
business partners to ascertain their Year 2000 readiness.
Operating expenses in 1997 and in the first six months of 1998 include
approximately $45 million and $22.6 million, respectively, for technology
projects, including costs related to Year 2000. In the second half of 1998,
Nationwide anticipates spending an amount comparable to expense for the first
half of 1998. At this time, no significant Year 2000 costs are anticipated in
1999. Management does not anticipate that the completion of Year 2000 renovation
and replacement activities will result in a reduction in operating expenses.
Rather, personnel and resources currently allocated to Year 2000 issues will be
assigned to other technology-related projects. These expenses do not have an
effect on the assets of the variable account and are not charged through to the
contract owner.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In February 1997, Nationwide Life Insurance Company was named as a defendant in
a lawsuit filed in New York Supreme Court related to the sale of whole life
policies on a "vanishing premium" basis (John H. Snyder v. Nationwide Life
Insurance Co.). The plaintiff in this lawsuit seeks to represent a national
class of Nationwide policyholders and claims unspecified compensatory and
punitive damages. On August 20, 1998, the Court in the Snyder case signed an
order preliminarily approving a class for settlement purposes and scheduled a
fairness hearing for December 17, 1998. The proposed settlement, if ultimately
approved, is not expected to have a material adverse effect on the financial
condition of Nationwide Life Insurance Company.
In April 1998, Nationwide Life Insurance Company was named as a defendant in a
lawsuit filed in Ohio State Court similar to the Snyder lawsuit (David Mishler
v. Nationwide Life Insurance Co.). These plaintiffs seek to represent a similar
class, make similar allegations and seek unspecified compensatory and punitive
damages.
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In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, brought an action in a Texas federal court against Nationwide Life
Insurance Company and the American Century Group as defendants (Robert Young and
David D. Distad v. Nationwide Life Insurance Company et al.). In this action,
plaintiffs seek to represent a class of variable life insurance policy owners
and variable annuity contract owners who they claim were misled when purchasing
these variable contracts. Plaintiffs alleged the purchasers were led to believe
that the performance of an underlying mutual fund managed by American Century,
whose shares may only be purchased by insurance companies, would track the
performance of a public mutual fund, also managed by American Century. The
amended complaint seeks unspecified compensatory and punitive damages. On April
27, 1998, the Court denied, in part, and granted, in part, motions to dismiss
the complaint filed by Nationwide Life Insurance Company and American Century.
The parties are presently engaged in discovery on the issue of whether the
lawsuit should be certified as a class action. Plaintiffs filed their motion in
support of class certification and Nationwide Life Insurance Company intends to
file a response opposing class certification. Nationwide Life Insurance Company
intends to defend this case vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT- Money Market
Fund and the Short-Term Investments Trust - Treasury Portfolio. "Yield" is a
measure of the net dividend and interest income earned over a specific seven-day
period (which period will be stated in the advertisement) expressed as a
percentage of the offering price of the fund's units. Yield is an annualized
figure, which means that it is assumed that funds generate the same level of net
income over a 52-week period. The "effective yield" is calculated similarly but
includes the effect of assumed compounding, calculated under rules prescribed by
the SEC. The effective yield will be slightly higher than yield due to this
compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- - - precious metals;
- - - real estate;
- - - stocks and bonds;
- - - closed-end funds;
- - - bank money market deposit accounts and passbook savings;
- - - CDs; and
- - - the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- - - S&P 500;
- - - Shearson/Lehman Intermediate Government/Corporate Bond Index;
- - - Shearson/Lehman Long-Term Government/Corporate Bond Index;
- - - Donoghue Money Fund Average;
- - - U.S. Treasury Note Index;
- - - Bank Rate Monitor National Index of 2-1/2 Year CD Rates; and
- - - Dow Jones Industrial Average.
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Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- - - Lipper Analytical Services, Inc.,
- - - CDA/Wiesenberger,
- - - Morningstar,
- - - Donoghue's,
- - - magazines such as:
= Money;
= Forbes;
= Kiplinger's Personal Finance Magazine;
= Financial World;
= Consumer Reports;
= Business Week;
= Time;
= Newsweek;
= National Underwriter;
= News and World Report;
- - - LIMRA;
- - - Value;
- - - Best's Agent Guide;
- - - Western Annuity Guide;
- - - Comparative Annuity Reports;
- - - Wall Street Journal;
- - - Barron's;
- - - Investor's Daily;
- - - Standard & Poor's Outlook; and
- - - Variable Annuity Research & Data Service (The VARDS Report)
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the deduction of all charges
made to the contracts, except for premium taxes, which may be imposed by certain
states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $10,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges except the CDSC) had they been available
in the variable account for one of the periods. The CDSC is not reflected
because the contracts are designed for long term investment. The CDSC, if
reflected, would decrease the level of performance shown. An initial investment
of $10,000 is assumed because that amount is closer to the size of a typical
contract than $1,000, which was used in
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calculating the standardized average annual total return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
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SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/98 to 12/31/98 to 12/31/98 Account
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Income & Growth - Investor Class
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International
Discovery Fund - Investor Class
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra
-------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc.
-------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Midcap Stock Fund - Class A
-------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund
-------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F
-------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years
- Institutional Shares
-------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth Opportunities Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield Fund - Class T
-------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund
-------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund
-------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund
-------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
-------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio
-------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund
-------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund
-------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund
-------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R), Inc.
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Aggressive Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Aggressive
Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderate Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Conservative
Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Conservative Portfolio
-------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio
-------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A
-------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A
-------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Morgan Stanley Institutional Fund, Inc. - Equity
Growth Portfolio - Class B
-------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund - Class D
-------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund - Class D
-------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund
-------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 31
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
-------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/98 to 12/31/98 to 12/31/98 Account
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Separate Account Trust - Nationwide Small
Company Fund
-------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Trust
-------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A
-------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 Index Portfolio
-------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A
-------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
-------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R)
-------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I
-------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund - Common Class
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Income & Growth - Investor Class
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International
Discovery Fund - Investor Class
-------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra
-------------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), Inc.
-------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Midcap Stock Fund - Class A
-------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund
-------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F
-------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years
- Institutional Shares
-------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth Opportunities Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield Fund - Class T
-------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 32
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Contrafund
-------------------------------------------------------------------------------------------------------------------
Fidelity Equity - Income Fund
-------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
-------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio
-------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund
-------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund
-------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund
-------------------------------------------------------------------------------------------------------------------
The Investment Company of America(R), Inc.
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Aggressive Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Aggressive
Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderate Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Moderately Conservative
Portfolio
-------------------------------------------------------------------------------------------------------------------
LifeDesigns Series - The Conservative Portfolio
-------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio
-------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A
-------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A
-------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Morgan Stanley Institutional Fund, Inc. - Equity
Growth Portfolio - Class B
-------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund - Class D
-------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund - Class D
-------------------------------------------------------------------------------------------------------------------
Nationwide Money Market Fund
-------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust - Nationwide Small
Company Fund
-------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc.
-------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Trust
-------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class Y
-------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A
-------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A
-------------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 Index Portfolio
-------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A
-------------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio -
Institutional Class
-------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R)
-------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I
-------------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund - Common Class
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 33
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History...........................................1
Services..................................................................1
Purchase of Securities Being Offered......................................2
Underwriters..............................................................2
Calculations of Performance...............................................2
Annuity Payments..........................................................3
Financial Statements......................................................4
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
A summary of the investment objective for each underlying mutual fund is listed
below.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY: INCOME & GROWTH - INVESTOR CLASS
The investment objective of the Fund is to seek dividend growth, current income
and capital appreciation by investing in common stocks. The Fund may buy
securities convertible into common stock, such as convertible bonds, convertible
preferred stocks or warrants. The Fund may also, for liquidity purposes, invest
in high-quality money market instruments with remaining maturities of one year
or less. The Fund may also enter into repurchase agreements, collateralized by
U.S. government securities, with banks or broker-dealers deemed to present
minimal credit risk. American Century Investment Management, Inc. serves as the
Fund's investment adviser.
AMERICAN CENTURY - TWENTIETH CENTURY INTERNATIONAL DISCOVERY FUND - INVESTOR
CLASS
The investment objective of the Fund is capital growth by investing primarily in
an internationally diversified portfolio of equity securities of issuers that
meet certain fundamental and technical standards of selection (relating
primarily to acceleration of earnings and revenues). The Fund will invest its
assets primarily in equity securities of small foreign issuers (those issuers
having, at the time of investment, a market capitalization of less than U.S. $1
billion or a public float of less than U.S. $500 million). The "public float" of
an issuer is defined as the aggregate market value of the issuer's outstanding
securities held by non-affiliates of the issuer. The Fund may invest up to 50%
of its assets in securities of issuers in emerging market countries. DUE TO THE
SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT
IN THE FUND MAY NOT BE APPROPRIATE FOR ALL INVESTORS. American Century
Investment Management, Inc. serves as the Fund's investment adviser.
AMERICAN CENTURY: TWENTIETH CENTURY ULTRA
The investment objective of the Fund is capital growth by investing primarily in
common stocks that are considered by management to have better-than-average
prospects for appreciation. It is management's intention that the portfolio will
generally consist of common stocks of medium-sized and smaller companies.
American Century Investment Services, Inc. serves as the Fund's investment
adviser.
DREYFUS APPRECIATION FUND, INC.
The primary investment objective of the Fund is to provide long-term capital
growth consistent with the preservation of capital. Current income is a
secondary investment objective. The Fund seeks to meet its objectives by
investing primarily in the common stocks of domestic and foreign issuers. The
Dreyfus Corporation serves as the Fund's investment adviser.
DREYFUS PREMIER MIDCAP STOCK FUND -
CLASS A
The investment objective of the Fund is to seek total investment returns
(including capital appreciation and income) which consistently outperform the
Standard & Poor's 400 MidCap Index. The Fund attempts to maintain a diversified
holding in common stocks of medium capitalization companies (firms with a market
value between $200 million and $5 billion). The Dreyfus Corporation serves as
the Fund's investment adviser.
THE DREYFUS THIRD CENTURY FUND, INC.
The Fund's primary goal is to provide capital growth through equity investment
in companies that, in the opinion of the Fund's management, not only to meet
traditional investment standards, but which also show evidence that they conduct
their business in a manner that contributes to the enhancement of the quality of
life of America. Current income is secondary to the primary goal. The Dreyfus
Corporation serves as the Fund's investment adviser.
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<PAGE> 35
FEDERATED BOND FUND - CLASS F
The investment objective of the Fund is to provide as high a level of current
income as is consistent with the preservation of capital. The Fund invests
primarily in a professionally managed, diversified portfolio of bonds. Under
normal circumstances, at least 65% of the Fund's net assets will be invested in
investment grade securities, including repurchase agreements collateralized by
investment grade securities. The Fund may invest in corporate debt obligations,
U.S. Government obligations, municipal securities, asset-backed securities,
adjustable rate mortgage securities, collateralized mortgage obligations, and
other securities which are deemed to be consistent with the Fund's investment
objectives. Federated Advisers serves as the Fund's investment adviser.
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS - INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund pursues this
investment objective by investing in U.S. government securities with remaining
maturities of five years or less. Federated Management serves as the Fund's
investment adviser.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND - CLASS A
The investment objective of the Fund is to pursue capital growth that exceeds
market performance through investments in growth, cyclical, and value stocks.
Fidelity Management & Research Company serves as the Fund's investment adviser.
FIDELITY ADVISOR HIGH YIELD FUND - CLASS T
The Fidelity Advisor High Yield Fund is a bond fund designed to meet the needs
of the long-term investor, seeking above-average monthly income and potential
capital growth by investing in lower-rated, high-yielding, fixed income
securities. Fidelity Management & Research Company serves as the Fund's
investment adviser.
FIDELITY EQUITY-INCOME FUND
The investment objective of the Fund is to obtain reasonable income from a
portfolio consisting primarily of income-producing equity securities. The Fund
seeks a yield which exceeds the composite yield on the securities comprising the
Standard & Poor's Composite Index of 500 Stocks. In pursuing this objective, the
Fund will also consider the potential for capital appreciation. Fidelity
Management & Research Company serves as the Fund's investment adviser.
FIDELITY OTC PORTFOLIO
The investment objective of the Fund is to seek capital appreciation by
investing primarily in securities traded on the over-the counter (OTC)
securities market. Securities traded on the OTC include, among others,
industrial corporations, financial services institutions, public utilities, and
transportation companies, common and preferred stocks, securities convertible
into common stock, warrants and similar rights, and debt securities, and
obligations of the federal government. The fund does not place any weight on
dividend and interest income unless it believes this income will have a
favorable influence on the market value of a security.
Fidelity Management & Research Company serves as the Fund's investment adviser.
FIDELITY PURITAN FUND
The investment objective of the Fund seeks to obtain as much income as possible,
consistent with the preservation and conservation of capital, by investing in a
broadly diversified portfolio of securities, including common stocks, preferred
stocks, and bonds. While emphasis on income is an important objective, this does
not preclude growth in capital since some securities offering a better than
average yield may also possess some growth possibilities. Fidelity Management &
Research Company serves as the Fund's investment adviser.
33
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<PAGE> 36
INVESCO DYNAMICS FUND
The investment objective of the Fund is to seek appreciation of capital through
aggressive investment policies. The Fund invests primarily in common stocks of
U.S. companies traded on national securities exchanges and over-the-counter. The
Fund also has the flexibility to invest in preferred stocks and convertible or
straight issues of debentures, as well as foreign securities. INVESCO Funds
Group, Inc. serves as the Fund's investment adviser.
INVESCO TOTAL RETURN FUND
The investment objective of the Fund is to seek to achieve a high total return
on investment through capital appreciation and current income by investing in a
combination of equity securities (consisting of common stocks and, to a lesser
degree, securities convertible into common stock) and fixed income securities.
The equity securities purchased by the Fund generally will be issued by
companies which are listed on a national securities exchange and which usually
pay regular dividends. This Fund seeks reasonably consistent total returns over
a variety of market cycles. INVESCO Funds Group, Inc. serves as the Fund's
investment adviser.
INVESCO Capital Management, Inc. serves as the Fund's sub-adviser.
LIFEDESIGNS SERIES
LifeDesigns Series consists of five separate nondiversified funds, each of which
is a separately managed nondiversified portfolio with its own investment
objective and policies. The objective of each of the Portfolios which is
fundamental, is to maximize total investment return (i.e. capital growth and
income) subject to investment restrictions and asset allocation policies. The
Portfolios will maximize total investment return as is specifically detailed in
the following objectives which are non-fundamental and can be changed without
approval of a Portfolio's shareholders.
THE AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital by
investing in underlying funds which invest primarily in equity securities
("Equity Funds"). This Fund is generally appropriate for investors seeking
higher returns over an investment time horizon of at least 15 years and
having a higher tolerance for market fluctuations. Nationwide Advisory
Services, Inc.
("NAS") serves as the Fund's investment adviser.
THE CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income and,
secondarily, long term growth of capital. This Fund will seek to meet its
objectives by primarily investing in a combination of the Nationwide
Contract (a fixed interest contract) and fixed income securities ("Bond
Funds"), with a similar investment in Equity Funds. This Fund is generally
appropriate for investors seeking low fluctuations in principal over an
investment time horizon of less than 5 years, as well more conservative
investors with an investment time horizon of between 5 and 10 years. NAS
serves as the Fund's investment adviser.
THE MODERATE PORTFOLIO
The investment objective of this Fund is to provide growth of capital and
income by investing primarily in Equity Funds, but will also invest a
significant percentage of its assets in the Nationwide Contract and in Bond
Funds. This Fund is generally appropriate for moderate investors seeking
moderate returns over an investment time horizon of between 10 and 15
years; conservative investors with an investment time horizon of at least
15 years or more; and more aggressive investors with an investment time
horizon of 5 to 10 years. NAS serves as the Fund's investment adviser.
THE MODERATELY AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital by
investing
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<PAGE> 37
primarily in Equity Funds. However, the Fund attempts to reduce its
volatility by also investing in the Nationwide Contract and Proprietary
Funds which also invest primarily in Bond Funds. This Fund is generally
appropriate for moderate investors seeking high returns over an investment
time horizon of 15 years or for more aggressive investors with an
investment time horizon of 10 to 15 years. NAS serves as the Fund's
investment adviser.
THE MODERATELY CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income and,
secondarily, long term growth of capital. This Fund will seek to meet its
objective by generally investing half of its assets in Equity Funds with
the remainder in the Nationwide Contract and Bond Funds. This Fund is
generally appropriate for moderate investors seeking lower fluctuations in
principal combined with some of the upside potential of equity investments
over an investment time horizon of between 5 and 10 years. This Fund is
also generally appropriate for conservative investors with an investment
time horizon of between 10 and 15 years and more aggressive investors with
an investment time horizon of less than 5 years. NAS serves as the Fund's
investment adviser.
MAS FUNDS FIXED INCOME PORTFOLIO
The investment objective of the Fund is to achieve above-average total return
over a market cycle of three of five years, consistent with reasonable risk, by
investing in a diversified portfolio of U. S. government securities, corporate
bonds (including bonds rated below investment grade commonly referred to as
"junk bonds"), foreign fixed-income securities and mortgage-backed securities of
domestic issuers and other fixed-income securities. The portfolio's average
weighted maturity will ordinarily be greater than five years. Miller, Anderson &
Sherrerd, LLP serves as the Fund's investment adviser.
MFS(R) HIGH INCOME FUND - CLASS A
The investment objective of the Fund is high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features. Securities offering the
high current income sought by this Fund are ordinarily in the lower rating
categories of recognized rating agencies or are unrated and generally involve
greater volatility of price and risk of principal and income than securities in
the high rating categories. Capital growth, if any, is a consideration
incidental to the investment objective of high current income. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
MORGAN STANLEY INSTITUTIONAL FUND, INC. - EQUITY GROWTH PORTFOLIO - CLASS B
The investment objective of the Portfolio is to seek long-term capital
appreciation by investing in growth-oriented equity securities of medium and
large capitalization companies. Equity securities include common and preferred
stocks, convertible securities and rights and warrants to purchase common
stocks. Under normal circumstances, the Portfolio will invest at least 65% of
the value of its total assets in equity securities. Morgan Stanley Asset
Management, Inc. serves as the Portfolio's investment adviser.
NATIONWIDE(R) FUND - CLASS D
The investment objective of the Fund is to seek total return through a flexible
combination of current income and capital appreciation. The Fund invests
primarily in common stocks, but also in convertible securities, other equity
securities, bonds and money market obligations. Nationwide Advisory Services,
Inc. serves as the Fund's investment adviser.
NATIONWIDE(R) MONEY MARKET FUND
The investment objective of the Fund is to seek as high a level of current
income as is consistent with the preservation of capital and maintenance of
liquidity. The Fund invests in high-quality money market instruments maturing in
397 days
35
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<PAGE> 38
or less. Nationwide Advisory Services, Inc. serves as the Fund's investment
adviser.
NATIONWIDE S&P 500(R) INDEX FUND - CLASS Y
The investment objective of the Fund is to provide investment results that
correspond to the price and yield performance of publicly traded common stocks
as represented by the Standard & Poor's 500 Composite Stock Price Index (the
"Index"). The Fund attempts to be fully invested at all times in stocks that
comprise the Index and stock index futures, and in any event, at least 80% of
the Fund's net assets will be invested in stocks comprising the Index.
Nationwide Advisory Services, Inc. serves as the Fund's investment adviser and
The Dreyfus Corporation is the Fund's sub-adviser.
"S&P 500(R)" has been licensed for use by Nationwide Advisory Services, Inc. The
Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
investing in the Fund.
NATIONWIDE SEPARATE ACCOUNT TRUST - NATIONWIDE SMALL COMPANY FUND
The investment objective of the Fund is long-term growth of capital by investing
primarily in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers, The Dreyfus Corporation, Neuberger & Berman, L.P., Lazard Asset
Management, Strong Capital Management, Inc. and Warburg Pincus Asset Management,
Inc., were chosen because they utilize a number of different investment styles
when investing in small company stocks. By utilizing different investment
styles, the Fund's adviser, Nationwide Advisory Services, Inc., hopes to
increase prospects for investment return and to reduce market risk and
volatility. Neuberger & Berman Guardian Fund, Inc. The Fund seeks capital
appreciation through investments generally in dividend-paying issues of
established companies that its investment officers believe are well managed. The
emphasis of the Fund's investments is on common stock. The Fund diversifies its
holdings among different industries and different companies in light of
conditions prevailing at any given time. Current income is a secondary
objective. Neuberger&Berman Management Incorporated serves as the Fund's
investment adviser.
NEUBERGER & BERMAN PARTNERS TRUST
The investment objective of the Fund is to seek capital growth. The Fund invests
using a value-oriented approach to the selection of individual securities. The
Fund manager seeks capital growth through an investment approach that is
designed to increase capital with reasonable risk. Neuberger&Berman Management
Incorporated serves as the Fund's investment adviser.
OPPENHEIMER GLOBAL FUND - CLASS A
The investment objective of the Fund is to seek capital appreciation. The Fund
emphasizes investment in foreign and domestic securities considered by the
Fund's investment manager to have appreciation possibilities, primarily common
stocks or securities having investment characteristics of common stocks (such as
convertible securities) of "growth-type" companies. As a matter of fundamental
policy, under normal market conditions, the Fund will invest its total assets in
securities of issuers traded in markets in at least three different countries
(which may include the United States). The portfolio may also emphasize
securities of cyclical industries and "special situations" when the Fund's
manager believes that they present opportunities for capital growth.
OppenheimerFunds, Inc. serves as the Fund's investment adviser.
PRESTIGE BALANCED FUND - CLASS Y
The investment objective of the Fund is to provide a high total return from a
diversified portfolio of equity and fixed income securities. The Fund seeks to
provide a total return that approaches the total return of the universe of
equity securities of large and medium sized
36
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<PAGE> 39
companies and that exceeds the return typical of a portfolio of fixed income
securities. Under normal market conditions, the Fund will invest approximately
60% of its assets in equity securities and 40% in fixed income securities. The
equity securities will primarily be securities of large and medium sized
companies included in the Standard & Poor's 500 Composite Stock Price Index, and
the fixed income securities will cover a range of fixed income sectors and
securities, including government, corporate, asset-backed and mortgage-backed
securities. Nationwide Advisory Services, Inc. serves as the Fund's investment
adviser and J.P. Morgan Investment Management Inc. is the Fund's sub-adviser.
PRESTIGE INTERNATIONAL FUND - CLASS Y
The investment objective of the Fund is capital appreciation. The Fund seeks to
accomplish its investment objective by investing primarily in equity securities
of non-United States companies that, in the opinion of its subadviser, are
inexpensively priced relative to the return on total capital or equity. The Fund
invests primarily in equity securities of non-United States companies. Under
normal market conditions, the Fund will invest at least 80% of the value of its
total assets in the equity securities of companies within at least three
different countries (not including the United States). Nationwide Advisory
Services, Inc. serves as the Fund's investment adviser and Lazard Asset
Management is the Fund's sub-adviser.
PRESTIGE LARGE CAP GROWTH FUND - CLASS Y
The investment objective of the Fund is long-term capital appreciation. The Fund
seeks to achieve its investment objective from a broadly diversified portfolio
of equity securities of large capitalization companies that are expected to have
better prospects for earnings growth than the growth rate of the general
domestic economy. Dividend income is a secondary objective. A large
capitalization company is a company with a market capitalization and industry
characteristics that are similar to companies in the Russell 1000(R) Growth
Index, which currently have market capitalizations that range from $1.4 billion
to $272 billion. Nationwide Advisory Services, Inc. serves as the Fund's
investment adviser and Goldman Sachs Asset Management is the Fund's sub-adviser.
PRESTIGE LARGE CAP VALUE FUND - CLASS Y
The investment objective of the Fund is to maximize total return, consisting of
both capital appreciation and current income. The Fund seeks to achieve its
investment objective by investing in U.S. equity securities that are currently
undervalued as determined by its subadviser. Under normal market conditions,
substantially all, but in no event less than 65% of the Fund's total assets will
be invested in equity securities of large capitalization U.S. companies,
including foreign companies whose securities are traded in the United States and
who comply with U.S. accounting standards. A large capitalization company is a
company with a market capitalization and industry characteristics that are
similar to companies in the Russell 1000(R) Value Index, which currently have
market capitalizations that range from $1.4 billion to $272 billion. Nationwide
Advisory Services, Inc. serves as the Fund's investment adviser and Brinson
Partners, Inc. is the Fund's sub-adviser.
PRESTIGE SMALL CAP FUND - CLASS Y
The investment objective of the Fund is long-term capital appreciation. The Fund
seeks to accomplish its investment objective from a broadly diversified
portfolio of equity securities issued by U.S. companies that have small market
capitalizations. Under normal market conditions, the Fund will invest at least
65% of its total assets in equity securities of companies whose market
capitalizations at the time of investment do not exceed 110% of the largest
company in the Russell 2000(R) Small Stock Index; these companies currently have
market capitalizations that range from $222 million to $1.4 billion. Nationwide
Advisory Services, Inc. serves as the Fund's investment adviser and INVESCO
Management &
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<PAGE> 40
Research, Inc. serves as the Fund's sub-adviser, providing daily portfolio
management for the Fund.
PUTNAM INVESTORS FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and any
increased income resulting from such growth. The Fund is designed for investors
seeking long-term growth of capital from a portfolio consisting primarily of
common stocks. The Fund's management emphasizes investment in quality growth
stocks. Putnam Investment Management, Inc., serves as the Fund's investment
adviser.
PUTNAM VOYAGER FUND - CLASS A
The investment objective of the Fund is capital appreciation. The Fund invests
primarily in common stocks believed to have potential for capital appreciation
significantly greater than the market average. The Fund is designed for
investors willing to assume above-average risk in return for above-average
capital growth potential. Putnam Investment Management, Inc. serves as the
Fund's investment adviser.
SEI INDEX FUNDS - S & P 500 INDEX PORTFOLIO
The S & P Index Portfolio seeks to provide investment results that correspond to
the aggregate price and dividend performance of the securities in the Standard &
Poor's 500 Composite Stock Price Index which is comprised of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The investment
objective is a fundamental policy of the Portfolio. There can be no assurance
that the Portfolio will achieve its investment objective. SEI Fund Management
serves as the Fund's investment adviser.
SELIGMAN GROWTH FUND, INC. - CLASS A
The investment objective of the Fund is longer-term growth in capital value and
an increase in future income. Fund assets have been invested primarily in common
stocks with the inherent investment risks tempered by portfolio diversification.
J & W Seligman & Co., Incorporated serves as the Fund's investment adviser.
SHORT-TERM INVESTMENTS TRUST - TREASURY PORTFOLIO - INSTITUTIONAL CLASS
The investment objective of the Portfolio is the maximization of current income
to the extent consistent with the preservation of capital and maintenance of
liquidity. The Portfolio seeks to achieve its objective by investing in a
portfolio consisting of direct obligations of the U.S. Treasury and repurchase
agreements secured by such obligations. The instruments purchased by the
Portfolio will have maturities of 397 days or less. AIM Advisers, Inc. serves as
the Fund's investment adviser.
T. ROWE PRICE INTERNATIONAL STOCK FUND(R)
The Fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. Companies. T. Rowe Price
Associates, Inc. serves as the Fund's investment adviser.
TEMPLETON FOREIGN FUND - CLASS I
The investment objective of the Fund is long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be incidental.
Templeton Investment Counsel, Inc. serves as the Fund's investment adviser.
WARBURG PINCUS EMERGING GROWTH FUND - COMMON CLASS
The investment objective of the Fund is to seek maximum capital appreciation by
investing in equity securities of small- to medium-sized companies in the United
States with emerging or renewed growth potential. Warburg Pincus Asset
Management, Inc. serves as the Fund's investment adviser.
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<PAGE> 41
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW PLANS ESTABLISHED
ON OR AFTER JUNE 30, 1998:
FIDELITY CONTRAFUND
The investment objective of the Fund is capital appreciation by investing in
securities that its manager believes are undervalued due to an overly
pessimistic appraisal by the public. Although the Fund will usually be invested
primarily in common stocks and securities convertible into common stock, the
percentage of its assets invested in other securities may vary. Fidelity
Management & Research Company serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1997:
FIDELITY MAGELLAN(R) FUND
The investment objective of the Fund is capital appreciation by investing
primarily in common stock and securities convertible into common stock. The Fund
may also invest in foreign securities, which involves additional risks. The Fund
may also invest in stock index futures and options both of which can be volatile
investments. Fidelity Management & Research Company serves as the Fund's
investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER MAY 1, 1997:
AMERICAN CENTURY: TWENTIETH CENTURY GROWTH
The investment objective of the Fund is capital growth through investment in
securities which the management considers to have better-than-average prospects
for appreciation. It is management's intention that the portfolio will generally
consist of common stocks of large established companies. American Century
Investment Services, Inc. serves as the Fund's investment adviser.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - CLASS A
The investment objective of the Fund is the long-term growth of capital and
future income rather than current income. Massachusetts Financial Services
Company serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE TO ALL ISSUED
CONTRACTS ON OR AFTER JULY 1, 1994:
THE BOND FUND OF AMERICA(SM), INC.
The Fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital. The Fund invests
substantially all of its assets in marketable corporate debt securities, U.S.
Government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. Normally, at least 65% of the
Fund's assets will be invested in bonds. Capital Research and Management Company
serves as the Fund's investment adviser.
THE INVESTMENT COMPANY OF AMERICA(R), INC.
The investment objectives are long-term growth of capital and income. The Fund
strives to accomplish these objectives through constant supervision, careful
selection and broad diversification. In the selection of securities for
investment, the possibilities of appreciation and potential dividends are given
more weight than current yield. The Fund ordinarily invests principally in
common stocks. However, assets may also be held in securities convertible into
common stocks, straight debt securities (rated in the top three quality
categories by Standard & Poor's Corporation or Moody's Investor Service, Inc. or
determined to be of equivalent quality by Capital Research and Management
Company), cash equivalent quality by Capital Research and Management Company),
cash or cash equivalents, U.S. Government securities, or nonconvertible
preferred stocks. Massachusetts Financial Services Company serves as the Fund's
investment adviser.
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<PAGE> 42
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1993:
EVERGREEN INCOME AND GROWTH FUND
The investment objective of the Fund is current income and capital appreciation.
The Fund invests primarily in common and preferred stocks, securities
convertible into or exchangeable for common stocks, and fixed income securities.
The Fund's objective is to maximize the "total return" on its portfolio of
investments. Evergreen Asset Management Corp. serves as the Fund's investment
adviser.
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A
The investment objective of the Fund is growth of capital. Dividend income, if
any, is incidental to the objective of capital growth. To achieve this
objective, a flexible approach toward types of companies as well as types of
securities is maintained by the Fund, depending upon the economic environment
and the relative attractiveness of the various securities markets. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
NATIONWIDE(R) GROWTH FUND - CLASS D
The investment objective of the Fund is to seek long term capital appreciation
by investing primarily in equity securities of companies of all sizes. Major
emphasis in the selection of securities is placed on companies which have
capable management, and are in fields where social and economic trends,
technological developments, and new processes or products indicate a potential
for greater-than-average growth.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE FOR OWNERS WHOSE
PREDECESSOR NATIONWIDE DCVA CONTRACT WAS ISSUED ON OR AFTER JANUARY 1, 1987:
FIDELITY CAPITAL & INCOME FUND
The investment objective of the Fund is to seek to provide a combination of
income and capital growth by investing primarily in debt instruments and common
and preferred stocks, with a focus on lower-quality debt securities and
securities of companies with uncertain financial positions. Fidelity Management
& Research Company serves as the Fund's investment adviser.
Effective on and after July 1, 1991, Nationwide will no longer permit contract
owners or participants to make additional purchase payments or to exchange
contract values into the Fidelity Capital & Income Fund. However, contract
values held in the Fidelity Capital & Income Fund as of July 1, 1991 may
continue to be invested in that sub-account. Unless Nationwide is notified
otherwise, any purchase payments or exchanges which the contract owner or
participant directs Nationwide to invest in the Fidelity Capital & Income Fund
on and after July 1, 1991 will instead be automatically invested in the
Nationwide Money Market Fund.
Nationwide has determined that further investment in the Fidelity Capital &
Income Fund is not in the best interests of the contract owners and participants
in view of the Fund's adoption, effective for shares purchased on and after
February 1, 1991, of a redemption fee equal to 1.5% of the net asset value of
any Fund shares redeemed which are held less than twelve months. Any redemption
fees which the Fund may assess against Fund shares held by Nationwide in the
NACo Variable Account which were purchased from February 1, 1991 to July 1, 1991
will be paid by Nationwide from surplus and will not be paid, directly or
indirectly, by contract owners, participants or the NACo Variable Account.
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<PAGE> 43
APPENDIX B: CONDENSED FINANCIAL INFORMATION
The condensed financial information shown in the following tables shows the
accumulation unit values for an accumulation unit outstanding throughout the
period.
TIER I
Plans that converted to a Variable Account Annual Expense Fee of 0.95% of
average net assets on December 31, 1995.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
American Century: Income & 1998
Growth - Investor Class
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century International
Discovery Fund - Investor
Class
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.562802 5.842997 17,611,062 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.005400 4.562802 15,929,074 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.359891 4.005400 37,362,979 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.443124 3.359891 38,748,520 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.350122 3.443124 41,912,416 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.533694 3.350122 43,106,409 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.571846 3.533694 31,955,054 1991
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.424846 1.737833 125,555,220 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.263551 1.424846 51,280,940 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.926489 1.263551 79,405,506 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.970411 0.926489 59,484,505 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.970411 21,036,904 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.155739 2.332586 6,366,974 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.039710 2.155739 3,393,296 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.741422 2.039710 6,578,720 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.850918 1.741422 5,740,929 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.637181 1.850918 5,644,051 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.484255 1.637181 4,185,113 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.338732 1.484255 3,262,200 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
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<PAGE> 44
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Dreyfus Appreciation Fund, 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Dreyfus Premier Midcap Stock 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.756438 3.532278 14,863,803 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.238323 2.756438 5,449,596 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.663803 2.238323 9,402,637 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.814915 1.663803 9,817,673 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.740666 1.814915 10,291,485 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.723855 1.740666 8,918,980 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.503652 1.723855 4,654,790 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.947502 2.422617 1,666,312 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.741651 1.947502 1,070,229 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.419467 1.741651 2,635,928 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.531292 1.419467 3,343,918 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.368966 1.531292 10,220,011 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.256090 1.368966 8,701,160 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.146614 1.256090 7,977,105 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated Bond Fund - Class F 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.226751 1.301886 3,296,152 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.195751 1.226751 1,296,431 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.062969 1.195751 2,344,091 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.094086 1.062969 1,802,090 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.031362 1.094086 1,501,568 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.031362 359,089 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Advisor Growth 1998
Opportunities Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
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<PAGE> 45
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Advisor High Yield 1998
Fund - Class T
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.096488 4.654233 570,207 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.712491 4.096488 294,263 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.210584 3.712491 818,785 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.397953 3.210584 900,127 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.746533 3.397953 1,009,928 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.165417 2.746533 1,100,291 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.972198 2.165417 1,260,909 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.588961 1.935931 165,606,687 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.315600 1.588961 63,488,282 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.974545 1.315600 86,483,728 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.994981 0.974545 59,048,072 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.994981 17,300,194 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.359692 6.900916 51,141,002 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.471070 5.359692 21,843,280 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.424310 4.471070 41,090,717 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.448520 3.424310 37,439,255 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.869860 3.448520 30,564,448 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.526472 2.869860 25,417,028 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.283309 2.526472 24,200,256 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Magellan(R) Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.439440 1.804998 68,868,962 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.301185 1.439440 35,450,214 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.960039 1.301185 63,751,788 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.987051 0.960039 43,410,162 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.987051 9,307,585 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity OTC Portfolio 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.680710 1.829868 17,193,114 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.371346 1.680710 4,002,730 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.001544 1.371346 3,611,136 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.001544 414,031 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
43
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<PAGE> 46
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Puritan Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.317344 1.596539 19,817,717 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.154955 1.317344 8,701,486 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.959935 1.154955 11,375,851 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.959935 3,191,039 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
INVESCO Dynamics Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
INVESCO Total Return Fund 10.000000 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Investment Company of 1998
America(R), Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.771097 2.277283 31,651,569 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.498194 1.771097 14,871,400 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.157835 1.498194 21,189,283 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.167040 1.157835 15,911,747 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.055548 1.167040 9,316,764 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.055548 1,904,764 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
LifeDesigns Series - The 1998
Aggressive Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
LifeDesigns Series - The 1998
Moderately Aggressive
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
LifeDesigns Series - The 1998
Moderate Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
LifeDesigns Series - The 1998
Moderately Conservative
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
LifeDesigns Series - The 1998
Conservative Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
44
46 of 145
<PAGE> 47
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MAS Funds Fixed Income 1998
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.229760 1.335173 2,016,658 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.156444 1.229760 554,865 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.980782 1.156444 461,663 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.980782 16,059 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R) Growth Opportunities 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
9.012670 1,768,566 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.114190 7.380232 1,022,657 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.589533 6.114190 2,209,754 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.834037 4.589533 2,656,048 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.200054 4.834037 6,486,767 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.936838 4.200054 6,897,026 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.656615 3.936838 7,710,706 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R)High Income Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.518160 6.168371 2,328,945 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.949752 5.518160 1,009,326 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.265493 4.949752 1,898,625 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.422523 4.265493 1,736,718 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.739642 4.422523 1,666,484 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.225557 3.739642 1,036,199 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.894993 3.225557 817,803 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.880822 15.968069 801,488 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.942612 10.880822 491,538 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.034148 8.942612 877,034 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.613442 7.034148 876,723 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.714892 7.613442 837,196 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.368639 6.714892 711,003 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.100857 6.368639 559,059 1991
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Morgan Stanley Institutional 1998
Fund, Inc. - Equity Growth
Portfolio - Class B
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
45
47 of 145
<PAGE> 48
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Fund - Class D 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
14.964379 20.697282 4,299,707 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
12.191058 14.964379 1,456,965 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
9.468045 12.191058 2,755,666 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
9.502760 9.468045 2,754,540 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.985447 9.502760 2,950,704 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.810680 8.985447 3,032,348 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.837093 8.810680 2,238,323 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Growth Fund - 1998
Class D
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.083008 3.854877 1,987,181 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.667201 3.083008 1,157,824 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.092009 2.667201 2,409,384 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.081399 2.092009 2,602,594 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.887524 2.081399 6,293,504 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.792687 1.887524 5,507,203 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.498853 1.792687 4,283,563 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R) Money Market 1998
Fund**
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.884848 3.003821 14,828,575 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.774433 2.884848 6,821,937 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.654661 2.774433 15,458,252 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.583387 2.654661 14,664,113 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.542721 2.583387 15,887,549 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.487178 2.542721 17,431,451 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.437912 2.487178 20,546,392 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide S&P(R)500 Index 1998
Fund - Class Y
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide Separate Account 1998
Trust - Nationwide Small
Company Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Guardian 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.460410 1.706116 23,446,031 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.250781 1.460410 6,973,153 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.955773 1.250781 7,940,457 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.955773 907,272 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
46
48 of 145
<PAGE> 49
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Partners 1998
Trust
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Oppenheimer Global Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Prestige Balanced Fund - 1998
Class Y
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Prestige International Fund 1998
- - - Class Y
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Prestige Large Cap Growth 1998
Fund - Class Y
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Prestige Large Cap Value 1998
Fund - Class &
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Prestige Small Cap Fund - 1998
Class Y
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Investors Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
13.594501 18.110411 3,305,277 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
11.305164 13.594501 1,545,059 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.297318 11.305164 2,260,621 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.652501 8.297318 2,145,377 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.410567 8.652501 1,975,963 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.934213 7.410567 1,682,860 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.383603 6.934213 1,597,104 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Voyager Fund - Class A 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.074879 3.837109 52,162,678 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.752130 3.074879 22,936,312 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.982311 2.752130 27,203,903 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.992379 1.982311 19,751,850 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.698751 1.992379 12,946,038 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.563079 1.698751 5,917,563 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.256187 1.563079 1,655,847 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
47
49 of 145
<PAGE> 50
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
SEI Index Funds - S&P 500 1998
Index Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.139331 1.501834 38,540,683 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.139331 4,129,102 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Seligman Growth Fund, Inc. - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.720312 12.541848 772,926 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
8.934609 10.720312 381,977 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.020585 8.934609 616,776 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.370495 7.020585 582,039 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.989639 7.370495 538,601 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.340967 6.989639 364,304 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.483042 6.340967 308,224 1991*
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio -
Institutional Class ***
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.168909 1.222017 3,399,331 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.119630 1.168909 1,151,812 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.066889 1.119630 1,524,715 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.034183 1.066889 1,223,255 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.012172 1.034183 500,957 1993
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.012172 246,584 1992
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
T. Rowe Price International 1998
Stock Fund(R)
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.178559 1.198954 23,881,713 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.025854 1.178559 9,304,599 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.929695 1.025854 10,412,582 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.929695 4,482,375 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Templeton Foreign Fund - 1998
Class I
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.215580 1.284158 37,738,973 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.040054 1.215580 13,461,397 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
0.944596 1.040054 16,316,118 1995
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 0.944596 6,972,585 1994
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Warburg Pincus Emerging 1998
Growth Fund - Common Class
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
* Period from July 1, 1991 (the date participant accounts of the NACo program
were transferred from the Nationwide DC Variable Account to the NACo Variable
Account and the NACo Variable Account began operations exclusive to the NACo
program).
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
48
50 of 145
<PAGE> 51
*** The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
49
51 of 145
<PAGE> 52
TIER IIa
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.90% of average
net assets on December 31, 1995.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.564331 5.847874 2,972,496 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.258167 4.564331 6,416,724 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.425323 1.739283 17,512,296 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.349699 1.425323 17,364,360 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.156482 2.334569 838,935 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.019231 2.156482 1,041,402 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.757360 3.535226 2,141,147 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.450467 2.757360 1,806,885 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.948154 2.424638 164,209 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.797369 1.948154 267,437 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.227166 1.302984 485,556 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.179520 1.227166 431,282 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.097872 4.658156 50,755 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.859929 4.097872 76,382 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.589493 1.937547 23,258,606 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.428112 1.589493 22,719,185 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.361485 6.906673 6,412,368 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.790401 5.361485 7,437,534 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
50
52 of 145
<PAGE> 53
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Magellan(R) Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.439922 1.806504 9,967,418 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.327329 1.439922 12,036,679 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity OTC Portfolio 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.681272 1.831396 2,364,115 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.509365 1.681272 1,269,335 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Puritan Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.317785 1.597871 2,540,462 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.202745 1.317785 3,037,801 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Investment Company of 1998
America(R), Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.771690 2.279183 5,422,918 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.588880 1.771690 5,329,249 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MAS Funds Fixed Income 1998
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.230172 1.336288 274,281 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.148924 1.230172 236,446 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R) Growth Opportunities 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.382705 9.020195 235,276 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.921487 7.382705 323,628 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R)High Income Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.520025 6.173570 244,788 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.086868 5.520025 244,640 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.884466 15.981395 111,799 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.146619 10.884466 155,643 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Fund - Class D 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
14.969386 20.714549 592,502 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
13.111630 14.969386 557,908 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Growth Fund - 1998
Class D
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.084040 3.858094 360,606 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.839932 3.084040 507,782 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
51
53 of 145
<PAGE> 54
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R) Money Market 1998
Fund**
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.885823 3.006353 1,760,454 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.810833 2.885823 2,854,818 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Guardian 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.460899 1.707540 3,222,201 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.325880 1.460899 2,513,725 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Investors Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
13.599051 18.125525 329,877 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
12.145782 13.599051 371,840 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Voyager Fund - Class A 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.075909 3.840312 7,200,296 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.068900 3.075909 7,518,991 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
SEI Index Funds - S&P 500 1998
Index Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.139711 1.503085 5,223,019 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.139711 1,547,081 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Seligman Growth Fund, Inc. - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.723901 12.552317 80,990 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
9.776056 10.723901 90,771 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Short-Term Investments - 1998
Trust - Treasury Portfolio -
Institutional Class***
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.169304 1.223047 203,199 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.135916 1.169304 201,261 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
T. Rowe Price International 1998
Stock Fund(R)
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.178953 1.199955 3,056,840 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.108680 1.178953 3,705,323 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Templeton Foreign Fund - 1998
Class I
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.215987 1.285230 5,823,447 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.114639 1.215987 5,803,820 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
52
54 of 145
<PAGE> 55
TIER IIb
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.90% of average
net assets on December 31, 1996.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.764658 5.844955 1,115,895 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.470933 1.738415 6,429,806 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.179712 2.333393 463,715 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.906659 3.533462 828,576 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.944620 2.423429 104,407 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.235181 1.302328 153,705 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.129010 4.655810 22,125 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.593589 1.936580 8,810,458 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.625012 6.903229 2,726,805 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Magellan(R) Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.490427 1.805603 3,146,118 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity OTC Portfolio 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.600124 1.830482 750,546 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Puritan Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.384849 1.597074 1,227,566 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
53
55 of 145
<PAGE> 56
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Investment Company of 1998
America(R), Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.885626 2.278047 1,973,413 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MAS Funds Fixed Income 1998
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.244949 1.335621 39,766 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R) Growth Opportunities 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.657658 9.015691 106,751 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R)High Income Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.601820 6.170461 148,670 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
12.09650 15.973419 38,917 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Fund - Class D 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
16.371504 20.704221 180,761 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Growth Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.186783 3.856169 106,963 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R) Money Market 1998
Fund**
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.922724 3.004839 472,514 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Guardian 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.524036 1.706688 1,051,558 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Investors Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
14.537628 18.116482 157,603 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Voyager Fund - Class A 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.040484 3.838394 2,560,666 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
SEI Index Funds - S&P 500 1998
Index Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.231347 1.502337 1,203,420 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Seligman Growth Fund, Inc. - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.978898 12.546053 42,594 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
54
56 of 145
<PAGE> 57
<TABLE>
<CAPTION>
- - ----------------------------- ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio -
Institutional Class***
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.185797 1.222431 156,120 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
T. Rowe Price International 1998
Stock Fund(R)
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.190178 1.199356 1,203,031 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Templeton Foreign Fund - 1998
Class I
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.266735 1.284589 1,891,595 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%. ------
55
57 of 145
<PAGE> 58
TIER IIIa
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.80% of average
net assets on December 31, 1995.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.567388 5.857641 1,491,035 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.258179 4.567388 3,952,718 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.426278 1.742188 9,471,388 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.349702 1.426278 11,724,488 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.157968 2.338535 597,695 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.019264 2.157968 737,276 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.759207 3.541129 917,688 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.450473 2.759207 1,075,140 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.949458 2.428687 130,014 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.797374 1.949458 303,775 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.227995 1.305179 241,356 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.179523 1.227995 184,497 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.100640 4.666006 120,784 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.859939 4.100640 203,017 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.590557 1.940782 12,620,829 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.428116 1.590557 13,966,075 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.365074 6.918202 5,904,892 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.790414 5.365074 6,668,170 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
56
58 of 145
<PAGE> 59
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Magellan(R) Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.440886 1.809520 5,726,530 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.327332 1.440886 6,812,829 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity OTC Portfolio 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.682398 1.834455 1,302,436 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.509369 1.682398 886,668 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Puritan Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.318667 1.600539 1,283,945 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.202749 1.318667 1,390,626 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Investment Company of 1998
America(R), Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.772876 2.282988 2,356,594 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.588884 1.772876 2,306,070 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MAS Funds Fixed Income 1998
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.230995 1.338520 94,434 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.148928 1.230995 116,525 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R) Growth Opportunities 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.387651 9.035263 197,549 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
6.921506 7.387651 330,931 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R)High Income Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.523753 6.183974 233,869 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.086882 5.523753 252,930 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.891758 16.008079 78,577 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.146647 10.891758 136,164 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Fund - Class D 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
14.979404 20.749126 355,149 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
13.111665 14.979404 289,479 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Growth Fund - 1998
Class D
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.086105 3.864536 89,839 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.839940 3.086105 133,215 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
57
59 of 145
<PAGE> 60
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R) Money Market 1998
Fund**
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.887772 3.011419 1,219,186 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.810841 2.887772 1,754,115 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Guardian 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.461877 1.710392 1,596,621 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.325883 1.461877 1,655,042 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Investors Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
13.608156 18.155790 233,708 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
12.145815 13.608156 239,486 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Voyager Fund - Class A 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.077970 3.846728 3,817,279 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.068905 3.077970 4,941,310 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
SEI Index Funds - S&P 500 1998
Index Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.140471 1.505589 3,491,065 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.000000 1.140471 1,023,459 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Seligman Growth Fund, 1998
Inc.-Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.731082 12.573280 61,083 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
9.776083 10.731082 107,031 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio -
Institutional Class***
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.170093 1.225108 331,148 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.135919 1.170093 394,386 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
T. Rowe Price International 1998
Stock Fund(R)
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.179742 1.201960 1,722,849 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.108683 1.179742 2,213,126 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Templeton Foreign Fund - 1998
Class I
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.216800 1.287377 2,363,601 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.114642 1.216800 2,314,772 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997was 3.91%. ------
58
60 of 145
<PAGE> 61
TIER IIIb
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.80% of average
net assets on December 31, 1996.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.767050 5.851796 674,415 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.471671 1.740450 4,660,957 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.180847 2.336182 219,702 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.908118 3.537596 406,041 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.945596 2.426264 25,537 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.235806 1.303866 61,181 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.131192 4.661311 14,865 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.594389 1.938846 6,956,699 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.627834 6.911304 2,138,680 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Magellan(R) Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.491175 1.807715 2,856,554 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity OTC Portfolio 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.600928 1.832624 658,565 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Puritan Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.385544 1.598943 860,797 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
59
61 of 145
<PAGE> 62
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Investment Company of 1998
America(R),Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.886572 2.280712 1,183,576 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MAS Funds Fixed Income 1998
Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.245574 1.337185 8,001 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R) Growth Opportunities 1998
Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
7.661505 9.026243 63,570 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
MFS(R)High Income Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.604658 6.177751 67,909 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
12.102572 15.992105 39,760 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Fund - Class D 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
16.379716 20.728440 193,920 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R)Growth Fund - 1998
Class D
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.188382 3.860681 119,317 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Nationwide(R) Money Market 1998
Fund**
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.924205 3.008389 683,175 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Neuberger & Berman Guardian 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.524801 1.708685 826,685 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Investors Fund - 1998
Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
14.544925 18.137679 183,147 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Putnam Voyager Fund - Class A 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.042012 3.842887 1,982,897 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
SEI Index Funds - S&P 500 1998
Index Portfolio
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.231963 1.504092 1,782,753 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Seligman Growth Fund, 1998
Inc.-Class A
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
10.984409 12.560735 23,580 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
60
62 of 145
<PAGE> 63
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio -
Institutional Class***
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.186398 1.223875 28,293 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
T. Rowe Price International 1998
Stock Fund(R)
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.190775 1.200760 1,125,641 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Templeton Foreign Fund - 1998
Class I
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.267370 1.286093 1,989,093 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
61
63 of 145
<PAGE> 64
TIER IVa
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of average
net assets on December 31, 1995.
<TABLE>
<CAPTION>
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Growth
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.570448 5.867425 672,795 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.258190 4.570448 6,694,438 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
American Century: Twentieth 1998
Century Ultra
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.427234 1.745098 4,693,395 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.349706 1.427234 24,600,287 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Bond Fund of America(SM), 1998
Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.159454 2.342504 293,584 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.019297 2.159454 1,310,545 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
The Dreyfus Third Century 1998
Fund, Inc.
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.761054 3.547042 724,635 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
2.450480 2.761054 2,645,579 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Evergreen Income and Growth 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.950763 2.432742 90,044 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.797380 1.950763 626,778 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years -
Institutional Shares
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.228823 1.307377 199,160 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.179526 1.228823 925,850 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Capital & Income 1998
Fund
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.103407 4.673860 15,630 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
3.859950 4.103407 152,550 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Contrafund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.591621 1.944023 6,919,494 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
1.428120 1.591621 26,974,645 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
Fidelity Equity-Income Fund 1998
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
5.368665 6.929751 1,480,026 1997
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
4.790428 5.368665 11,209,254 1996
- - ------------------------------ ------------------------ ----------------------- ------------------------ ------------
</TABLE>
62
64 of 145
<PAGE> 65
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity Magellan(R) Fund 1998
1.441850 1.812541 2,947,714 1997
1.327336 1.441850 12,376,864 1996
- - ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 1998
1.683525 1.837520 498,827 1997
1.509373 1.683525 2,239,000 1996
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 1998
1.319550 1.603211 734,376 1997
1.202752 1.319550 3,250,797 1996
- - ----------------------------------------------------------------------------------------------------------------
The Investment Company of 1998
America(R), Inc. 1.774063 2.286799 1,186,761 1997
1.588888 1.774063 4,423,281 1996
- - ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income 1998
Portfolio 1.231819 1.340756 84,398 1997
1.148931 1.231819 359,528 1996
- - ----------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities 1998
Fund - Class A 7.392601 9.050357 33,173 1997
6.921525 7.392601 399,976 1996
- - ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - 1998
Class A 5.527479 6.194384 108,967 1997
5.086896 5.527479 494,287 1996
- - ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors 1998
Growth Stock Fund - Class A
10.899055 16.034807 28,741 1997
10.146674 10.899055 248,216 1996
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund - Class D 1998
14.989429 20.783760 218,220 1997
13.111701 14.989429 664,951 1996
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund - 1998
Class D 3.088171 3.870989 62,008 1997
2.839948 3.088171 534,141 1996
</TABLE>
63
65 of 145
<PAGE> 66
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide(R) Money Market 1998
Fund** 2.889720 3.016489 1,244,833 1997
2.810849 2.889720 6,170,419 1996
- - ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 1998
Fund, Inc. 1.462856 1.713248 828,370 1997
1.325887 1.462856 3,851,735 1996
- - ----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - 1998
Class A 13.617267 18.186106 93,488 1997
12.145848 13.617267 476,103 1996
- - ----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 1998
3.080033 3.853154 1,919,434 1997
3.068913 3.080033 9,182,389 1996
- - ----------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 1998
Index Portfolio 1.141231 1.508098 1,436,973 1997
1.000000 1.141231 2,582,625 1996
- - ----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, 1998
Inc.-Class A 10.738267 12.594278 29,833 1997
9.776109 10.738267 206,422 1996
- - ----------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust
- - - Treasury Portfolio -
Institutional Class*** 1.170883 1.227171 1,061,646 1997
1.135922 1.170883 549,456 1996
- - ----------------------------------------------------------------------------------------------------------------
T. Rowe Price International 1998
Stock Fund(R) 1.180532 1.203968 867,768 1997
1.108686 1.180532 6,337,264 1996
- - ----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - 1998
Class I 1.217615 1.289527 1,164,252 1997
1.114645 1.217615 5,552,808 1996
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
64
66 of 145
<PAGE> 67
TIER IVb
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of average
net assets on December 31, 1996.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth 1998
Century Growth 4.764684 5.861569 791,919 1997
- - ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth 1998
Century Ultra 1.470941 1.743357 4,507,568 1997
- - ----------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), 1998
Inc. 2.179785 2.340149 124,227 1997
- - ----------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century 1998
Fund, Inc. 2.906675 3.543503 528,101 1997
- - ----------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth 1998
Fund 1.944631 2.430315 78,659 1997
- - ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years - 1.235187 1.306062 88,326 1997
Institutional Shares
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income 1998
Fund 4.129122 4.669162 51,553 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 1998
1.593598 1.942084 5,170,372 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 1998
5.625043 6.922841 1,223,287 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 1998
1.490435 1.810733 1,539,847 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 1998
1.600133 1.835685 781,703 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 1998
1.384857 1.601612 379,214 1997
- - ----------------------------------------------------------------------------------------------------------------
The Investment Company of 1998
America(R), Inc. 1.8856367 1.601612 318,963 1997
- - ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income 1998
Portfolio 1.244956 1.339418 68,206 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 68
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Growth Opportunities 1998
Fund - Class A 7.657700 9.041322 84,709 1997
- - ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - 1998
Class A 5.601851 6.188157 51,594 1997
- - ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors 1998
Growth Stock Fund - Class A 12.096565 16.018807 21,209 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund - Class D 1998
16.371594 20.763040 90,530 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund - 1998
Class D 3.186800 3.867128 19,388 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market 1998
Fund** 2.922740 3.013456 364,874 1997
- - ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 1998
Fund, Inc. 1.524045 1.711539 751,166 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - 1998
Class A 14.537708 18.167964 65,920 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 1998
3.040501 3.849306 1,809,222 1997
- - ----------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 1998
Index Portfolio 1.231354 1.506599 1,151,075 1997
- - ----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - 1998
Class A 10.978958 12.581713 25,438 1997
- - ----------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio - 1.185040 1.225937 102,438 1997
Institutional Class***
- - ----------------------------------------------------------------------------------------------------------------
T. Rowe Price International 1998
Stock Fund(R) 1.190184 1.202766 811,683 1997
- - ----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - 1998
Class I 1.266741 1.288241 990,793 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
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<PAGE> 69
TIER IVc
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.70% of average
net assets on December 31, 1996. Tier IVc includes certain departments of a
member county that was previously converted to Tier IVc using the asset balance
as of December 31, 1995.
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth 1998
Century Growth 4.771826 5.852797 2,226 1997
- - ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth 1998
Century Ultra 1.473146 1.740747 39,473 1997
- - ----------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), 1998
Inc. 2.183080 2.336617 139 1997
- - ----------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century 1998
Fund, Inc. 2.911030 3.538202 4,553 1997
- - ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years - 1.237055 1.304091 34,364 1997
Institutional Shares
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 1998
1.595986 1.939178 51,788 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 1998
5.633468 6.912488 6,909 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 1998
1.492668 1.808025 36,399 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 1998
1.602532 1.832937 4,185 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 1998
1.386931 1.599217 9,482 1997
- - ----------------------------------------------------------------------------------------------------------------
The Investment Company of 1998
America(R), Inc. 1.888461 2.281103 3,811 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 70
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MAS Funds Fixed Income 1998
Portfolio 1.246208 1.337415 438 1997
- - ----------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities 1998
Fund - Class A 7.669182 9.027786 693 1997
- - ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - 1998
Class A 5.610319 6.178817 117 1997
- - ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors 1998
Growth Stock Fund - Class A 12.1146941 15.994835 353 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund - Class D 1998
16.396107 20.731998 2,085 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund - 1998
Class D 3.191575 3.861342 226 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market 1998
Fund** 2.927158 3.008908 5,303 1997
- - ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 1998
Fund, Inc. 1.526328 1.708978 19,355 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - 1998
Class A 14.559488 18.140786 2,047 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 1998
3.045061 3.843542 15,376 1997
- - ----------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 1998
Index Portfolio 1.233193 1.504352 29,469 1997
- - ----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - 1998
Class A 10.995409 12.562888 406 1997
- - ----------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust 1998
- - - Treasury Portfolio - 1.187596 1.224087 7,027 1997
Institutional Class***
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T. Rowe Price International 1998
Stock Fund(R)
1.191967 1.200967 6,790 1997
- - ----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - 1998
Class I
1.268639 1.286315 8,712 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
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<PAGE> 72
TIER V
Plans that converted from a Variable Account Annual Expense Fee of 0.95% of
average net assets to a Variable Account Annual Expense Fee of 0.65% of average
net assets on December 31, 1996.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Twentieth 1998
Century Growth 4.776599 5.869391 2,322,606 1997
- - ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth 1998
Century Ultra 1.474619 1.745683 19,969,711 1997
- - ----------------------------------------------------------------------------------------------------------------
The Bond Fund of America(SM), 1998
Inc. 2.185294 2.343312 753,555 1997
- - ----------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century 1998
Fund, Inc. 2.913941 3.548231 2,219,012 1997
- - ----------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth 1998
Fund 1.949492 2.433557 297,366 1997
- - ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government 1998
Securities Fund: 2-5 Years - 1.238301 1.307818 579,571 1997
Institutional Shares
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income 1998
Fund 4.139531 4.675440 61,610 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 1998
1.597582 1.944675 19,667,377 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 1998
5.639098 6.932074 8,086,997 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 1998
1.494160 1.813149 6,992,191 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 1998
1.604136 1.838136 2,776,451 1997
- - ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 1998
1.388317 1.603749 2,031,661 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 73
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Investment Company of 1998
America(R), Inc. 1.890348 2.287566 2,872,363 1997
- - ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income 1998
Portfolio 1.248067 1.341206 277,396 1997
- - ----------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities 1998
Fund - Class A 7.676856 9.053391 212,160 1997
- - ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - 1998
Class A 5.615972 6.196477 418,967 1997
- - ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors 1998
Growth Stock Fund - Class A 12.126811 16.040180 117,830 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund - Class D 1998
16.412492 20.790728 569,519 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund - 1998
Class D 3.194767 3.872287 269,417 1997
- - ----------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market 1998
Fund** 2.930108 3.017508 3,269,252 1997
- - ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 1998
Fund, Inc. 1.527855 1.713822 4,309,283 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - 1998
Class A 14.574047 18.192202 377,276 1997
- - ----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 1998
3.048108 3.854445 6,307,757 1997
- - ----------------------------------------------------------------------------------------------------------------
SEI Index Funds - S&P 500 1998
Index Portfolio 1.234422 1.508603 5,095,657 1997
- - ----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - 1998
Class A 11.006405 12.598501 124,591 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT NUMBER OF ACCUMULATION YEAR
VALUE AT BEGINNING OF VALUE AT END OF PERIOD UNITS OUTSTANDING AT
PERIOD THE END OF THE PERIOD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Investments Trust 1998
- - - Treasury Portfolio - 1.188793 1.227585 238,580 1997
Institutional Class***
- - ----------------------------------------------------------------------------------------------------------------
T. Rowe Price International 1998
Stock Fund(R) 1.193159 1.204372 4,374,310 1997
- - ----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - 1998
Class I 1.269907 1.289960 4,910,891 1997
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
**The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1997
was 4.23%.
***The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1997 was 3.91%.
72
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<PAGE> 75
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS ISSUED
BY THE NACo VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth the prospectus and
should be read in conjunction with the prospectus dated May 1, 1999. The
prospectus may be obtained from Nationwide Life Insurance Company, P.O. Box
16766, One Nationwide Plaza, Columbus, Ohio 43216, or by calling 1-800-545-4730,
(T.T.Y. 1-800-848-0833).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History......................................... 1
Services................................................................ 1
Purchase of Securities Being Offered ................................... 1
Underwriters ........................................................... 2
Calculation of Performance ............................................. 2
Annuity Payments........................................................ 4
Financial Statements.................................................... 5
</TABLE>
GENERAL INFORMATION AND HISTORY
The Variable Account is a separate investment account of Nationwide Life
Insurance Company (the "Company"). The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned by
Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.2%) and
Nationwide Mutual Fire Insurance Company (4.8%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
SERVICES
The Company has responsibility for administration of the Contracts and the
Variable Account, maintaining records, including name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contracts issued to each such Contract Owner and the
Contract Value of each Contract.
All assets of the Variable Account are held in custody for safekeeping by the
Company. The assets of each Sub-Account will be kept physically segregated and
held separate and apart from assets of other Sub-Accounts and from assets of any
other firm, person, or corporation. The Company will maintain a record of all
and redemption for shares of the Underlying Mutual Fund held in each
Sub-Account.
The Company, or affiliates of the Company, may have entered into agreements with
either the investment adviser or distributor for several of the Underlying
Mutual Funds. The agreements relate to administrative services furnished by the
Company or an affiliate of the Company and provide for an annual fee based on
the average aggregate net assets of the Variable Account (and other separate
accounts of the Company or life insurance company subsidiaries of the Company)
invested in particular
1
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<PAGE> 76
Underlying Mutual Funds. These fees in no way affect the Net Asset Value of the
Underlying Mutual Funds or fees paid by the Contract Owner.
The audited financial statements and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc.
For those Plans which provide this Contract and the Company's Group Fixed Fund
Retirement Contracts, the Contract Owner, or the Participant if the Plan so
provides, may exchange Accumulation Units between any Sub-Account of the
Variable Account and the deposit fund of the Group Fixed Fund Retirement
Contract. Exchanges from the deposit fund to any Sub-Account of the Variable
Account will be subject to the limitations of the Group Fixed Fund Retirement
Contract. Exchanges will be effective when received in good order at the Home
Office.
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Investment Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio
43215. NISC is a wholly owned subsidiary of Nationwide. During the fiscal years
ended December 31, 1997, 1996, and 1995, no underwriting commissions were paid
by Nationwide to NISC.
CALCULATION OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund and the
Short-Term Investments Trust Treasury Portfolio Sub-Accounts, subject to Rule
482 of the Securities Act of 1933, shall consist of a seven calendar day
historical yield, carried at least to the nearest hundredth of a percent. The
yield will be calculated by determining the net change, exclusive capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. As of December 31, 1997, the
Nationwide Money Market Fund and the Short-Term Investments Trust Treasury
Portfolio Sub-Accounts seven-day current yield were 4.23% and 3.91%
respectively. The Nationwide Money Market Fund and the Short-Term Investments
Trust Treasury Portfolio Sub-Accounts' seven-day effective yield is computed
similarly but includes the effect of assumed compounding on an annualized basis
of the current yield quotations of the Sub-Accounts, and for the period ending
December 31, 1997 were 4.32% and 3.98% respectively.
The yield and effective yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Sub-Accounts' portfolios,
portfolio quality and average maturity, changes in interest rates, and the
Sub-Accounts' expenses. Although the Sub-Account determines its yield on the
basis of a seven calendar day period, it may use a different time period on
occasion. There is no assurance that the yields quoted on any given occasion
will remain in effect for any period of time and there is no guarantee that the
Net Asset Values will remain constant. It should be noted that a Contract
Owner's investment in Nationwide Money Market Fund and the Short Term Investment
Trust Treasury Portfolio Sub-Account is not guaranteed or insured. Yields of
other money market funds may not be comparable if a different base period or
another method of calculation is used.
2
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<PAGE> 77
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Accounts
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return". "Average annual total return" will
show the percentage rate of return of a hypothetical initial investment of
$1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account if the Underlying Mutual Fund option has not been available in
the Variable Account for any of the prescribed periods. THIS CALCULATION
REFLECTS THE DEDUCTION OF ALL APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT
FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges except the Participant Account Maintenance Charge and CDSC) had such
Underlying Mutual Fund options been available in the Variable Account for the
periods quoted. THE CDSC IS NOT REFLECTED BECAUSE THE CONTRACTS ARE DESIGNED FOR
LONG TERM INVESTMENT. THE CDSC, IF REFLECTED, WOULD DECREASE THE LEVEL OF
PERFORMANCE SHOWN. AN INITIAL INVESTMENT OF $10,000 IS ASSUMED BECAUSE THAT
AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL CONTRACT THAN DOES THE
$1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED AVERAGE ANNUAL TOTAL
RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown. The quotations and other comparative material advertised by the Company
are based upon historical earnings and are not intended to represent or
guarantee future results. A Contract Owner's or Participant's Account Value at
redemption may be more or less than the original cost.
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" located in the
prospectus.
3
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<PAGE> 78
<PAGE> 1
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of NACo Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of NACo Variable Account as of December 31, 1997, and
the related statements of operations and changes in contract owners' equity for
each of the years in the two year period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures include confirmation of securities owned as of December 31, 1997, by
correspondence with the transfer agents of the underlying mutual funds. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NACo Variable Account as of
December 31, 1997, and the results of its operations and its changes in
contract owners' equity for each of the years in the two year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NACO VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century: Twentieth Century Growth Fund (ACTCGro)
4,291,370 shares (cost $88,601,874) ............................................................. $ 103,035,805
American Century: Twentieth Century Ultra Fund (ACTCUltra)
8,004,428 shares (cost $216,934,024) ............................................................ 218,520,874
The Bond Fund of America(SM), Inc. (BdFdAm)
1,062,195 shares (cost $14,617,410) ............................................................. 14,870,732
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
5,002,424 shares (cost $45,056,483) ............................................................. 52,575,475
Evergreen Income and Growth Fund - Class Y (EvIncGro)
168,957 shares (cost $3,368,230) ................................................................ 4,043,133
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
404,319 shares (cost $4,264,947) ................................................................ 4,297,907
Fidelity Capital & Income Fund (FidCapInc)
265,562 shares (cost $2,237,282) ................................................................ 2,658,279
Fidelity Contrafund (FidContr)
6,884,041 shares (cost $270,249,054) ............................................................ 321,002,831
Fidelity Equity-Income Fund (FidEqInc)
6,743,244 shares (cost $239,634,342) ............................................................ 353,413,444
Fidelity Magellan(R) Fund (FidMgln)
1,306,291 shares (cost $104,252,765) ............................................................ 124,450,301
Fidelity OTC Portfolio (FidOTC)
941,944 shares (cost $31,926,103) ............................................................... 31,508,034
Fidelity Puritan(R) Fund (FidPurtn)
1,634,297 shares (cost $28,386,708) ............................................................. 31,672,685
The Investment Company of America(R) (InvCoAm)
2,554,066 shares (cost $57,497,295) ............................................................. 72,152,374
MAS Funds - Fixed Income Portfolio (MASFIP)
226,135 shares (cost $2,700,953) ................................................................ 2,695,530
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,146,474 shares (cost $13,461,885) ............................................................. 15,958,923
MFS(R) High Income Fund - Class A (MFSHiInc)
2,601,403 shares (cost $14,193,356) ............................................................. 14,385,760
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,031,758 shares (cost $11,575,941) ............................................................. 12,814,439
Nationwide(R) Fund (NWFund)
3,363,858 shares (cost $68,052,739) ............................................................. 89,108,593
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Nationwide(R) Growth Fund (NWGroFd)
523,849 shares (cost $6,208,414) ................................................................ 7,669,144
Nationwide(R) Money Market Fund (NWMyMkt)
44,019,657 shares (cost $44,019,657) ............................................................ 44,019,657
Neuberger & Berman Guardian Fund (NBGuard)
1,546,964 shares (cost $40,472,926) ............................................................. 40,066,366
Putnam Investors Fund - Class A (PutInvFd)
5,331,304 shares (cost $50,456,063) ............................................................. 59,923,856
Putnam Voyager Fund - Class A (PutVoyFd)
10,519,384 shares (cost $161,006,964) ........................................................... 200,394,263
SEI Index Funds - S&P 500 Index Portfolio (SEI500lx)
1,891,075 shares (cost $50,913,658) ............................................................. 57,961,448
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,596,635 shares (cost $9,021,423) .............................................................. 9,707,543
Short-Term Investments Trust - Treasury Portfolio - Institutional Class (AIMTreas)
4,160,006 shares (cost $4,160,006) .............................................................. 4,160,006
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
2,136,462 shares (cost $31,045,917) ............................................................. 28,671,326
Templeton Foreign Fund - Class I (TemForFd)
4,876,616 shares (cost $50,264,551) ............................................................. 48,522,327
-------------
Total investments ............................................................................ 1,970,261,055
Accounts receivable ................................................................................... 599,224
-------------
Total assets ................................................................................. 1,970,860,279
ACCOUNTS PAYABLE ......................................................................................... 66,032
-------------
CONTRACT OWNERS' EQUITY (NOTE 4) ......................................................................... $ 1,970,794,247
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACTCGRO
-------------- ------------- ----------- -----------
1997 1996 1997 1996
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 21,526,606 18,399,398 - 1,237,485
Mortality and expense charges (note 2) ............. (8,687,459) (6,124,188) (597,743) (773,702)
Administration charge (note 2)
Tier I ....................................... (3,835,645) (2,597,055) (241,160) (321,103)
Tier II ...................................... (1,270,800) (836,073) (106,219) (117,371)
Tier III ..................................... (639,538) (432,408) (42,450) (57,199)
Tier IV ...................................... (235,537) (589,120) (19,525) (69,950)
Tier V ....................................... (354,719) - (23,235) -
-------------- ------------- ----------- -----------
Net investment activity .......................... 6,502,908 7,820,554 (1,030,332) (101,840)
Proceeds from mutual fund shares sold .............. 390,188,601 129,158,279 76,437,716 21,718,951
Cost of mutual fund shares sold .................... (330,761,963) (119,175,064) (77,270,118) (19,610,019)
-------------- ------------- ----------- -----------
Realized gain (loss) on investments .............. 59,426,638 9,983,215 (832,402) 2,108,932
Change in unrealized gain (loss) on investments .... 133,294,095 79,007,949 13,050,693 15,963,893
-------------- ------------- ----------- -----------
Net gain (loss) on investments ................... 192,720,733 88,991,164 12,218,291 18,072,825
-------------- ------------- ----------- -----------
Reinvested capital gains ........................... 158,561,197 78,266,596 15,163,270 1,663,504
-------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 357,784,838 175,078,314 26,351,229 19,634,489
-------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 428,935,376 318,493,085 9,656,125 16,288,513
Transfers between funds ............................ - - (67,825,676) (26,081,481)
Redemptions ........................................ (222,355,417) (71,502,064) (15,764,285) (8,867,521)
Adjustments to maintain reserves ................... (104,195) (127,810) 1,467 (8,235)
-------------- ------------- ----------- -----------
Net equity transactions ........................ 206,475,764 246,863,211 (73,932,369) (18,668,724)
Net change in contract owners' equity .............. 564,260,602 421,941,525 (47,581,140) 965,765
Contract owners' equity beginning of period ........ 1,406,533,645 984,592,120 150,619,441 149,653,676
-------------- ------------- ----------- -----------
Contract owners' equity end of period .............. $1,970,794,247 1,406,533,645 103,038,301 150,619,441
============== ============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACTCULTRA BDFDAM
-------------- ------------ ----------- -----------
1997 1996 1997 1996
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 83,084 - 1,010,649 983,502
Mortality and expense charges (note 2) ............. (953,698) (648,777) (71,217) (68,410)
Administration charge (note 2)
Tier I ....................................... (405,576) (271,468) (32,333) (31,741)
Tier II ...................................... (141,718) (87,166) (10,968) (8,216)
Tier III ..................................... (62,578) (43,731) (5,391) (4,757)
Tier IV ...................................... (28,453) (66,121) (1,857) (5,977)
Tier V ....................................... (45,144) - (2,386) -
-------------- ------------ ----------- -----------
Net investment activity .......................... (1,554,083) (1,117,263) 886,497 864,401
Proceeds from mutual fund shares sold .............. 30,918,833 10,123,449 6,105,619 3,918,729
Cost of mutual fund shares sold .................... (20,795,085) (7,647,599) (5,779,601) (4,170,224)
-------------- ------------ ----------- -----------
Realized gain (loss) on investments .............. 10,123,748 2,475,850 326,018 (251,495)
Change in unrealized gain (loss) on investments .... (17,363,508) 5,194,710 (75,230) 120,398
-------------- ------------ ----------- -----------
Net gain (loss) on investments ................... (7,239,760) 7,670,560 250,788 (131,097)
-------------- ------------ ----------- -----------
Reinvested capital gains ........................... 44,171,059 8,455,551 - -
-------------- ------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 35,377,216 15,008,848 1,137,285 733,304
-------------- ------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 53,715,959 44,415,944 2,197,440 2,665,962
Transfers between funds ............................ 3,392,831 (123,456) (571,835) (1,815,612)
Redemptions ........................................ (23,610,763) (9,988,739) (1,874,029) (1,020,041)
Adjustments to maintain reserves ................... (32,791) 4,505 (934) (388)
-------------- ------------ ----------- -----------
Net equity transactions ........................ 33,465,236 34,308,254 (249,358) (170,079)
Net change in contract owners' equity .............. 68,842,452 49,317,102 887,927 563,225
Contract owners' equity beginning of period ........ 149,650,009 100,332,907 13,981,906 13,418,681
-------------- ------------ ----------- -----------
Contract owners' equity end of period .............. $ 218,492,461 149,650,009 14,869,833 13,981,906
============== ============ =========== ===========
</TABLE>
<PAGE> 5
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Dry3dCen EvincGro
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 91,287 58,249 195,572 230,814
Mortality and expense charges (note 2) ................... (221,903) (128,394) (21,028) (22,935)
Administration charge (note 2)
Tier I ............................................. (97,392) (55,900) (9,235) (9,315)
Tier II ............................................ (34,054) (16,664) (2,503) (2,088)
Tier III ........................................... (11,626) (7,707) (1,203) (1,899)
Tier IV ............................................ (7,396) (13,044) (764) (2,724)
Tier V ............................................. (9,978) - (1,117) -
------------ ------------ ------------ ------------
Net investment activity ................................ (291,062) (163,460) 159,722 191,853
Proceeds from mutual fund shares sold .................... 4,764,654 2,082,457 1,435,669 812,536
Cost of mutual fund shares sold .......................... (3,479,290) (1,902,636) (1,298,478) (810,548)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,285,364 179,821 137,191 1,988
Change in unrealized gain (loss) on investments .......... 5,489,938 1,051,717 361,146 299,106
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 6,775,302 1,231,538 498,337 301,094
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 4,107,891 4,062,877 250,452 -
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 10,592,131 5,130,955 908,511 492,947
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 9,531,871 4,367,438 219,542 263,265
Transfers between funds .................................. 6,920,263 1,020,985 (890,063) (690,152)
Redemptions .............................................. (4,743,489) (1,289,248) (615,031) (236,697)
Adjustments to maintain reserves ......................... (2,888) (1,444) (227) (57)
------------ ------------ ------------ ------------
Net equity transactions .............................. 11,705,757 4,097,731 (1,285,779) (663,641)
Net change in contract owners' equity .................... 22,297,888 9,228,686 (377,268) (170,694)
Contract owners' equity beginning of period .............. 30,274,825 21,046,139 4,420,173 4,590,867
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 52,572,713 30,274,825 4,042,905 4,420,173
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FedUSGvt FidCapInc
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 209,493 165,458 200,858 254,679
Mortality and expense charges (note 2) ............... (18,574) (15,988) (14,160) (15,511)
Administration charge (note 2)
Tier I ......................................... (7,959) (6,388) (5,604) (5,478)
Tier II ........................................ (2,671) (1,708) (1,301) (1,341)
Tier III ....................................... (799) (702) (1,998) (2,553)
Tier IV ........................................ (688) (2,234) (614) (1,397)
Tier V ......................................... (1,002) - (434) -
------------ ------------- ------------- -------------
Net investment activity ............................ 177,800 138,438 176,747 228,399
Proceeds from mutual fund shares sold ................ 3,311,692 1,121,910 708,617 402,846
Cost of mutual fund shares sold ...................... (3,290,687) (1,104,963) (510,739) (303,343)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 21,005 16,947 197,878 99,503
Change in unrealized gain (loss) on investments ...... 34,443 (74,664) (9,038) (32,719)
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 55,448 (57,717) 188,840 66,784
------------ ------------- ------------- -------------
Reinvested capital gains ............................. - - - -
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 233,248 80,721 365,587 295,183
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 845,763 917,785 13 79
Transfers between funds .............................. 373,832 (15,253) (236,823) (206,511)
Redemptions .......................................... (638,843) (302,046) (447,420) (151,301)
Adjustments to maintain reserves ..................... (213) (236) (261) (258)
------------ ------------- ------------- -------------
Net equity transactions .......................... 580,539 600,250 (684,491) (357,991)
Net change in contract owners' equity ................ 813,787 680,971 (318,904) (62,808)
Contract owners' equity beginning of period .......... 3,483,920 2,802,949 2,976,924 3,039,732
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 4,297,707 3,483,920 2,658,020 2,976,924
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 6
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidContr FidEqInc
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,195,540 1,729,074 6,194,440 5,475,347
Mortality and expense charges (note 2) ................... (1,359,850) (798,784) (1,565,778) (1,122,012)
Administration charge (note 2)
Tier I ............................................. (616,290) (344,719) (659,522) (446,967)
Tier II ............................................ (203,894) (114,869) (215,189) (139,206)
Tier III ........................................... (95,933) (53,673) (143,887) (98,535)
Tier IV ............................................ (39,669) (73,089) (32,619) (114,864)
Tier V ............................................. (48,345) - (72,789) -
------------ ------------ ------------ ------------
Net investment activity ................................ (168,441) 343,940 3,504,656 3,553,763
Proceeds from mutual fund shares sold .................... 21,045,430 1,366,015 28,097,646 2,277,100
Cost of mutual fund shares sold .......................... (13,726,446) (1,138,648) (13,468,143) (1,372,592)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 7,318,984 227,367 14,629,503 904,508
Change in unrealized gain (loss) on investments .......... 19,495,166 16,820,570 46,925,897 25,291,931
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 26,814,150 17,047,937 61,555,400 26,196,439
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 27,727,162 12,840,593 13,064,496 10,075,492
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 54,372,871 30,232,470 78,124,552 39,825,694
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 80,513,062 56,201,369 50,674,836 37,458,833
Transfers between funds .................................. 17,826,645 10,119,538 11,399,955 1,709,515
Redemptions .............................................. (33,838,679) (8,109,140) (39,688,848) (9,799,106)
Adjustments to maintain reserves ......................... (25,668) (82,591) (5,107) (10,973)
------------ ------------ ------------ ------------
Net equity transactions .............................. 64,475,360 58,129,176 22,380,836 29,358,269
Net change in contract owners' equity .................... 118,848,231 88,361,646 100,505,388 69,183,963
Contract owners' equity beginning of period .............. 202,139,639 113,777,993 252,903,435 183,719,472
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $320,987,870 202,139,639 353,408,823 252,903,435
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidMgIn FidOTC
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................... $ 1,505,116 1,231,059 - 23,360
Mortality and expense charges (note 2) .................. (556,391) (470,560) (130,795) (45,939)
Administration charge (note 2)
Tier I ............................................ (265,730) (210,832) (56,929) (18,847)
Tier II ........................................... (82,339) (67,570) (17,458) (5,450)
Tier III .......................................... (40,641) (30,164) (8,619) (2,930)
Tier IV ........................................... (14,355) (40,626) (3,645) (5,320)
Tier V ............................................ (16,376) - (6,672) -
------------ ------------- ------------- -------------
Net investment activity ............................... 529,284 411,307 (224,118) (55,126)
Proceeds from mutual fund shares sold ................... 12,485,988 9,511,017 7,535,213 5,210,061
Cost of mutual fund shares sold ......................... (9,950,443) (9,021,392) (6,716,721) (4,935,771)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................... 2,535,545 489,625 818,492 274,290
Change in unrealized gain (loss) on investments ......... 15,085,951 (5,107,582) (488,087) 192,680
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................ 17,621,496 (4,617,957) 330,405 466,970
------------ ------------- ------------- -------------
Reinvested capital gains ................................ 6,362,186 13,496,407 2,202,654 1,432,109
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 24,512,966 9,289,757 2,308,941 1,843,953
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ....................................... 25,481,895 31,416,476 11,403,571 5,657,606
Transfers between funds ................................. (7,601,758) (21,447,207) 7,515,284 2,619,455
Redemptions ............................................. (13,965,007) (6,185,751) (3,842,544) (953,105)
Adjustments to maintain reserves ........................ (3,444) (3,719) (3,592) 2,639
------------ ------------- ------------- -------------
Net equity transactions ............................. 3,911,686 3,779,799 15,072,719 7,326,595
Net change in contract owners' equity ................... 28,424,652 13,069,556 17,381,660 9,170,548
Contract owners' equity beginning of period ............. 96,022,426 82,952,870 14,122,665 4,952,117
------------ ------------- ------------- -------------
Contract owners' equity end of period ................... $124,447,078 96,022,426 31,504,325 14,122,665
============ ============= ============= =============
</TABLE>
<PAGE> 7
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FIDPURTN INVCOAM
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,002,542 663,018 1,117,268 858,735
Mortality and expense charges (note 2) ................... (137,123) (92,533) (310,471) (201,765)
Administration charge (note 2)
Tier I ............................................. (66,667) (42,011) (147,489) (98,152)
Tier II ............................................ (21,034) (14,101) (56,789) (31,791)
Tier III ........................................... (8,864) (4,836) (20,464) (10,503)
Tier IV ............................................ (3,289) (8,068) (5,858) (14,185)
Tier V ............................................. (4,128) - (8,057) -
------------ ------------ ------------ ------------
Net investment activity ................................ 761,437 501,469 568,140 502,339
Proceeds from mutual fund shares sold .................... 3,662,742 962,001 4,672,687 675,337
Cost of mutual fund shares sold .......................... (2,886,331) (865,169) (2,891,566) (513,445)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 776,411 96,832 1,781,121 161,892
Change in unrealized gain (loss) on investments .......... 2,156,757 169,722 6,778,676 4,136,181
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 2,933,168 266,554 8,559,797 4,298,073
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 1,480,106 1,666,308 6,012,594 1,928,126
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 5,174,711 2,434,331 15,140,531 6,728,538
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 8,122,684 7,953,081 14,055,579 10,683,322
Transfers between funds .................................. 359,606 (1,017,005) 2,266,399 378,502
Redemptions .............................................. (3,573,534) (916,941) (7,025,850) (1,818,340)
Adjustments to maintain reserves ......................... (346) (2,681) (636) (1,655)
------------ ------------ ------------ ------------
Net equity transactions .............................. 4,908,410 6,016,454 9,295,492 9,241,829
Net change in contract owners' equity .................... 10,083,121 8,450,785 24,436,023 15,970,367
Contract owners' equity beginning of period .............. 21,589,381 13,138,596 47,716,024 31,745,657
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 31,672,502 21,589,381 72,152,047 47,716,024
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MASFIP MFSGROPP
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... $ 138,468 80,179 - -
Mortality and expense charges (note 2) ..................... (10,147) (5,596) (81,246) (74,504)
Administration charge (note 2)
Tier I ............................................... (5,562) (2,333) (36,299) (32,153)
Tier II .............................................. (1,154) (809) (11,776) (9,036)
Tier III ............................................. (317) (322) (6,917) (7,134)
Tier IV .............................................. (281) (582) (2,083) (6,237)
Tier V ............................................... (387) - (2,838) -
------------ ------------- ------------- -------------
Net investment activity .................................. 120,620 70,537 (141,159) (129,064)
Proceeds from mutual fund shares sold ...................... 1,286,155 507,874 2,859,690 1,150,785
Cost of mutual fund shares sold ............................ (1,260,770) (513,015) (2,016,264) (948,141)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ...................... 25,385 (5,141) 843,426 202,644
Change in unrealized gain (loss) on investments ............ (5,429) 991 547,661 996,452
------------ ------------- ------------- -------------
Net gain (loss) on investments ........................... 19,956 (4,150) 1,391,087 1,199,096
------------ ------------- ------------- -------------
Reinvested capital gains ................................... 35,341 15,684 1,975,637 1,657,280
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 175,917 82,071 3,225,565 2,727,312
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 796,916 757,253 289,620 323,809
Transfers between funds .................................... 552,003 238,058 (778,278) (372,651)
Redemptions ................................................ (388,815) (51,714) (2,103,012) (840,556)
Adjustments to maintain reserves ........................... 122 (20) (13,012) (10,408)
------------ ------------- ------------- -------------
Net equity transactions ................................ 960,226 943,577 (2,604,682) (899,806)
Net change in contract owners' equity ...................... 1,136,143 1,025,648 620,883 1,827,506
Contract owners' equity beginning of period ................ 1,559,535 533,887 15,338,362 13,510,856
------------ ------------- ------------- -------------
Contract owners' equity end of period ...................... $ 2,695,678 1,559,535 15,959,245 15,338,362
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 8
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MFSHIINC MFSGRSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 1,110,356 889,431 5,750 -
Mortality and expense charges (note 2) ................... (64,630) (52,543) (60,114) (48,355)
Administration charge (note 2)
Tier I ............................................... (27,160) (22,596) (25,523) (19,892)
Tier II .............................................. (8,510) (5,087) (8,400) (5,932)
Tier III ............................................. (4,958) (3,885) (5,187) (3,649)
Tier IV .............................................. (1,712) (5,842) (1,546) (5,102)
Tier V ............................................... (3,381) - (2,624) -
------------ ------------ ------------ ------------
Net investment activity ................................. 1,000,005 799,478 (97,644) (82,930)
Proceeds from mutual fund shares sold .................... 11,436,316 4,588,314 4,936,847 1,966,038
Cost of mutual fund shares sold .......................... (10,796,798) (4,584,436) (4,951,950) (1,887,331)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ...................... 639,518 3,878 (15,103) 78,707
Change in unrealized gain (loss) on investments .......... (181,828) 309,388 2,506,771 (849,763)
------------ ------------ ------------ ------------
Net gain (loss) on investments ........................... 457,690 313,266 2,491,668 (771,056)
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 1,959,714 2,673,340
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 1,457,695 1,112,744 4,353,738 1,819,354
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 2,868,284 1,750,588 1,918,046 1,557,760
Transfers between funds .................................. 346,011 (516,810) (3,240,441) 525,257
Redemptions .............................................. (1,335,492) (693,668) (1,447,659) (513,838)
Adjustments to maintain reserves ......................... 1,475 (1,252) 1,016 (695)
------------ ------------ ------------ ------------
Net equity transactions ................................ 1,880,278 538,858 (2,769,038) 1,568,484
Net change in contract owners' equity .................... 3,337,973 1,651,602 1,584,700 3,387,838
Contract owners' equity beginning of period .............. 11,049,325 9,397,723 11,230,813 7,842,975
------------ ------------ ------------ ------------
Contract owners' equity end of period ...................... $ 14,387,298 11,049,325 12,815,513 11,230,813
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NWFUND NWGROFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 858,226 665,218 60,952 73,925
Mortality and expense charges (note 2) ............... (330,998) (197,452) (38,660) (34,864)
Administration charge (note 2)
Tier I ........................................... (148,673) (83,411) (17,881) (14,949)
Tier II .......................................... (47,277) (30,586) (6,779) (6,067)
Tier III ......................................... (25,296) (11,762) (2,338) (1,259)
Tier IV .......................................... (9,148) (18,775) (622) (3,428)
Tier V ........................................... (12,503) - (1,460) -
------------ ------------- ------------- -------------
Net investment activity ............................ 284,331 323,232 (6,788) 13,358
Proceeds from mutual fund shares sold ................ 6,266,837 2,896,804 1,515,017 589,678
Cost of mutual fund shares sold ...................... (3,680,205) (2,273,962) (992,381) (443,098)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ................ 2,586,632 622,842 522,636 146,580
Change in unrealized gain (loss) on investments ...... 13,332,389 4,317,064 283,755 350,942
------------ ------------- ------------- -------------
Net gain (loss) on investments ..................... 15,919,021 4,939,906 806,391 497,522
------------ ------------- ------------- -------------
Reinvested capital gains ............................. 4,357,194 2,639,185 928,742 474,821
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 20,560,546 7,902,323 1,728,345 985,701
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 17,504,981 5,816,573 423,584 540,709
Transfers between funds .............................. 15,259,707 (221,892) (580,789) (505,058)
Redemptions .......................................... (8,674,178) (2,632,012) (1,098,214) (251,120)
Adjustments to maintain reserves ..................... (2,327) (1,901) (35) (308)
------------ ------------- ------------- -------------
Net equity transactions ............................ 24,088,183 2,960,768 (1,255,454) (215,777)
Net change in contract owners' equity ................ 44,648,729 10,863,091 472,891 769,924
Contract owners' equity beginning of period .......... 44,457,575 33,594,484 7,196,235 6,426,311
------------ ------------- ------------- -------------
Contract owners' equity end of period ................ $ 89,106,304 44,457,575 7,669,126 7,196,235
============ ============= ============= =============
</TABLE>
<PAGE> 9
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NWMYMKT NBGUARD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 2,538,526 2,149,385 219,518 196,669
Mortality and expense charges (note 2) ................... (254,376) (232,068) (170,400) (83,256)
Administration charge (note 2)
Tier I ............................................. (95,174) (78,586) (72,318) (33,390)
Tier II ............................................ (27,102) (26,094) (24,787) (11,620)
Tier III ........................................... (17,915) (14,966) (10,868) (5,748)
Tier IV ............................................ (10,690) (34,876) (4,336) (8,820)
Tier V ............................................. (17,451) - (9,033) -
------------ ------------ ------------ ------------
Net investment activity ................................ 2,115,818 1,762,795 (72,224) 53,835
Proceeds from mutual fund shares sold .................... 65,472,045 36,057,505 4,722,451 1,397,739
Cost of mutual fund shares sold .......................... (65,472,045) (36,057,505) (3,617,011) (1,206,162)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... - - 1,105,440 191,577
Change in unrealized gain (loss) on investments .......... - - (1,847,382) 1,430,910
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... - - (741,942) 1,622,487
------------ ------------ ------------ ------------
Reinvested capital gains ................................. - - 5,284,078 1,002,975
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 2,115,818 1,762,795 4,469,912 2,679,297
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 10,477,258 5,939,190 14,909,263 10,662,720
Transfers between funds .................................. (10,384,252) 6,268,382 3,648,156 (308,504)
Redemptions .............................................. (8,399,390) (6,040,030) (4,870,821) (1,054,373)
Adjustments to maintain reserves ......................... (686) (3,204) (7,439) (951)
------------ ------------ ------------ ------------
Net equity transactions .............................. (8,307,070) 6,164,338 13,679,159 9,298,892
Net change in contract owners' equity .................... (6,191,252) 7,927,133 18,149,071 11,978,189
Contract owners' equity beginning of period .............. 50,815,017 42,887,884 21,909,962 9,931,773
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 44,623,765 50,815,017 40,059,033 21,909,962
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PUTINVFD PUTVOYFD
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 201,337 183,827 - -
Mortality and expense charges (note 2) .............. (245,470) (156,121) (845,606) (550,692)
Administration charge (note 2)
Tier I ........................................ (128,526) (80,822) (392,409) (249,007)
Tier II ....................................... (26,541) (17,637) (122,438) (74,066)
Tier III ...................................... (18,768) (8,805) (56,223) (37,901)
Tier IV ....................................... (4,493) (11,839) (24,210) (47,307)
Tier V ........................................ (8,093) - (30,696) -
------------ ------------- ------------- -------------
Net investment activity ........................... (230,554) (91,397) (1,471,582) (958,973)
Proceeds from mutual fund shares sold ............... 7,194,124 1,318,475 13,936,317 1,631,415
Cost of mutual fund shares sold ..................... (5,511,306) (1,244,147) (7,581,337) (906,797)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ............... 1,682,818 74,328 6,354,980 724,618
Change in unrealized gain (loss) on investments ..... 7,106,597 1,609,874 21,628,132 1,835,298
------------ ------------- ------------- -------------
Net gain (loss) on investments .................... 8,789,415 1,684,202 27,983,112 2,559,916
------------ ------------- ------------- -------------
Reinvested capital gains ............................ 5,186,816 3,982,924 11,805,197 8,602,740
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 13,745,677 5,575,729 38,316,727 10,203,683
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 9,952,027 5,272,327 49,543,414 40,603,066
Transfers between funds ............................. 6,647,199 928,922 (5,787,505) 17,094,396
Redemptions ......................................... (6,224,509) (1,529,851) (18,823,850) (5,623,714)
Adjustments to maintain reserves .................... (299) (656) (3,442) (728)
------------ ------------- ------------- -------------
Net equity transactions ......................... 10,374,418 4,670,742 24,928,617 52,073,020
Net change in contract owners' equity ............... 24,120,095 10,246,471 63,245,344 62,276,703
Contract owners' equity beginning of period ......... 35,803,162 25,556,691 137,145,381 74,868,678
------------ ------------- ------------- -------------
Contract owners' equity end of period ............... $ 59,923,257 35,803,162 200,390,725 137,145,381
============ ============= ============= =============
</TABLE>
(Continued)
<PAGE> 10
NACO VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SEI500IX SELGROFD
------------ ------------ ------------ ------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................................... $ 496,400 28,314 - -
Mortality and expense charges (note 2) ................... (180,116) (13,423) (47,926) (35,287)
Administration charge (note 2)
Tier I ............................................. (81,570) (5,772) (22,236) (15,080)
Tier II ............................................ (23,893) (1,822) (5,696) (3,364)
Tier III ........................................... (14,809) (960) (2,991) (2,768)
Tier IV ............................................ (4,741) (1,252) (1,383) (3,885)
Tier V ............................................. (6,925) - (2,297) -
------------ ------------ ------------ ------------
Net investment activity ................................ 184,346 5,085 (82,529) (60,384)
Proceeds from mutual fund shares sold .................... 6,510,687 1,226,914 2,225,057 665,681
Cost of mutual fund shares sold .......................... (4,821,399) (1,131,438) (1,924,254) (685,474)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .................... 1,689,288 95,476 300,803 (19,793)
Change in unrealized gain (loss) on investments .......... 6,582,190 465,601 129,162 689,754
------------ ------------ ------------ ------------
Net gain (loss) on investments ......................... 8,271,478 561,077 429,965 669,961
------------ ------------ ------------ ------------
Reinvested capital gains ................................. 382,784 131,859 1,117,389 620,965
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 8,838,608 698,021 1,464,825 1,230,542
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................................ 25,239,383 4,620,835 1,994,573 1,441,227
Transfers between funds .................................. 21,078,872 5,546,852 (842,537) 573,792
Redemptions .............................................. (7,775,480) (282,950) (1,342,748) (322,865)
Adjustments to maintain reserves ......................... (8,585) (522) (659) 157
------------ ------------ ------------ ------------
Net equity transactions .............................. 38,534,190 9,884,215 (191,371) 1,692,311
Net change in contract owners' equity .................... 47,372,798 10,582,236 1,273,454 2,922,853
Contract owners' equity beginning of period .............. 10,582,236 - 8,433,505 5,510,652
------------ ------------ ------------ ------------
Contract owners' equity end of period .................... $ 57,955,034 10,582,236 9,706,959 8,433,505
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AIMTREAS TRINTSTK
------------ ------------- ------------- -------------
1997 1996 1997 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 217,515 115,635 404,000 318,699
Mortality and expense charges (note 2) ............. (20,246) (11,332) (150,968) (95,586)
Administration charge (note 2)
Tier I ....................................... (6,730) (4,804) (63,120) (36,081)
Tier II ...................................... (1,889) (728) (21,402) (13,753)
Tier III ..................................... (1,303) (1,360) (11,121) (5,859)
Tier IV ...................................... (2,261) (1,127) (3,996) (11,415)
Tier V ....................................... (776) - (7,667) -
------------ ------------- ------------- -------------
Net investment activity .......................... 184,310 96,284 145,726 156,005
Proceeds from mutual fund shares sold .............. 22,350,432 4,232,659 29,556,434 6,973,759
Cost of mutual fund shares sold .................... (22,350,432) (4,232,659) (26,380,399) (5,889,819)
------------ ------------- ------------- -------------
Realized gain (loss) on investments .............. - - 3,176,035 1,083,940
Change in unrealized gain (loss) on investments .... - - (3,819,017) 922,999
------------ ------------- ------------- -------------
Net gain (loss) on investments ................... - - (642,982) 2,006,939
------------ ------------- ------------- -------------
Reinvested capital gains ........................... - - 1,111,001 354,110
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 184,310 96,284 613,745 2,517,054
------------ ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 976,012 820,514 10,320,079 9,239,961
Transfers between funds ............................ 1,160,637 260,363 (2,910,875) 3,932,941
Redemptions ........................................ (847,759) (197,508) (4,778,319) (946,866)
Adjustments to maintain reserves ................... 2,892 (255) 3,678 1,803
------------ ------------- ------------- -------------
Net equity transactions ........................ 1,291,782 883,114 2,634,563 12,227,839
Net change in contract owners' equity .............. 1,476,092 979,398 3,248,308 14,744,893
Contract owners' equity beginning of period ........ 2,686,515 1,707,117 25,426,682 10,681,789
------------ ------------- ------------- -------------
Contract owners' equity end of period .............. $ 4,162,607 2,686,515 28,674,990 25,426,682
============ ============= ============= =============
</TABLE>
<PAGE> 11
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TemForFd
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................... $ 1,469,709 787,336
Mortality and expense charges (note 2) ................. (227,825) (127,799)
Administration charge (note 2)
Tier I ............................................. (100,578) (55,258)
Tier II ............................................ (37,019) (21,931)
Tier III ........................................... (16,074) (6,841)
Tier IV ............................................ (5,303) (11,034)
Tier V ............................................. (8,925) -
------------ ------------
Net investment activity .............................. 1,073,985 564,473
Proceeds from mutual fund shares sold .................. 8,737,686 3,772,230
Cost of mutual fund shares sold ........................ (7,341,764) (3,774,731)
------------ ------------
Realized gain (loss) on investments .................. 1,395,922 (2,501)
Change in unrealized gain (loss) on investments ........ (4,411,710) 2,902,496
------------ ------------
Net gain (loss) on investments ....................... (3,015,788) 2,899,995
------------ ------------
Reinvested capital gains ............................... 3,875,434 489,746
------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 1,933,631 3,954,214
------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ...................................... 15,303,596 10,856,880
Transfers between funds ................................ 2,903,432 2,104,634
Redemptions ............................................ (4,616,849) (883,023)
Adjustments to maintain reserves ....................... (2,254) (3,777)
------------ ------------
Net equity transactions .............................. 13,587,925 12,074,714
NET CHANGE IN CONTRACT OWNERS' EQUITY .................... 15,521,556 16,028,928
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .............. 32,998,572 16,969,644
------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD .................... $ 48,520,128 32,998,572
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
NACo Variable Account (NACoVA) was established pursuant to a resolution
of the Board of Directors of Nationwide Life Insurance Company (the
Company) on September 7, 1988, and has been registered as a unit
investment trust under the Investment Company Act of 1940. The NACoVA
was introduced for exclusive use by Member Counties for deferred
compensation Plans adopted under the National Association of Counties
(NACo) Program.
The Company offers group flexible fund retirement contracts through the
NACoVA. The primary distribution for the contracts is through an
affiliated sales organization.
(b) The Contracts
The Group Flexible Retirement Contracts (the Contract) are offered for
purchase in connection with deferred compensation Plans adopted by
Member Counties under the NACo Program. Participants in the contracts
may invest in any of the following fund sub-accounts:
American Century: Twentieth Century Growth Fund (ACTCGro)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
The Bond Fund of America(SM), Inc. (BdFdAm)
(only available for certain contracts issued beginning
January 1, 1994)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
Evergreen Income and Growth Fund - Class Y (EvIncGro) (formerly
The Evergreen Total Return Fund - Class Y) (not available for
contracts issued on or after October 1, 1993)
Federated U.S. Government Securities Fund: 2-5 Years - Institutional
Shares (FedUSGvt)
Fidelity Capital & Income Fund (FidCapInc)
(not available for contracts issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan(R) Fund (FidPurtn)
The Investment Company of America(R) (InvCoAm)
(only available for certain contracts issued beginning
July 1, 1994)
MAS Funds - Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp) (not
available for contracts issued on or after October 1, 1993)
MFS(R) High Income Fund - Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
<PAGE> 13
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an
affiliated investment advisor) (not available for contracts
issued on or after October 1, 1993)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Putnam Investors Fund - Class A (PutInvFd)
Putnam Voyager Fund - Class A (PutVoyFd)
SEI Index Funds - S&P 500 Index Portfolio (SEI500Ix)
Seligman Growth Fund, Inc. - Class A (SelGroFd)
Short-Term Investments Trust - Treasury Portfolio - Institutional
Class (AIMTreas)
T. Rowe Price International Funds, Inc. - International
Stock Fund(R) (TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
All of the above funds were being utilized as of December 31, 1997.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain expenses
(see note 2). The accompanying financial statements include only
contract owners' purchase payments pertaining to the variable portions
of their contracts and exclude any purchase payments for fixed dollar
benefits, the latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the NACoVA form a part of, and are taxed with, operations
of the Company, which is taxed as a life insurance company under the
Internal Revenue Code. The assets in this account are held pursuant to
contracts with entities which are exempt from federal income tax.
Because of this exemption, no taxes need be provided for investment
income or realized and unrealized capital gains. Annuity payouts and
withdrawal payments are taxable as wages when received by the
participants.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
year presentation.
<PAGE> 14
(2) EXPENSES
No deduction for a sales charge is made from the purchase payments for
these contracts. However, if an owner terminates the contract and directs
the Company to withdraw all or part of the contract value held in the
Account for less than sixteen (16) years, the Company will, with certain
exceptions, assess a contingent deferred sales charge by deducting an
amount from each participant's account. This charge will be equal to not
more than 4% in the first year, declining to 1% in the fifteenth year, of
the lesser of all purchase payments made on behalf of a participant prior
to the date of withdrawal, or the amount withdrawn. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company. Sales charges may be reduced or eliminated upon
negotiated conversion of the contracts to other investment programs offered
by the Company or its affiliates.
The following charges are deducted by the Company: a mortality risk charge,
an expense risk charge and an administration charge which are assessed
through the daily unit value calculation. The morality risk charge and the
expense risk charge are equal to an annual rate of 0.10% and 0.40%
respectively; and the administration charge prior to May 1, 1996 was 0.45%.
Beginning May 1, 1996, the administration charge is based upon the
aggregate balance of assets held under the Contract by each Member County,
as follows:
<TABLE>
<CAPTION>
Expense Administration
Tier Assets (Millions) Charge
<S> <C> <C>
I Up to $10 .45%
II Over $10 to $25 .40%
III Over $25 to $50 .30%
IV Over $50 to $150 .20%
V Over $150 .15%
</TABLE>
The administration charge is determined using the December 31 asset balance
and is effective at the next expense tier on the following May 1.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various
investment options for each participant's account. The number of transfers
allowed, and any administrative charges associated therewith, are subject
to negotiation between the contract owner and the Company.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 15
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
TIER I (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 7,567,678 $ 5.842997 $ 44,217,920 28%
American Century: Twentieth Century
Ultra Fund ................................... 58,270,626 1.737833 101,264,617 22%
The Bond Fund of America(SM), Inc. ............. 3,075,422 2.332586 7,173,686 8%
The Dreyfus Third Century Fund, Inc. ........... 7,094,050 3.532278 25,058,157 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 776,076 2.422617 1,880,135 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 1,452,934 1.301886 1,891,554 6%
Fidelity Capital & Income Fund ................. 232,885 4.654233 1,083,901 14%
Fidelity Contrafund ............................ 82,151,064 1.935931 159,038,791 22%
Fidelity Equity-Income Fund .................... 23,161,038 6.900916 159,832,378 29%
Fidelity Magellan(R) Fund ...................... 35,656,191 1.804998 64,359,353 25%
Fidelity OTC Portfolio ......................... 8,056,286 1.829868 14,741,940 9%
Fidelity Puritan(R) Fund ....................... 10,750,214 1.596539 17,163,136 21%
The Investment Company of America(R) ........... 16,333,170 2.277283 37,195,250 29%
MAS Funds - Fixed Income Portfolio ............. 1,169,738 1.335173 1,561,803 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 834,685 9.012670 7,522,740 22%
MFS(R) High Income Fund - Class A .............. 1,054,064 6.168371 6,501,858 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 364,302 15.968069 5,817,199 47%
Nationwide(R) Fund ............................. 2,097,021 20.697282 43,402,635 38%
Nationwide(R) Growth Fund ...................... 959,417 3.854877 3,698,435 25%
Nationwide(R) Money Market Fund ................ 5,808,984 3.003821 17,449,148 4%
Neuberger & Berman Guardian Fund ............... 10,840,792 1.706116 18,495,649 17%
Putnam Investors Fund - Class A ................ 1,862,211 18.110411 33,725,407 33%
Putnam Voyager Fund - Class A .................. 26,549,651 3.837109 101,873,905 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 19,127,252 1.501834 28,725,957 32%
Seligman Growth Fund, Inc. - Class A. .......... 384,411 12.541848 4,821,224 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 1,270,880 1.222017 1,553,037 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 10,712,801 1.198954 12,844,156 2%
Templeton Foreign Fund - Class I ............... 18,596,589 1.284158 23,880,959 6%
========== ========= -----------
Sub-Total Tier I (December 31, 1995) ......... $ 946,774,930
===========
</TABLE>
(Continued)
<PAGE> 16
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ----------- ----------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,972,496 $ 5.847874 $ 17,382,782 28%
American Century: Twentieth Century
Ultra Fund ................................... 17,512,296 1.739283 30,458,839 22%
The Bond Fund of America(SM), Inc. ............. 838,935 2.334569 1,958,552 8%
The Dreyfus Third Century Fund, Inc. ........... 2,141,147 3.535226 7,569,439 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 164,209 2.424638 398,147 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 485,556 1.302984 632,672 6%
Fidelity Capital & Income Fund ................. 50,755 4.658156 236,425 14%
Fidelity Contrafund ............................ 23,258,606 1.937547 45,064,642 22%
Fidelity Equity-Income Fund .................... 6,412,368 6.906673 44,288,129 29%
Fidelity Magellan(R) Fund ...................... 9,967,418 1.806504 18,006,180 25%
Fidelity OTC Portfolio ......................... 2,364,115 1.831396 4,329,631 9%
Fidelity Puritan(R) Fund ....................... 2,540,462 1.597871 4,059,331 21%
The Investment Company of America(R) ........... 5,422,918 2.279183 12,359,823 29%
MAS Funds - Fixed Income Portfolio ............. 274,281 1.336288 366,518 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 235,276 9.020195 2,122,235 22%
MFS(R) High Income Fund - Class A .............. 244,788 6.173570 1,511,216 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 111,799 15.981395 1,786,704 47%
Nationwide(R) Fund ............................. 592,502 20.714549 12,273,412 38%
Nationwide(R) Growth Fund ...................... 360,606 3.858094 1,391,252 25%
Nationwide(R) Money Market Fund ................ 1,760,454 3.006353 5,292,546 4%
Neuberger & Berman Guardian Fund ............... 3,222,201 1.707540 5,502,037 17%
Putnam Investors Fund - Class A ................ 329,877 18.125525 5,979,194 33%
Putnam Voyager Fund - Class A .................. 7,200,296 3.840312 27,651,383 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,223,019 1.503085 7,850,642 32%
Seligman Growth Fund, Inc. - Class A. .......... 80,990 12.552317 1,016,612 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 203,199 1.223047 248,522 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 3,056,840 1.199955 3,668,070 2%
Templeton Foreign Fund - Class I ............... 5,823,447 1.285230 7,484,469 6%
========== ========= -----------
Sub-Total Tier II (December 31, 1995) ........ $ 270,889,404
===========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 1,115,895 $5.844955 $ 6,522,356 28%
American Century: Twentieth Century
Ultra Fund .................................... 6,429,806 1.738415 11,177,671 22%
The Bond Fund of America(SM), Inc. .............. 463,715 2.333393 1,082,029 8%
The Dreyfus Third Century Fund, Inc. ............ 828,576 3.533462 2,927,742 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 104,407 2.423429 253,023 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 153,705 1.302328 200,174 6%
Fidelity Capital & Income Fund .................. 22,125 4.655810 103,010 14%
Fidelity Contrafund ............................. 8,810,458 1.936580 17,062,157 22%
Fidelity Equity-Income Fund ..................... 2,726,805 6.903229 18,823,759 29%
Fidelity Magellan(R) Fund ....................... 3,146,118 1.805603 5,680,640 25%
Fidelity OTC Portfolio .......................... 750,546 1.830482 1,373,861 9%
Fidelity Puritan(R) Fund ........................ 1,227,566 1.597074 1,960,514 21%
The Investment Company of America(R) ............ 1,973,413 2.278047 4,495,528 29%
MAS Funds - Fixed Income Portfolio .............. 39,766 1.335621 53,112 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 106,751 9.015691 962,434 22%
MFS(R) High Income Fund - Class A ............... 148,670 6.170461 917,362 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 38,917 15.973419 621,638 47%
Nationwide(R) Fund .............................. 180,761 20.704221 3,742,516 38%
Nationwide(R) Growth Fund ....................... 106,963 3.856169 412,467 25%
Nationwide(R) Money Market Fund ................. 472,514 3.004839 1,419,828 4%
Neuberger & Berman Guardian Fund ................ 1,051,558 1.706688 1,794,681 17%
Putnam Investors Fund - Class A ................. 157,603 18.116482 2,855,212 33%
Putnam Voyager Fund - Class A ................... 2,560,666 3.838394 9,828,845 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,203,420 1.502337 1,807,942 32%
Seligman Growth Fund, Inc. - Class A. ........... 42,594 12.546053 534,387 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 156,120 1.222431 190,846 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,203,031 1.199356 1,442,862 2%
Templeton Foreign Fund - Class I ................ 1,891,595 1.284589 2,429,922 6%
========= ======== ------------
Sub-Total Tier II (December 31, 1996) ......... $100,676,518
============
</TABLE>
(Continued)
<PAGE> 18
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 1,491,035 $ 5.857641 $ 8,733,948 28%
American Century: Twentieth Century
Ultra Fund ................................... 9,471,388 1.742188 16,500,939 22%
The Bond Fund of America(SM), Inc. ............. 597,695 2.338535 1,397,731 8%
The Dreyfus Third Century Fund, Inc. ........... 917,688 3.541129 3,249,652 28%
Evergreen Income and Growth Fund -
Class Y ...................................... 130,014 2.428687 315,763 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 241,356 1.305179 315,013 6%
Fidelity Capital & Income Fund ................. 120,784 4.666006 563,579 14%
Fidelity Contrafund ............................ 12,620,829 1.940782 24,494,278 22%
Fidelity Equity-Income Fund .................... 5,904,892 6.918202 40,851,236 29%
Fidelity Magellan(R) Fund ...................... 5,726,530 1.809520 10,362,271 26%
Fidelity OTC Portfolio ......................... 1,302,436 1.834455 2,389,260 9%
Fidelity Puritan(R) Fund ....................... 1,283,945 1.600539 2,055,004 21%
The Investment Company of America(R) ........... 2,356,594 2.282988 5,380,076 29%
MAS Funds - Fixed Income Portfolio ............. 94,434 1.338520 126,402 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 197,549 9.035263 1,784,907 22%
MFS(R) High Income Fund - Class A .............. 233,869 6.183974 1,446,240 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 78,577 16.008079 1,257,867 47%
Nationwide(R) Fund ............................. 355,149 20.749126 7,369,031 39%
Nationwide(R) Growth Fund ...................... 89,839 3.864536 347,186 25%
Nationwide(R) Money Market Fund ................ 1,219,186 3.011419 3,671,480 4%
Neuberger & Berman Guardian Fund ............... 1,596,621 1.710392 2,730,848 17%
Putnam Investors Fund - Class A ................ 233,708 18.155790 4,243,153 33%
Putnam Voyager Fund - Class A .................. 3,817,279 3.846728 14,684,034 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 3,491,065 1.505589 5,256,109 32%
Seligman Growth Fund, Inc. - Class A. .......... 61,083 12.573280 768,014 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 331,148 1.225108 405,692 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 1,722,849 1.201960 2,070,796 2%
Templeton Foreign Fund - Class I ............... 2,363,601 1.287377 3,042,846 6%
========== ========= ------------
Sub-Total Tier III (December 31, 1995) ....... $165,813,355
============
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 674,415 $ 5.851796 $ 3,946,539 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,660,957 1.740450 8,112,163 22%
The Bond Fund of America(SM), Inc. .............. 219,702 2.336182 513,264 8%
The Dreyfus Third Century Fund, Inc. ............ 406,041 3.537596 1,436,409 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 25,537 2.426264 61,960 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 61,181 1.303866 79,772 6%
Fidelity Capital & Income Fund .................. 14,865 4.661311 69,290 14%
Fidelity Contrafund ............................. 6,956,699 1.938846 13,487,968 22%
Fidelity Equity-Income Fund ..................... 2,138,680 6.911304 14,781,068 29%
Fidelity Magellan(R) Fund ....................... 2,856,554 1.807715 5,163,836 26%
Fidelity OTC Portfolio .......................... 658,565 1.832624 1,206,902 9%
Fidelity Puritan(R) Fund ........................ 860,797 1.598943 1,376,365 21%
The Investment Company of America(R) ............ 1,183,576 2.280712 2,699,396 29%
MAS Funds - Fixed Income Portfolio .............. 8,001 1.337185 10,699 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 63,570 9.026243 573,798 22%
MFS(R) High Income Fund - Class A ............... 67,909 6.177751 419,525 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 39,760 15.992105 635,846 47%
Nationwide(R) Fund .............................. 193,920 20.728440 4,019,659 39%
Nationwide(R) Growth Fund ....................... 119,317 3.860681 460,645 25%
Nationwide(R) Money Market Fund ................. 683,175 3.008389 2,055,256 4%
Neuberger & Berman Guardian Fund ................ 826,685 1.708685 1,412,544 17%
Putnam Investors Fund - Class A ................. 183,147 18.137679 3,321,861 33%
Putnam Voyager Fund - Class A ................... 1,982,897 3.842887 7,620,049 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,782,753 1.504092 2,681,425 32%
Seligman Growth Fund, Inc. - Class A. ........... 23,580 12.560735 296,182 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 28,293 1.223875 34,627 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 1,125,641 1.200760 1,351,625 2%
Templeton Foreign Fund - Class I ................ 1,989,093 1.286093 2,558,159 6%
========= ========= ------------
Sub-Total Tier III (December 31, 1996) ........ $ 80,386,832
============
</TABLE>
(Continued)
<PAGE> 20
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1995, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 672,795 $ 5.867425 $ 3,947,574 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,693,395 1.745098 8,190,434 22%
The Bond Fund of America(SM), Inc. .............. 293,584 2.342504 687,722 8%
The Dreyfus Third Century Fund, Inc. ............ 724,635 3.547042 2,570,311 28%
Evergreen Income and Growth Fund -
Class Y ....................................... 90,044 2.432742 219,054 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 199,160 1.307377 260,377 6%
Fidelity Capital & Income Fund .................. 15,630 4.673860 73,052 14%
Fidelity Contrafund ............................. 6,919,494 1.944023 13,451,655 22%
Fidelity Equity-Income Fund ..................... 1,480,026 6.929751 10,256,212 29%
Fidelity Magellan(R) Fund ....................... 2,947,714 1.812541 5,342,852 26%
Fidelity OTC Portfolio .......................... 498,827 1.837520 916,605 9%
Fidelity Puritan(R) Fund ........................ 734,376 1.603211 1,177,360 21%
The Investment Company of America(R) ............ 1,186,761 2.286799 2,713,884 29%
MAS Funds - Fixed Income Portfolio .............. 84,398 1.340756 113,157 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 33,173 9.050357 300,227 22%
MFS(R) High Income Fund - Class A ............... 108,967 6.194384 674,983 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 28,741 16.034807 460,856 47%
Nationwide(R) Fund .............................. 218,220 20.783760 4,535,432 39%
Nationwide(R) Growth Fund ....................... 62,008 3.870989 240,032 25%
Nationwide(R) Money Market Fund ................. 1,244,833 3.016489 3,755,025 4%
Neuberger & Berman Guardian Fund ................ 828,370 1.713248 1,419,203 17%
Putnam Investors Fund - Class A ................. 93,488 18.186106 1,700,183 34%
Putnam Voyager Fund - Class A ................... 1,919,534 3.853154 7,396,260 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,436,973 1.508098 2,167,096 32%
Seligman Growth Fund, Inc. - Class A. ........... 29,833 12.594278 375,725 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 1,061,646 1.227171 1,302,821 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 867,768 1.203968 1,044,765 2%
Templeton Foreign Fund - Class I ................ 1,164,252 1.289527 1,501,334 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1995) ......... $ 76,794,191
============
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
-------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 791,919 $ 5.861569 $ 4,641,888 28%
American Century: Twentieth Century
Ultra Fund .................................... 4,507,568 1.743357 7,858,300 22%
The Bond Fund of America(SM), Inc. .............. 124,227 2.340149 290,710 9%
The Dreyfus Third Century Fund, Inc. ............ 528,101 3.543503 1,871,327 29%
Evergreen Income and Growth Fund -
Class Y ....................................... 78,659 2.430315 191,166 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 88,325 1.306062 115,358 6%
Fidelity Capital & Income Fund .................. 51,553 4.669162 240,709 14%
Fidelity Contrafund ............................. 5,170,372 1.942084 10,041,297 22%
Fidelity Equity-Income Fund ..................... 1,223,287 6.922841 8,468,621 29%
Fidelity Magellan(R) Fund ....................... 1,539,847 1.810733 2,788,252 26%
Fidelity OTC Portfolio .......................... 781,703 1.835685 1,434,960 9%
Fidelity Puritan(R) Fund ........................ 379,214 1.601612 607,354 22%
The Investment Company of America(R) ............ 318,963 2.284519 728,677 29%
MAS Funds - Fixed Income Portfolio .............. 68,206 1.339418 91,356 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 84,709 9.041322 765,881 23%
MFS(R) High Income Fund - Class A ............... 51,594 6.188157 319,272 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 21,209 16.018807 339,743 47%
Nationwide(R) Fund .............................. 90,530 20.763040 1,879,678 39%
Nationwide(R) Growth Fund ....................... 19,388 3.867128 74,976 25%
Nationwide(R) Money Market Fund ................. 364,874 3.013456 1,099,532 4%
Neuberger & Berman Guardian Fund ................ 751,166 1.711539 1,285,650 17%
Putnam Investors Fund - Class A ................. 65,920 18.167964 1,197,632 34%
Putnam Voyager Fund - Class A ................... 1,809,222 3.849306 6,964,249 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 1,151,075 1.506599 1,734,208 32%
Seligman Growth Fund, Inc. - Class A. ........... 25,438 12.581713 320,054 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 102,438 1.225937 125,583 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 811,683 1.202766 976,265 2%
Templeton Foreign Fund - Class I ................ 990,793 1.288241 1,276,380 6%
========= ========= ------------
Sub-Total Tier IV (December 31, 1996) ......... $ 57,729,078
============
</TABLE>
(Continued)
<PAGE> 22
<TABLE>
<CAPTION>
ANNUAL
TIER IV (DECEMBER 31, 1996, SEE NOTE 2)* UNITS UNIT VALUE RETURN
---------------------------------- --------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ................................... 2,223 $ 5.852797 $ 13,011 28%
American Century: Twentieth Century
Ultra Fund .................................... 39,473 1.740747 68,713 22%
The Bond Fund of America(SM), Inc. .............. 139 2.336617 325 8%
The Dreyfus Third Century Fund, Inc. ............ 4,553 3.538202 16,109 28%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .............. 34,364 1.304091 44,814 6%
Fidelity Contrafund ............................. 51,788 1.939178 100,426 22%
Fidelity Equity-Income Fund ..................... 6,909 6.912488 47,758 29%
Fidelity Magellan(R) Fund ....................... 36,399 1.808025 65,810 26%
Fidelity OTC Portfolio .......................... 4,185 1.832937 7,671 9%
Fidelity Puritan(R) Fund ........................ 9,482 1.599217 15,164 21%
The Investment Company of America(R) ............ 3,811 2.281103 8,693 29%
MAS Funds - Fixed Income Portfolio .............. 438 1.337415 586 9%
MFS(R) Growth Opportunities Fund -
Class A ....................................... 693 9.027786 6,256 22%
MFS(R) High Income Fund - Class A ............... 117 6.178817 723 12%
Massachusetts Investors Growth
Stock Fund - Class A .......................... 353 15.994835 5,646 47%
Nationwide(R) Fund .............................. 2,085 20.731998 43,226 39%
Nationwide(R) Growth Fund ....................... 226 3.861342 873 25%
Nationwide(R) Money Market Fund ................. 5,303 3.008908 15,956 4%
Neuberger & Berman Guardian Fund ................ 19,355 1.708978 33,077 17%
Putnam Investors Fund - Class A ................. 2,047 18.140786 37,134 33%
Putnam Voyager Fund - Class A ................... 15,376 3.843542 59,098 25%
SEI Index Funds - S&P 500 Index Portfolio ....... 29,469 1.504352 44,332 32%
Seligman Growth Fund, Inc. - Class A. ........... 406 12.562888 5,101 17%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ...... 7,027 1.224087 8,602 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ................... 6,790 1.200967 8,155 2%
Templeton Foreign Fund - Class I ................ 8,712 1.286315 11,206 6%
====== ========= ---------
Sub-Total Tier IV (December 31, 1996) ......... $ 668,465
=========
</TABLE>
*Tier includes certain Departments of a Member County that was previously
converted to Tier IV using the Asset Balance as of December 31, 1995.
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL
TIER V (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
------------------------------------- ---------- ---------- ------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund .................................. 2,322,606 $ 5.869391 $ 13,632,283 29%
American Century: Twentieth Century
Ultra Fund ................................... 19,969,711 1.745683 34,860,785 23%
The Bond Fund of America(SM), Inc. ............. 753,555 2.343312 1,765,814 9%
The Dreyfus Third Century Fund, Inc. ........... 2,219,012 3.548231 7,873,567 29%
Evergreen Income and Growth Fund -
Class Y ...................................... 297,366 2.433557 723,657 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ............. 579,571 1.307818 757,973 7%
Fidelity Capital & Income Fund ................. 61,610 4.675440 288,054 14%
Fidelity Contrafund ............................ 19,667,377 1.944675 38,246,656 22%
Fidelity Equity-Income Fund .................... 8,086,997 6.932074 56,059,662 29%
Fidelity Magellan(R) Fund ...................... 6,992,191 1.813149 12,677,884 26%
Fidelity OTC Portfolio ......................... 2,776,451 1.838136 5,103,495 9%
Fidelity Puritan(R) Fund ....................... 2,031,661 1.603749 3,258,274 22%
The Investment Company of America(R) ........... 2,872,363 2.287566 6,570,720 29%
MAS Funds - Fixed Income Portfolio ............. 277,396 1.341206 372,045 9%
MFS(R) Growth Opportunities Fund -
Class A ...................................... 212,160 9.053391 1,920,767 23%
MFS(R) High Income Fund - Class A .............. 418,967 6.196477 2,596,119 12%
Massachusetts Investors Growth
Stock Fund - Class A ......................... 117,830 16.040180 1,890,014 47%
Nationwide(R) Fund ............................. 569,519 20.790728 11,840,715 39%
Nationwide(R) Growth Fund ...................... 269,417 3.872287 1,043,260 26%
Nationwide(R) Money Market Fund ................ 3,269,252 3.017508 9,864,994 5%
Neuberger & Berman Guardian Fund ............... 4,309,283 1.713822 7,385,344 17%
Putnam Investors Fund - Class A ................ 377,276 18.192202 6,863,481 34%
Putnam Voyager Fund - Class A .................. 6,307,757 3.854445 24,312,902 25%
SEI Index Funds - S&P 500 Index Portfolio ...... 5,095,657 1.508603 7,687,323 32%
Seligman Growth Fund, Inc. - Class A. .......... 124,591 12.598501 1,569,660 18%
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class ..... 238,580 1.227585 292,877 5%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) .................. 4,374,310 1.204372 5,268,296 2%
Templeton Foreign Fund - Class I ............... 4,910,891 1.289960 6,334,853 6%
========== ========= --------------
Sub-Total Tier V (December 31, 1996) ......... 271,061,474
==============
Total Contract Owners' Equity .................. $1,970,794,247
==============
</TABLE>
<PAGE> 79
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
respectively. The contract is immaterial to the Company's results of
operations. The ceding of risk does not discharge the original insurer
from its primary obligation to the policyholder. Under the terms of the
contract, Franklin has established a trust as collateral for the
recoveries. The trust assets are invested in investment grade
securities, the market value of which must at all times be greater than
or equal to 102% of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
CREDIT RISK: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 80
Part C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) Financial Statements:
(1) Financial statements included in Prospectus (Part A):
Condensed Financial Information 12
(2) Financial statements included in Part B:
Those financial statements required by Item 23 to be included
in Part B have been incorporated therein by reference to the
Prospectus (Part A).
NACo Variable Account:
Independent Auditors' Report. 78
Statement of Assets, Liabilities and Contract Owners' Equity
as of December 31, 1997. 79
Statement of Operations and Changes in Contract Owners'
Equity for the years ended December 31, 1997 and 1996. 81
Notes to Financial Statements. 92
Nationwide Life Insurance Company:
Independent Auditors' Report. 104
Consolidated Balance Sheets as of December 31, 1997 and 1996. 105
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995. 106
Consolidated Statements of Shareholder's Equity for the years ended
December 31, 1997,1996 and 1995. 107
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. 108
Notes to Consolidated Financial Statements. 109
</TABLE>
125 of 145
<PAGE> 81
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors authorizing the
establishment of the Registrant, adopted September 7, 1988-Filed
previously with pre-effective Amendment No. 1 to the registration
statement (File No. 33-33425), and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contract between the Registrant and
Principal Underwriter-Filed previously with pre-effective Amendment
No. 1 to the registration statement (File No. 33-33425), and hereby
incorporated by reference.
(4) The form of the variable annuity contract- Filed previously with
pre-effective Amendment No. 1 to the registration statement (file
No. 33-33425), and hereby incorporated by reference.
(5) Variable Annuity Application - Filed previously with pre-effective
Amendment No. 1 to the registration statement (file No. 33-33425), and
hereby incorporated by reference.
(6) Articles of Incorporation of Depositor. --Filed previously with
pre-effective Amendment No. 1 to the registration statement (File
No. 33-33425), and hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel-Filed previously with pre-effective Amendment No. 1
to the registration statement (File No. 33-33425), and hereby
incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule-Filed previously with
pre-effective Amendment No. 1 to the registration statement (File
No. 33-33425), and hereby incorporated by reference.
126 of 145
<PAGE> 82
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
127 of 145
<PAGE> 83
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
128 of 145
<PAGE> 84
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President-Office of
Columbus, Ohio 43215 Product and Market Compliance
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
129 of 145
<PAGE> 85
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
</TABLE>
130 of 145
<PAGE> 86
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
</TABLE>
131 of 145
<PAGE> 87
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to
form or acquire the control of other
corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
</TABLE>
132 of 145
<PAGE> 88
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Mutual Funds Ohio Investment Company
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
</TABLE>
133 of 145
<PAGE> 89
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
Nationwide Trust Company, FSB United States Federal savings Bank
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
</TABLE>
134 of 145
<PAGE> 90
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
135 of 145
<PAGE> 91
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS(R) Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
136 of 145
<PAGE> 92
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
Nationwide VL Separate Account-D Ohio Nationwide and Annuity Life Issuer of Life Insurance
Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
137 of 145
<PAGE> 93
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- - ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- - ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- - --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- - --------------------------- | --------------------------- | ----------------------------
| | |
- - --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- - --------------------------- | | --------------------------- | ----------------------------
| | |
- - --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- - --------------------------- | | --------------------------- | ----------------------------
| | |
- - --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- - --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- - --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- - -----------------------------------------------------------------------|
|
- - --------------- --------------------------------------------------
| |
- - -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 96
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- - ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- - ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- - ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- - ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- - ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- - -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- - -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- - ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 99
Item 27. Number of Contract Owners
The number of Owners of Contracts as of January 31, 1998 was 3071.
Item 28. Indemnification
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by the Company of any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that such person
is or was a director, officer or employee of the Company, against
expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law of the
State of Ohio.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Investment Services Corporation ("NISC") serves
as principal underwriter and general distributor for the
Nationwide DC Variable Account and the NACo Variable
Account.
140 of 145
<PAGE> 100
(b) NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
NAME AND BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
- - ------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper Chairman of the Board
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Richard A. Karas Director and Vice Chairman
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Dimon R. McFerson Director, Chairman and Chief Executive Officer -
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Timothy E. Murphy President
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Joseph P. Rath Director and Vice President - Compliance
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Mark R. Thresher Vice President and Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Gary E. Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Phillip C. Gath Director
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, Ohio 43215
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
141 of 145
<PAGE> 101
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Investment
Services
Corporation
</TABLE>
Item 30. Location of Accounts and Records
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
(d) Represent that any contract offered by the prospectus and
which is issued pursuant to Section 403(b) of the Code, is
issued by the Registrant in reliance upon, and in compliance
with, the Securities and Exchange Commission's no-action
letter to the American Council of Life Insurance (publicly
available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with Internal
Revenue Code Section 403(b)(11).
The Depositor hereby represents:
(a) That the fees and charges deducted under the Contract in the
aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by
the Company.
142 of 145
<PAGE> 102
PROSPECTUS
NACo National Association of Counties
Counties Care for America
Group
Flexible Fund
Retirement
Contracts
offered by
NATIONWIDE
Life Insurance
Company
through its NACo Variable Account
MAY 1, 1999
143 of 145
<PAGE> 103
INDEPENDENT AUDITORS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of NACo Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 30, 1998, included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1998
144 of 145
<PAGE> 104
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, NACo VARIABLE and the Depositor, Nationwide Life Insurance
Company have caused this Post-Effective Amendment to be signed on its behalf in
the City of Columbus, and State of Ohio, on this 26th day of February, 1999.
NACo VARIABLE ACCOUNT
--------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
--------------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
--------------------------------------------------------
Joseph P. Rath
Vice President - Office of Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 26th day
of February, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- - ----------------------------------------
Lewis J. Alphin
A. I. BELL Director
- - ----------------------------------------
A. I. Bell
KEITH W. ECKEL Director
- - ----------------------------------------
Keith W. Eckel
Willard J. Engel Director
- - ----------------------------------------
Willard J. Engel
Fred C. Finney Director
- - ----------------------------------------
Fred C. Finney
Charles L. Fuellgraf, Jr. Director
- - ----------------------------------------
Charles L. Fuellgraf, Jr.
Joseph J. Gasper President and Chief Operating
- - ---------------------------------------- Officer and Director
Joseph J. Gasper
Dimon R. MCFerson Chairman and Chief Executive
- - ---------------------------------------- Officer Nationwide Insurance
Dimon R. McFerson Enterprise and Director
David O. Miller Chairman of the Board and
- - ---------------------------------------- Director
David O. Miller
Yvonne L. Montgomery Director
- - ----------------------------------------
Yvonne L. Montgomery
Robert A. Oakley Executive Vice President - Chief
- - ---------------------------------------- Financial Officer
Robert A. Oakley
James F. Patterson Director
- - ----------------------------------------
James F. Patterson
Arden L. Shisler Director By /s/ JOSEPH P. RATH
- - ---------------------------------------- --------------------------------------
Arden L. Shisler Joseph P. Rath
Attorney-in-Fact
Robert L. Stewart Director
- - ----------------------------------------
Robert L. Stewart
Nancy C. Thomas Director
- - ----------------------------------------
Nancy C. Thomas
Harold W. Weihl Director
- - ----------------------------------------
Harold W. Weihl
</TABLE>
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