<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. 18 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 19 [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
================================================================================
1 of 161
<PAGE> 2
NACO VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page............................................................ 3
Item 2. Definitions........................................................... 6
Item 3. Synopsis or Highlights................................................ 12
Item 4. Condensed Financial Information....................................... 12
Item 5. General Description of Registrant, Depositor,
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......................................................... 25
Item 10. Purchases and Contract Value.......................................... 17
Item 11. Redemptions........................................................... 21
Item 12. Taxes................................................................. 25
Item 13. Legal Proceedings..................................................... 27
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............................................................ 78
Item 16. Table of Contents..................................................... 78
Item 17. General Information and History....................................... 78
Item 18. Services.............................................................. 78
Item 19. Purchase of Securities Being Offered.................................. 79
Item 20. Underwriters.......................................................... 79
Item 21. Calculation of Performance............................................ 79
Item 22. Annuity Payments...................................................... 80
Item 23. Financial Statements.................................................. 81
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.....................................140
Item 25. Directors and Officers of the Depositor...............................142
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant......................................144
Item 27. Number of Contract Owners.............................................156
Item 28. Indemnification.......................................................156
Item 29. Principal Underwriters................................................156
Item 30. Location of Accounts and Records......................................158
Item 31. Management Services...................................................158
Item 32. Undertakings..........................................................158
</TABLE>
2 of 161
<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: International Discovery Fund - Investor Class
(formerly "American Century: Twentieth
Century International Discovery Fund - Investor Class")
- American Century: Ultra (formerly "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(R) Money Market Fund
- Nationwide S&P 500(R) Index Fund - Class Y
- Nationwide Separate Account Trust - Nationwide Small Company Fund
(subadvisers: The Dreyfus Corporation, Neuberger Berman, L.P., Lazard
Asset Management, Strong Capital Management, Inc. and Warburg
Pincus Asset Management, Inc.)
- 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 A
- Warburg Pincus Emerging Growth Fund - Common Class
1
3 of 161
<PAGE> 4
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: Growth (formerly "American Century:
Twentieth Century Growth")
- Massachusetts Investors Growth Stock Fund - Class A
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 ( dated May 1, 1999) which contains
additional information about the contracts and the NACo Variable Account has
been 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 OR - AVAILABLE IN EVERY
GOVERNMENT AGENCY 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
4 of 161
<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
5 of 161
<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..........................10
NATIONWIDE LIFE INSURANCE COMPANY..................11
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..........................15
Minimum Purchase Payments
Application of Purchase Payments
Allocation of Purchase Payments
Determining Variable Account Value -
Valuing an Accumulation Unit
Determining the Participant 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.........................23
Contracts Issued under the New York
Model Plan
STATEMENTS AND REPORTS.............................24
YEAR 2000 COMPLIANCE ISSUES........................24
LEGAL PROCEEDINGS..................................25
ADVERTISING........................................26
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION...................................31
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS.........................................32
APPENDIX B: CONDENSED FINANCIAL
INFORMATION...................................41
4
6 of 161
<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.
5
7 of 161
<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 0.69% 0.00% 0.00% 0.69%
American Century: Growth 1.00% 0.00% 0.00% 1.00%
American Century: International Discovery Fund - 1.66% 0.00% 0.00% 1.66%
Investor Class
American Century: Ultra 1.00% 0.00% 0.00% 1.00%
The Bond Fund of America(SM), Inc. 0.32% 0.09% 0.25% 0.66%
Dreyfus Appreciation Fund, Inc. 0.55% 0.34% 0.00% 0.89%
Dreyfus Premier Midcap Stock Fund - Class A 1.10% 0.25% 0.00% 1.35%
The Dreyfus Third Century Fund, Inc. 0.75% 0.22% 0.00% 0.97%
Evergreen Income and Growth Fund 0.97% 0.28% 0.00% 1.25%
Federated Bond Fund - Class F 0.65% 0.43% 0.00% 1.08%
Federated U.S. Government Securities Fund: 2-5 Years 0.40% 0.14% 0.00% 0.54%
- - Institutional Shares
Fidelity Advisor Growth Opportunities Fund - Class A 0.46% 0.25% 0.25% 0.96%
Fidelity Advisor High Yield Fund - Class T 0.58% 0.24% 0.25% 1.07%
Fidelity Capital & Income Fund 0.58% 0.23% 0.00% 0.81%
Fidelity Contrafund 0.45% 0.16% 0.00% 0.61%
Fidelity Equity-Income Fund 0.47% 0.20% 0.00% 0.67%
Fidelity Magellan(R)Fund 0.42% 0.17% 0.00% 0.59%
Fidelity OTC Portfolio 0.49% 0.24% 0.00% 0.73%
Fidelity Puritan Fund 0.44% 0.19% 0.00% 0.63%
INVESCO Dynamics Fund 0.55% 0.28% 0.25% 1.08%
INVESCO Total Return Fund 0.58% 0.20% 0.25% 1.03%
The Investment Company of America(R), Inc. 0.25% 0.08% 0.22% 0.55%
LifeDesigns Series - The Aggressive Portfolio 0.50% 0.00% 0.00% 0.50%
LifeDesigns Series - The Moderately Aggressive 0.50% 0.00% 0.00% 0.50%
Portfolio
LifeDesigns Series - The Moderate Portfolio 0.50% 0.00% 0.00% 0.50%
LifeDesigns Series - The Moderately Conservative 0.50% 0.00% 0.00% 0.50%
Portfolio
LifeDesigns Series - The Conservative Portfolio 0.50% 0.00% 0.00% 0.50%
MAS Funds Fixed Income Portfolio 0.38% 0.11% 0.00% 0.49%
Massachusetts Investors Growth Stock Fund - Class A 0.25% 0.22% 0.32% 0.79%
MFS(R)Growth Opportunities Fund - Class A 0.42% 0.21% 0.18% 0.81%
MFS(R)High Income Fund - Class A 0.44% 0.27% 0.30% 1.01%
Morgan Stanley Institutional Fund, Inc. - Equity 0.60% 0.20% 0.25% 1.05%
Growth Portfolio - Class B
Nationwide(R)Fund - Class D 0.57% 0.12% 0.00% 0.69%
Nationwide(R)Growth Fund - Class D 0.58% 0.19% 0.00% 0.77%
Nationwide Money Market Fund 0.40% 0.18% 0.00% 0.58%
Nationwide S&P 500(R)Index Fund - Class Y 0.13% 0.34% 0.00% 0.47%
Nationwide Separate Account Trust - Nationwide Small 1.00% 0.07% 0.00% 1.07%
Company Fund
Neuberger Berman Guardian Fund, Inc. 0.70% 0.09% 0.00% 0.79%
Neuberger Berman Partners Trust 0.85% 0.05% 0.00% 0.90%
</TABLE>
6
8 of 161
<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
Oppenheimer Global Fund - Class A 0.69% 0.23% 0.22% 1.14%
Prestige Balanced Fund - Class Y 0.25% 0.70% 0.00% 0.95%
Prestige International Fund - Class Y 0.43% 0.82% 0.00% 1.25%
Prestige Large Cap Growth Fund - Class Y 0.35% 0.70% 0.00% 1.05%
Prestige Large Cap Value Fund - Class Y 0.30% 0.70% 0.00% 1.00%
Prestige Small Cap Fund - Class Y 0.50% 0.70% 0.00% 1.20%
Putnam Investors Fund - Class A 0.51% 0.19% 0.25% 0.95%
Putnam Voyager Fund - Class A 0.48% 0.23% 0.25% 0.96%
SEI Index Funds - S&P 500 Index Portfolio 0.40% 0.00% 0.00% 0.40%
Seligman Growth Fund, Inc. - Class A 0.70% 0.23% 0.23% 1.16%
Short-Term Investments Trust - Treasury Portfolio - 0.06% 0.02% 0.00% 0.08%
Institutional Class
T. Rowe Price International Stock Fund(R) 0.67% 0.18% 0.00% 0.85%
Templeton Foreign Fund - Class A 0.61% 0.26% 0.25% 1.12%
Warburg Pincus Emerging Growth Fund - Common Class 0.90% 0.32% 0.00% 1.22%
</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 0.75% 0.45% 0.00% 1.20%
Federated U.S. Government Securities Fund: 2-5 Years 0.40% 0.39% 0.00% 0.79%
- - Institutional Shares
Fidelity Advisor Growth Opportunities Fund - Class A 0.46% 0.26% 0.25% 0.97%
Fidelity Advisor High Yield Fund - Class T 0.58% 0.28% 0.15% 1.01%
Fidelity Contrafund 0.45% 0.20% 0.00% 0.65%
Fidelity Magellan(R)Fund 0.42% 0.18% 0.00% 0.60%
Fidelity OTC Portfolio 0.49% 0.26% 0.00% 0.75%
Fidelity Puritan Fund 0.44% 0.21% 0.00% 0.65%
Nationwide S&P 500(R)Index Fund - Class Y 0.13% 0.61% 0.00% 0.74%
</TABLE>
7
9 of 161
<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. Deductions for premium taxes are not reflected but may apply. The
example reflects the 5 year CDSC schedule and the maximum Variable Account
Annual Expense Fee (0.95%). 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 contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century: Income & 67 103 142 250 17 53 92 200 17 53 92 200
Growth - Investor Class
American Century: Growth 70 113 159 284 20 63 109 234 20 63 109 234
American Century: 77 134 193 354 27 84 143 304 27 84 143 304
International Discovery Fund
- - Investor Class
American Century: Ultra 70 113 159 284 20 63 109 234 20 63 109 234
The Bond Fund of America(SM), 67 102 140 247 17 52 90 197 17 52 90 197
Inc.
Dreyfus Appreciation Fund, 69 110 153 272 19 60 103 222 19 60 103 222
Inc.
Dreyfus Premier Midcap Stock 74 124 177 322 24 74 127 272 24 74 127 272
Fund - Class A
The Dreyfus Third Century 70 112 157 281 20 62 107 231 20 62 107 231
Fund, Inc.
Evergreen Income and Growth 73 121 172 311 23 71 122 261 23 71 122 261
Fund
Federated Bond Fund - Class F 71 116 163 293 21 66 113 243 21 66 113 243
Federated U.S. Government 66 99 134 233 16 49 84 183 16 49 84 183
Securities Fund: 2-5 Years -
Institutional Shares
Fidelity Advisor Growth 70 112 156 280 20 62 106 230 20 62 106 230
Opportunities Fund - Class A
Fidelity Advisor High Yield 71 115 162 292 21 65 112 242 21 65 112 242
Fund - Class T
Fidelity Capital & Income 68 107 148 263 18 57 98 213 18 57 98 213
Fund
Fidelity Contrafund 66 101 138 241 16 51 88 191 16 51 88 191
Fidelity Equity - Income Fund 67 103 141 248 17 53 91 198 17 53 91 198
</TABLE>
8
10 of 161
<PAGE> 11
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Magellan(R)Fund 66 100 137 239 16 50 87 189 16 50 87 189
Fidelity OTC Portfolio 68 105 144 254 18 55 94 204 18 55 94 204
Fidelity Puritan Fund 67 101 139 243 17 51 89 193 17 51 89 193
INVESCO Dynamics Fund 71 116 163 293 21 66 113 243 21 66 113 243
INVESCO Total Return Fund 71 114 160 287 21 64 110 237 21 64 110 237
The Investment Company of 66 99 134 234 16 49 84 184 16 49 84 184
America(R), Inc.
LifeDesigns Series - The 65 97 132 228 15 47 82 178 15 47 82 178
Aggressive Portfolio
LifeDesigns Series - The 65 97 132 228 15 47 82 178 15 47 82 178
Moderately Aggressive
Portfolio
LifeDesigns Series - The 65 97 132 228 15 47 82 178 15 47 82 178
Moderate Portfolio
LifeDesigns Series - The 65 97 132 228 15 47 82 178 15 47 82 178
Moderately Conservative
Portfolio
LifeDesigns Series - The 65 97 132 228 15 47 82 178 15 47 82 178
Conservative Portfolio
MAS Funds Fixed Income 65 97 131 227 15 47 81 177 15 47 81 177
Portfolio
Massachusetts Investors 68 107 147 261 18 57 97 211 18 57 97 211
Growth Stock Fund - Class A
MFS(R)Growth Opportunities 68 107 148 263 18 57 98 213 18 57 98 213
Fund - Class A
MFS(R)High Income Fund - 71 114 159 285 21 64 109 235 21 64 109 235
Class A
Morgan Stanley Institutional 71 115 161 290 21 65 111 240 21 65 111 240
Fund, Inc. - Equity Growth
Portfolio - Class B
Nationwide(R)Fund - Class D 67 103 142 250 17 53 92 200 17 53 92 200
Nationwide(R)Growth Fund - 68 106 146 259 18 56 96 209 18 56 96 209
Class D
Nationwide Money Market Fund 66 100 136 238 16 50 86 188 16 50 86 188
Nationwide S&P 500(R)Index 65 96 130 225 15 46 80 175 15 46 80 175
Fund - Class Y
Nationwide Separate Account 71 115 162 292 21 65 112 242 21 65 112 242
Trust - Nationwide Small
Company Fund
Neuberger Berman Guardian 68 107 147 261 18 57 97 211 18 57 97 211
Fund, Inc.
Neuberger Berman Partners 69 110 153 273 19 60 103 223 19 60 103 223
Trust
Oppenheimer Global Fund - 72 118 166 299 22 68 116 249 22 68 116 249
Class A
Prestige Balanced Fund - 70 112 156 279 20 62 106 229 20 62 106 229
Class Y
Prestige International Fund 73 121 172 311 23 71 122 261 23 71 122 261
- - Class Y
</TABLE>
9
11 of 161
<PAGE> 12
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prestige Large Cap Growth 71 115 161 290 21 65 111 240 21 65 111 240
Fund - Class Y
Prestige Large Cap Value 70 113 159 284 20 63 109 234 20 63 109 234
Fund - Class Y
Prestige Small Cap Fund - 73 120 169 306 23 70 119 256 23 70 119 256
Class Y
Putnam Investors Fund - 70 112 156 279 20 62 106 229 20 62 106 229
Class A
Putnam Voyager Fund - Class A 70 112 156 280 20 62 106 230 20 62 106 230
SEI Index Funds - S&P 500 64 94 126 217 14 44 76 167 14 44 76 167
Index Portfolio
Seligman Growth Fund, Inc. - 72 118 167 301 22 68 117 251 22 68 117 251
Class A
Short-Term Investments Trust 61 84 108 179 11 34 58 129 11 34 58 129
- - Treasury Portfolio -
Institutional Class
T. Rowe Price International 69 108 151 268 19 58 101 218 19 58 101 218
Stock Fund(R)
Templeton Foreign Fund - 72 117 165 297 22 67 115 247 22 67 115 247
Class A
Warburg Pincus Emerging 73 120 170 308 23 70 120 258 23 70 120 258
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.
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.
10
12 of 161
<PAGE> 13
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.
Although the contract strives to achieve its goals, there can be no assurance
that the contracts will achieve them.
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 CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 5% of purchase payments surrendered.
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 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
11
13 of 161
<PAGE> 14
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
12
14 of 161
<PAGE> 15
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 account on the participant anniversary, which is
13
15 of 161
<PAGE> 16
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; and
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:
- a life income payment option;
14
16 of 161
<PAGE> 17
- 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 Beginning July 1, 1985 and Before 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 beginning July 1, 1985
and before 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>
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 for contracts issued beginning July 1, 1985 and before the later
of May 1, 1998 or the date on which state insurance authorities approve contract
modifications.
When a CDSC of less than 4% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced expenses
to Nationwide in connection with case acquisition costs, plan start-up expenses,
commissions and marketing expenses. Nationwide will not apply any deductions in
a discriminatory manner.
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 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 expenses
to Nationwide in connection with case acquisition costs, plan start-up expenses,
commissions and marketing expenses. Nationwide will not apply any deductions in
a discriminatory manner.
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.
Premium taxes may be deducted from death benefit proceeds.
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
15
17 of 161
<PAGE> 18
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.
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 at the
accumulation unit value determined 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 when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- New Year's Day - Independence Day
- Martin Luther King, Jr. Day - Labor Day
- Presidents' Day - Thanksgiving
- Good Friday - Christmas
- Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, account value may be affected since the contract owner would
not have access to their account.
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 underlying mutual funds
allocated to 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% of
the purchase payments 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.
DETERMINING VARIABLE ACCOUNT VALUE - VALUING AN ACCUMULATION UNIT
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation
16
18 of 161
<PAGE> 19
units. Accumulation unit values (for each sub-account) are determined by
calculating the net investment factor for the underlying mutual funds for the
current valuation period and multiplying that result with the accumulation unit
values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(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.
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate ranging from 0.00% to 0.95% of the
daily net assets of the variable account, depending on which contract
features the plan has chosen.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
DETERMINING THE PARTICIPANT 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. Certain plans may
impose limitations on participant exchange privileges as a consequence of
agreements entered into to purchase mutual funds or other investments unrelated
to the contract. 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
17
19 of 161
<PAGE> 20
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.
EXCHANGE 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 and will not be liable for following telephone or
internet instructions that it reasonably determined 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 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
No modifications may be made prior to the first contract anniversary.
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
18
20 of 161
<PAGE> 21
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 (see "Retirement Income Forms"). 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 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.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, contract value may be affected since the contract owner and/or
participant would not have access to their account.
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
19
21 of 161
<PAGE> 22
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 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.
20
22 of 161
<PAGE> 23
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:
- 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.
21
23 of 161
<PAGE> 24
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
The amount of annuity payments will vary depending on the performance of the
underlying mutual funds selected.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. If not
prohibited by law, a contract owner may, at contract issuance, elect an
alternated assumed investment rate of 5% per annum. The choice of assumed
investment rate affects the pattern of Retirement Income Payments. An assumed
investment rate is the percentage rate of return required to maintain level
variable annuity payments. Subsequent variable annuity payments may be more or
less than the first payment based on whether actual investment performance is
higher or lower than the assumed investment rate.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate built into the variable payment annuity purchase rate basis in
the contracts.
First Year's 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).
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 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.
22
24 of 161
<PAGE> 25
Second and Subsequent Years' Payments
On each anniversary of the beginning of Retirement Income Payments, the second
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. Subsequent years' payments
will be calculated in the same fashion on each anniversary date.
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 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.
23
25 of 161
<PAGE> 26
- 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
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 at least
semi-annually. Nationwide will also provide annual and semi-annual reports
containing all applicable information and financial statements or their
equivalent, which must be sent to the underlying mutual fund beneficial
shareholders as required by the rules under the Investment Company Act of 1940
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 impelemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that supports our mutual fund products
will be fully deployed in the first quarter of 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners including electronic interfaces. Processes
have been put into place and programs initiated to process data irrespective
24
26 of 161
<PAGE> 27
of the format by converting non-compliant data into a Year 2000 compliant
format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems with embedded
computer chips. Nationwide's building systems such as fire, security, and
elevators and escalators supporting facilities in Columbus, Ohio have been
tested and are Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses in 1998 and 1997 included approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending approximately $5 million on Year 2000
activities in 1999. These expenses do not have an effect on the assets of the
variable account and are not charged through to the contract owner.
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.
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 was named as a defendant in a lawsuit filed in New
York state court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Co.). In April 1998,
Nationwide was named as a defendant in a lawsuit filed in Ohio state court
similar to the Snyder case (David and Joan Mishler v. Nationwide Life Insurance
Co.). In August 1998, Nationwide Mutual Insurance Company and Nationwide and the
plaintiffs executed a stipulation of settlement and submitted it to the New York
state court for approval. On August 20, 1998, the court in the Snyder case
signed an order preliminarily approving a class for settlement purposes (which
would include the Mishler case) and scheduled a fairness hearing for December
17, 1998. At that hearing, the court reviewed the fairness and reasonableness of
the proposed settlement and issued a final order and judgment. The approved
settlement provides for dismissal of both the Snyder and Mishler cases, bars
class members from pursuing litigation against Nationwide Mutual Insurance
Company and its affiliates, including Nationwide and its subsidiaries, relating
to the allegations in the Snyder case, and provides class members with a
potential value of approximately $100 million in policy adjustments, discounted
premiums and discounted products.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance policy and the other who was the owner of a variable annuity contract,
commenced a lawsuit in a federal court in Texas against Nationwide and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In
25
27 of 161
<PAGE> 28
this lawsuit, plaintiffs seek to represent a class of variable life insurance
policy owners and variable annuity contract owners whom they claim were
allegedly misled when purchasing these variable contracts into believing that
the performance of their underlying mutual fund option managed by American
Century, whose shares may only be purchased by insurance companies, would track
the performance of a mutual fund, also managed by American Century, whose shares
are publicly traded. The amended complaint seeks unspecified compensatory and
punitive damages. On April 27, 1998, the district court denied, in part, and
granted, in part, Nationwide and American Century's motions to dismiss the
complaint. The remaining claims against Nationwide allege securities fraud,
common law fraud, civil conspiracy and breach of contract. On December 2, 1998,
the district court issued an order denying plaintiffs' motion for class
certification. On December 10, 1998, the district court stayed the lawsuit
pending plaintiffs' petition to the federal appeals court for interlocutory
review of the order denying class certification. On December 14, 1998,
plaintiffs filed their petition for interlocutory review, on which the federal
appeals court has not yet ruled. Nationwide intends to defend the case
vigorously.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit 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.
The general distributor, NISC, is not a party to any litigation of any material
nature.
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:
26
28 of 161
<PAGE> 29
- 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.
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
27
29 of 161
<PAGE> 30
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. An initial investment of $10,000 is assumed because that amount is
closer to the size of a typical contract than $1,000, which is used in
calculating the standardized average annual total return.
28
30 of 161
<PAGE> 31
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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>
Seligman Growth Fund, Inc. - Class A 33.96% 17.92% 16.29%
Short-Term Investments Trust - Treasury Portfolio - 4.46% 4.30% 4.70%
Institutional Class
T. Rowe Price International Stock Fund(R) 15.04% 7.84% 9.41%
Templeton Foreign Fund - Class A -5.79% 4.95% 9.56%
Warburg Pincus Emerging Growth Fund - Common Class 4.82% 14.15% 15.42%
</TABLE>
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
31
33 of 161
<PAGE> 32
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 - INTERNATIONAL DISCOVERY FUND - INVESTOR CLASS (FORMERLY
"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: ULTRA (FORMERLY "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
32
34 of 161
<PAGE> 33
life of America. Current income is secondary to the primary goal. The Dreyfus
Corporation serves as the Fund's investment adviser.
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
35 of 161
<PAGE> 34
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 primarily in Equity Funds. However, the
34
36 of 161
<PAGE> 35
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
37 of 161
<PAGE> 36
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
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of companies whose equity market capitalizations at
the time of investment are similar to the market capitalizations of companies in
the Russell 2000 Small Stock Index. The Fund is subadvised by: The Dreyfus
Corporation, Neuberger Berman, LLC., Lazard Asset Management, Strong Capital
Management, Inc. and Warburg Pincus Asset Management, Inc.
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 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.
36
38 of 161
<PAGE> 37
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 & Research, Inc. serves as the Fund's sub-adviser, providing daily
portfolio management for the Fund.
PUTNAM INVESTORS FUND - CLASS A
37
39 of 161
<PAGE> 38
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 A
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.
38
40 of 161
<PAGE> 39
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: GROWTH (FORMERLY "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.
39
41 of 161
<PAGE> 40
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.
40
42 of 161
<PAGE> 41
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.
Variable Account Annual Expense Fee of 0.95% of average net assets
<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: Growth 5.842997 7.915964 6,270,208 1998
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: Ultra 1.737833 2.316089 59,827,396 1998
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), 2.332586 2.429862 3,149,438 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*
The Dreyfus Third Century 3.532278 4.554488 172 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*
</TABLE>
41
43 of 161
<PAGE> 42
<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>
Evergreen Income and Growth 2.422617 2.380651 569,094 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 U.S. Government 1.301886 1.394078 3,088,503 1998
Securities Fund: 2-5 Years 1.226751 1.301886 3,296,152 1997
- - Institutional Shares 1.195751 1.226751 1,296,431 1996
1.062969 1.195751 2,344,091 1995
1.094086 1.062969 1,802,090 1994
1.031362 1.094086 1,501,568 1993
1.000000 1.031362 359,089 1992
Fidelity Capital & Income 4.654233 4.829318 187,924 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 1.935931 2.522162 79,731,135 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 6.900916 7.691828 20,055,246 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*
</TABLE>
42
44 of 161
<PAGE> 43
<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 1.804998 2.389171 33,527,719 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 1.829868 2.544511 7,583,243 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
Fidelity Puritan Fund 1.596539 1.843889 10,568,994 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
The Investment Company of 2.277283 2.773161 15,826,712 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
MAS Funds Fixed Income 1.335173 1.413926 1,989,011 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 9.012670 11.531693 657,789 1998
Fund - Class A 7.380232 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*
</TABLE>
43
45 of 161
<PAGE> 44
<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)High Income Fund - 6.168371 6.172749 1,376,013 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 15.968069 22.143725 310,155 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
Nationwide(R)Fund - Class D 20.697282 26.722904 36 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 - 3.854877 4.725203 679,189 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*
Neuberger Berman Guardian 1.706116 1.729738 9,040,807 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>
44
46 of 161
<PAGE> 45
<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>
Putnam Investors Fund - 18.110411 24.311753 2,421,935 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 - 3.837109 4.715165 27,161,675 1998
Class A 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*
SEI Index Funds - S&P 500 1.501834 1.909266 28,576,205 1998
Index Portfolio 1.139331 1.501834 38,540,683 1997
1.000000 1.139331 4,129,102 1996
Seligman Growth Fund, Inc. 12.541848 16.801408 352,047 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 1.222017 1.276562 1,766,084 1998
Trust - Treasury Portfolio 1.168909 1.222017 3,399,331 1997
- - Institutional Class ** 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
</TABLE>
45
47 of 161
<PAGE> 46
<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 1.198954 1.379298 9,434,812 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
</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 Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
46
48 of 161
<PAGE> 47
Variable Account Annual Expense Fee of 0.90% of average net assets
<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: Growth 5.847874 7.926529 3,210,215 1998
4.564331 5.847874 2,972,496 1997
4.258167 4.564331 6,416,724 1996
American Century: Ultra 1.739283 2.319181 25,526,505 1998
1.425323 1.739283 17,512,296 1997
1.349699 1.425323 17,364,360 1996
The Bond Fund of 2.334569 2.433154 1,615,501 1998
America(SM), Inc. 2.156482 2.334569 838,935 1997
2.019231 2.156482 1,041,402 1996
Evergreen Income and Growth 2.424638 2.383829 288,461 1998
Fund 1.948154 2.424638 164,209 1997
1.797369 1.948154 267,437 1996
Federated U.S. Government 1.302984 1.395957 1,498,243 1998
Securities Fund: 2-5 Years 1.227166 1.302984 485,556 1997
- - Institutional Shares 1.179520 1.227166 431,282 1996
Fidelity Capital & Income 4.658156 4.835829 59,194 1998
Fund 4.097872 4.658156 50,755 1997
3.859929 4.097872 76,382 1996
Fidelity Contrafund 1.937547 2.525528 34,985,707 1998
1.589493 1.937547 23,258,606 1997
1.428112 1.589493 22,719,185 1996
Fidelity Equity-Income Fund 6.906673 7.702094 10,047,811 1998
5.361485 6.906673 6,412,368 1997
4.790401 5.361485 7,437,534 1996
Fidelity Magellan(R)Fund 1.806504 2.392359 13,728,148 1998
1.439922 1.806504 9,967,418 1997
1.327329 1.439922 12,036,679 1996
Fidelity OTC Portfolio 1.831396 2.547908 3,156,471 1998
1.681272 1.831396 2,364,115 1997
1.509365 1.681272 1,269,335 1996
</TABLE>
47
49 of 161
<PAGE> 48
<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 Puritan Fund 1.597871 1.846350 5,207,051 1998
1.317785 1.597871 2,540,462 1997
1.202745 1.317785 3,037,801 1996
The Investment Company of 2.279183 2.776862 6,890,273 1998
America(R), Inc. 1.771690 2.279183 5,422,918 1997
1.588880 1.771690 5,329,249 1996
MAS Funds Fixed Income 1.336288 1.415813 991,972 1998
Portfolio 1.230172 1.336288 274,281 1997
1.148924 1.230172 236,446 1996
MFS(R)Growth Opportunities 9.020195 11.547088 366,180 1998
Fund - Class A 7.382705 9.020195 235,276 1997
6.921487 7.382705 323,628 1996
MFS(R)High Income Fund - 6.173570 6.181070 516,943 1998
Class A 5.520025 6.173570 244,788 1997
5.086868 5.520025 244,640 1996
Massachusetts Investors 15.981395 22.173275 143,669 1998
Growth Stock Fund - Class A 10.884466 15.981395 111,799 1997
10.146619 10.884466 155,643 1996
Nationwide(R)Growth Fund - 3.858094 4.731510 408,603 1998
Class D 3.084040 3.858094 360,606 1997
2.839932 3.084040 507,782 1996
Neuberger Berman Guardian 1.707540 1.732048 4,341,380 1998
Fund, Inc. 1.460899 1.707540 3,222,201 1997
1.325880 1.460899 2,513,725 1996
Putnam Investors Fund - 18.125525 24.344197 897,593 1998
Class A 13.599051 18.125525 329,877 1997
12.145782 13.599051 371,840 1996
Putnam Voyager Fund - Class 3.840312 4.721461 10,644,754 1998
A 3.075909 3.840312 7,200,296 1997
3.068900 3.075909 7,518,991 1996
</TABLE>
48
50 of 161
<PAGE> 49
<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>
SEI Index Funds - S&P 500 1.503085 1.911811 12,293,095 1998
Index Portfolio 1.139711 1.503085 5,223,019 1997
1.000000 1.139711 1,547,081 1996
Seligman Growth Fund, Inc. 12.552317 16.823830 174,614 1998
- - Class A 10.723901 12.552317 80,990 1997
9.776056 10.723901 90,771 1996
Short-Term Investments - 1.223047 1.278283 1,030,158 1998
Trust - Treasury Portfolio 1.169304 1.223047 203,199 1997
- - Institutional Class* 1.135916 1.169304 201,261 1996
T. Rowe Price International 1.199955 1.381139 3,948,203 1998
Stock Fund(R) 1.178953 1.199955 3,056,840 1997
1.108680 1.178953 3,705,323 1996
</TABLE>
*The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
49
51 of 161
<PAGE> 50
Variable Account Annual Expense Fee of 0.80% of average net assets
<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 & 1.000000 1.097595 76,300 1998
Growth
American Century: Growth 5.857641 7.947702 2,832,513 1998
4.567388 5.857641 1,491,035 1997
4.258179 4.567388 3,952,718 1996
American Century: 1.000000 1.084264 103,189 1998
International Discovery Fund
American Century: Ultra 1.742188 2.325375 20,465,127 1998
1.426278 1.742188 9,471,388 1997
1.349702 1.426278 11,724,488 1996
The Bond Fund of America(SM), 2.338535 2.439748 954,957 1998
Inc. 2.157968 2.338535 597,695 1997
2.019264 2.157968 737,276 1996
Dreyfus Appreciation Fund, 1.000000 1.080133 60,330 1998
Inc.
Dreyfus Premier Midcap 1.000000 1.133283 6,837 1998
Stock Fund - Class A
The Dreyfus Third Century 3.541129 4.572707 6,657,158 1998
Fund, Inc. 2.759207 3.541129 917,688 1997
2.450473 2.759207 1,075,140 1996
Evergreen Income and Growth 2.428687 2.390198 111,941 1998
Fund 1.949458 2.428687 130,014 1997
1.797374 1.949458 303,775 1996
Federated Bond Fund - 1.000000 1.018687 77,098 1998
Class F
Federated U.S. Government 1.305179 1.399720 1,061,815 1998
Securities Fund: 2-5 Years 1.227995 1.305179 241,356 1997
- - Institutional Shares 1.179523 1.227995 184,497 1996
</TABLE>
50
52 of 161
<PAGE> 51
<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 Advisor Growth 1.000000 1.089301 32,561 1998
Opportunities Fund - Class A
Fidelity Advisor High Yield 1.000000 1.064751 395 1998
Fund - Class T
Fidelity Capital & Income 4.666006 4.848865 60,278 1998
Fund 4.100640 4.666006 120,784 1997
3.859939 4.100640 203,017 1996
Fidelity Contrafund 1.940782 2.532274 26,018,143 1998
1.590557 1.940782 12,620,829 1997
1.428116 1.590557 13,966,075 1996
Fidelity Equity-Income Fund 6.918202 7.722666 6,525,557 1998
5.365074 6.918202 5,904,892 1997
4.790414 5.365074 6,668,170 1996
Fidelity Magellan(R)Fund 1.809520 2.398748 11,284,101 1998
1.440886 1.809520 5,726,530 1997
1.327332 1.440886 6,812,829 1996
Fidelity OTC Portfolio 1.834455 2.554714 2,759,385 1998
1.682398 1.834455 1,302,436 1997
1.509369 1.682398 886,668 1996
Fidelity Puritan Fund 1.600539 1.851282 3,223,535 1998
1.318667 1.600539 1,283,945 1997
1.202749 1.318667 1,390,626 1996
INVESCO Dynamics Fund 1.000000 1.172431 38,248 1998
INVESCO Total Return Fund 1.000000 1.023668 9,067 1998
The Investment Company of 2.282988 2.784278 4,926,029 1998
America(R), Inc. 1.772876 2.282988 2,356,594 1997
1.588884 1.772876 2,306,070 1996
</TABLE>
51
53 of 161
<PAGE> 52
<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 1.338520 1.419597 261,209 1998
Portfolio 1.230995 1.338520 94,434 1997
1.148928 1.230995 116,525 1996
MFS(R)Growth Opportunities 9.035263 11.577941 190,471 1998
Fund - Class A
7.387651 9.035263 197,549 1997
6.921506 7.387651 330,931 1996
MFS(R)High Income Fund - 6.183974 6.197734 346,946 1998
Class A 5.523753 6.183974 233,869 1997
5.086882 5.523753 252,930 1996
Massachusetts Investors 16.008079 22.232493 125,998 1998
Growth Stock Fund - Class A 10.891758 16.008079 78,577 1997
10.146647 10.891758 136,164 1996
Morgan Stanley 1.000000 1.106680 11,853 1998
Institutional Fund, Inc. -
Equity Growth Portfolio -
Class B
Nationwide(R)Fund - Class D 20.749126 26.830004 3,247,615 1998
14.979404 20.749126 355,149 1997
13.111665 14.979404 289,479 1996
Nationwide(R)Growth Fund - 3.864536 4.744149 280,426 1998
Class D 3.086105 3.864536 89,839 1997
2.839940 3.086105 133,215 1996
Nationwide(R)Money Market 3.011419 3.139103 6,949,105 1998
Fund* 2.887772 3.011419 1,219,186 1997
2.810841 2.887772 1,754,115 1996
Nationwide S&P 500(R)Index 1.000000 1.093550 64,039 1998
Fund - Class Y
Nationwide Separate Account 0.961555 0.963521 1,340,017 1998
Trust- Nationwide Small
Company Fund
Neuberger Berman Guardian 1.710392 1.736676 2,886,123 1998
Fund, Inc.
1.461877 1.710392 1,596,621 1997
1.325883 1.461877 1,655,042 1996
</TABLE>
52
54 of 161
<PAGE> 53
<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>
Neuberger Berman Partners 1.000000 1.041831 6 1998
Trust
Oppenheimer Global Fund - 1.000000 1.106449 2,237 1998
Class A
Putnam Investors Fund - 18.155790 24.409212 549,318 1998
Class A 13.608156 18.155790 233,708 1997
12.145815 13.608156 239,486 1996
Putnam Voyager Fund - 3.846728 4.734076 7,755,689 1998
Class A 3.077970 3.846728 3,817,279 1997
3.068905 3.077970 4,941,310 1996
SEI Index Funds - S&P 500 1.505589 1.916911 8,439,537 1998
Index Portfolio 1.140471 1.505589 3,491,065 1997
1.000000 1.140471 1,023,459 1996
Seligman Growth Fund, 12.573280 16.868765 90,887 1998
Inc.-Class A 10.731082 12.573280 61,083 1997
9.776083 10.731082 107,031 1996
Short-Term Investments 1.225108 1.281729 320,548 1998
Trust - Treasury Portfolio 1.170093 1.225108 331,148 1997
- - Institutional Class** 1.135919 1.170093 394,386 1996
T. Rowe Price International 1.201960 1.384829 3,133,125 1998
Stock Fund(R) 1.179742 1.201960 1,722,849 1997
1.108683 1.179742 2,213,126 1996
Templeton Foreign Fund - 1.287377 1.214689 13,917,762 1998
Class A 1.216800 1.287377 2,363,601 1997
1.114642 1.216800 2,314,772 1996
Warburg Pincus Emerging 1.000000 1.140152 5,986 1998
Growth Fund - Common Clas
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
**The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
53
55 of 161
<PAGE> 54
Variable Account Annual Expense Fee of 0.70% of average net assets
<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 & 1.000000 1.097739 36,320 1998
Growth
American Century: 1.000000 1.084406 43,124 1998
International Discovery Fund
Dreyfus Appreciation Fund, 1.000000 1.080275 52,910 1998
Inc.
Dreyfus Premier Midcap 1.000000 1.133431 23,028 1998
Stock Fund - Class A
The Dreyfus Third Century 3.547042 4.584920 3,080,222 1998
Fund, Inc. 2.761054 3.547042 724,635 1997
2.450480 2.761054 2,645,579 1996
Federated Bond Fund - 1.000000 1.018821 1,037 1998
Class F
Fidelity Advisor Growth 1.000000 1.089444 1,223 1998
Opportunities Fund - Class A
Fidelity Advisor High Yield 1.000000 1.064934 116 1998
Fund - Class T
INVESCO Dynamics Fund 1.000000 1.172584 3,535 1998
INVESCO Total Return Fund 1.000000 1.023803 1,276 1998
LifeDesigns Series - The 1.000000 1.152311 819,842 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.110341 382,730 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.145999 1,312,884 1998
Moderate Portfolio
</TABLE>
54
56 of 161
<PAGE> 55
<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>
LifeDesigns Series - The 1.000000 1.143522 1,127,941 1998
Moderately Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.131933 455,658 1998
Moderatly Conservative
Portfolio
Nationwide(R)Fund - Class D 20.783760 26.901646 1,298,643 1998
14.989429 20.783760 218,220 1997
13.111701 14.989429 664,951 1996
Nationwide(R)Money Market 3.016489 3.147557 3,320,018 1998
Fund* 2.889720 3.016489 1,244,833 1997
2.810849 2.889720 6,170,419 1996
Nationwide S&P 500(R)Index 1.000000 1.093694 97,706 1998
Fund - Class Y
Nationwide Separate Account 0.961707 0.964638 589,435 1998
Trust - Nationwide Small
Company Fund
Neuberger Berman Partners 1.000000 1.041968 46,617 1998
Trust
Prestige Balanced Fund - 1.000000 1.061002 67,659 1998
Class Y
Prestige International Fund 1.000000 1.092070 2,686 1998
- - Class Y
Prestige Large Cap Growth 1.000000 1.139564 39,909 1998
Fund - Class Y
Prestige Large Cap Value 1.000000 1.049429 858 1998
Fund - Class Y
Prestige Small Cap Fund - 1.000000 1.090386 7,654 1998
Class Y
</TABLE>
55
57 of 161
<PAGE> 56
<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>
Oppenheimer Global Fund - 1.000000 1.106594 942 1998
Class A
Templeton Foreign Fund - 1.289527 1.217936 7,746,564 1998
Class A 1.217615 1.289527 1,164,252 1997
1.114645 1.217615 5,552,808 1996
Warburg Pincus Emerging 1.000000 1.140301 882 1998
Growth Fund - Common Class
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
56
58 of 161
<PAGE> 57
Variable Account Annual Expense Fee of 0.65% of average net assets
<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: Growth 5.869391 7.975584 1,377,500 1998
4.776599 5.869391 2,322,606 1997
American Century: Ultra 1.745683 2.333533 9,983,888 1998
1.474619 1.745683 19,969,711 1997
The Bond Fund of America(SM), 2.343312 2.448428 722,007 1998
Inc. 2.185294 2.343312 753,555 1997
Evergreen Income and Growth 2.433557 2.398586 125,423 1998
Fund 1.949492 2.433557 297,366 1997
Federated U.S. Government 1.307818 1.404671 558,667 1998
Securities Fund: 2-5 Years 1.238301 1.307818 579,571 1997
- - Institutional Shares
Fidelity Capital & Income 4.675440 4.866016 142,236 1998
Fund 4.139531 4.675440 61,610 1997
Fidelity Contrafund 1.944675 2.541159 11,832,023 1998
1.597582 1.944675 19,667,377 1997
Fidelity Equity-Income Fund 6.932074 7.749762 4,532,595 1998
5.639098 6.932074 8,086,997 1997
Fidelity Magellan(R)Fund 1.813149 2.407162 5,041,523 1998
1.494160 1.813149 6,992,191 1997
Fidelity OTC Portfolio 1.838136 2.563678 1,453,622 1998
1.604136 1.838136 2,776,451 1997
Fidelity Puritan Fund 1.603749 1.857778 1,260,820 1998
1.388317 1.603749 2,031,661 1997
The Investment Company of 2.287566 2.794045 1,858,205 1998
America(R), Inc. 1.890348 2.287566 2,872,363 1997
MAS Funds Fixed Income 1.341206 1.424580 278,580 1998
Portfolio 1.248067 1.341206 277,396 1997
</TABLE>
57
59 of 161
<PAGE> 58
<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 9.053391 11.618570 180,839 1998
Fund - Class A 7.676856 9.053391 212,160 1997
MFS(R)High Income Fund - 6.196477 6.219656 253,885 1998
Class A 5.615972 6.196477 418,967 1997
Massachusetts Investors 16.040180 22.310477 64,922 1998
Growth Stock Fund - Class A 12.126811 16.040180 117,830 1997
Nationwide(R)Growth Fund - 3.872287 4.760794 88,677 1998
Class D 3.194767 3.872287 269,417 1997
Neuberger Berman Guardian 1.713822 1.742771 1,466,182 1998
Fund, Inc. 1.527855 1.713822 4,309,283 1997
Putnam Investors Fund - 18.192202 24.494833 297,345 1998
Class A 14.574047 18.192202 377,276 1997
Putnam Voyager Fund - 3.854445 4.750689 4,199,459 1998
Class A 3.048108 3.854445 6,307,757 1997
SEI Index Funds - S&P 500 1.508603 1.923629 5,122,867 1998
Index Portfolio 1.234422 1.508603 5,095,657 1997
Seligman Growth Fund, Inc. 12.598501 16.927940 52,182 1998
- - Class A 11.006405 12.598501 124,591 1997
Short-Term Investments 1.227585 1.286263 891,584 1998
Trust - Treasury Portfolio 1.188793 1.227585 238,580 1997
- - Institutional Class*
T. Rowe Price International 1.204372 1.389689 1,610,019 1998
Stock Fund(R)
1.193159 1.204372 4,374,310 1997
</TABLE>
*The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
58
60 of 161
<PAGE> 59
Variable Account Annual Expense Fee of 0.60% of average net assets
<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>
LifeDesigns Series - The 1.000000 1.150285 296,908 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.108390 97,738 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.143985 193,617 1998
Moderate Portfolio
LifeDesigns Series - The 1.000000 1.141512 169,925 1998
Moderatly Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.129944 135,133 1998
Moderately Conservative
Portfolio
Prestige Balanced Fund - 1.000000 1.061142 38 1998
Class Y
Prestige International Fund 1.000000 1.092213 19,996 1998
- - Class Y
Prestige Large Cap Growth 1.000000 1.139713 22,783 1998
Fund - Class Y
Prestige Large Cap Value 1.000000 1.049566 24,429 1998
Fund - Class Y
Prestige Small Cap Fund - 1.000000 1.090529 33,702 1998
Class Y
</TABLE>
59
61 of 161
<PAGE> 60
Variable Account Annual Expense Fee of 0.55% of average net assets
<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 & 1.000000 1.097955 39,351 1998
Growth - Investor Class
American Century: 1.000000 1.084619 7,164 1998
International Discovery
Fund - Investor Class
Dreyfus Appreciation Fund, 1.000000 1.080487 20,457 1998
Inc.
The Dreyfus Third Century 3.532278 4.557584 2,140,647 1998
Fund, Inc.
Fidelity Advisor Growth 1.000000 1.089659 5,256 1998
Opportunities Fund - Class A
Fidelity Advisor High Yield 1.000000 1.065207 2,276 1998
Fund - Class T
INVESCO Dynamics Fund 1.000000 1.172815 5,449 1998
Nationwide(R)Fund - Class D 20.697282 26.741341 904,019 1998
Nationwide(R)Money Market 3.003821 3.129626 2,277,564 1998
Fund*
Nationwide S&P 500(R)Index 1.000000 1.093909 4,693 1998
Fund - Class Y
Nationwide Separate Account 0.961325 0.962506 494,950 1998
Trust - Nationwide Small
Company Fund
Neuberger Berman Partners 1.000000 1.042174 1,093 1998
Trust
Oppenheimer Global Fund - 1.000000 1.106811 6,579 1998
Class A
</TABLE>
60
62 of 161
<PAGE> 61
<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>
Templeton Foreign Fund - 1.284158 1.210671 1.210671 1998
Class A
Warburg Pincus Emerging 1.000000 1.140526 8,854 1998
Growth Fund - Common Class
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
61
63 of 161
<PAGE> 62
Variable Account Annual Expense Fee of 0.50% of average net assets
<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: Growth 5.842997 7.922098 359,828 1998
American Century: Ultra 1.737833 2.317883 3,364,116 1998
The Bond Fund of America(SM), 2.332586 2.431945 268,515 1998
Inc.
Federated U.S. Government 1.301886 1.395671 281,752 1998
Securities Fund: 2-5 Years
- - Institutional Shares
Fidelity Capital & Income 4.654233 4.834839 15,722 1998
Fund
Fidelity Contrafund 1.935931 2.524114 6,920,209 1998
Fidelity Equity-Income Fund 6.900916 7.697797 2,032,139 1998
Fidelity Magellan(R)Fund 1.800499 2.391021 2,481,152 1998
Fidelity OTC Portfolio 1.829868 2.546479 554,256 1998
Fidelity Puritan(R)Fund 1.596539 1.845320 1,058,070 1998
The Investment Company of 2.277283 2.775312 1,244,473 1998
America(SM), Inc.
MAS Funds Fixed Income 1.335173 1.415024 100,650 1998
Portfolio
MFS(R)Growth Opportunities 9.012670 11.540626 63,546 1998
Fund - Class A
MFS(R)High Income Fund - 6.168371 6.179806 106,230 1998
Class A
</TABLE>
62
64 of 161
<PAGE> 63
<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>
Massachusetts Investors 15.968069 22.160876 22,289 1998
Growth Stock Fund - Class A
Nationwide(R)Growth Fund - 3.854877 4.728868 31,217 1998
Class D
Neuberger Berman Guardian 1.706116 1.731080 658,443 1998
Fund, Inc.
Putnam Investors Fund - 18.110411 24.330583 60,549 1998
Class A
Putnam Voyager Fund - 3.837109 4.718816 1,141,130 1998
Class A
SEI Index Funds - S&P 500 1.501834 1.910747 2,027,825 1998
Index Portfolio
Seligman Growth Fund, Inc. 12.541848 16.814429 24,055 1998
- - Class A
Short-Term Investments 1.222017 1.278022 86,239 1998
Trust - Treasury Portfolio
- - Institutional Class*
T. Rowe Price International 1.198954 1.380367 1,224,755 1998
Stock Fund(R)
</TABLE>
*The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
63
65 of 161
<PAGE> 64
Variable Account Annual Expense Fee of 0.45% of average net assets
<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>
LifeDesigns Series - The 1.000000 1.150582 211,746 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.108677 207,470 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.144281 114,698 1998
Moderate Portfolio
LifeDesigns Series - The 1.000000 1.141807 154,400 1998
Moderately Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.130236 55,915 1998
Moderately Conservative
Portfolio
Prestige Large Cap Growth 1.000000 1.139937 6,708 1998
Fund - Class Y
Prestige Large Cap Value 1.000000 1.049773 7,855 1998
Fund - Class Y
Prestige Small Cap Fund - 1.000000 1.090743 17,596 1998
Class Y
</TABLE>
64
66 of 161
<PAGE> 65
Variable Account Annual Expense Fee of 0.40% of average net assets
<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 & 1.000000 1.098171 636 1998
Growth - Investor Class
American Century: Growth 5.867425 7.987376 2,228,401 1998
American Century: 1.000000 1.084832 456,421 1998
International Discovery
Fund - Investor Class
American Century: Ultra 1.745098 2.336984 23,187,750 1998
The Bond Fund of America(SM), 2.342504 2.452190 861,657 1998
Inc.
Dreyfus Appreciation Fund, 1.000000 1.080700 7,474 1998
Inc.
The Dreyfus Third Century 3.532278 4.558760 1,100,730 1998
Fund, Inc.
Evergreen Income and Growth 2.432742 2.402138 242,926 1998
Fund
Federated Bond Fund - 1.000000 1.019222 170,453 1998
Class F
Federated U.S. Government 1.307377 1.406762 1,119,202 1998
Securities Fund: 2-5 Years
- - Institutional Shares
Fidelity Advisor Growth 1.000000 1.089873 930 1998
Opportunities Fund - Class A
Fidelity Capital & Income 4.673860 4.873259 53,798 1998
Fund
Fidelity Contrafund 1.944023 2.544916 21,126,009 1998
Fidelity Equity-Income Fund 6.929751 7.761233 7,558,249 1998
</TABLE>
65
67 of 161
<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>
Fidelity Magellan(R)Fund 1.812541 2.410721 7,449,476 1998
Fidelity OTC Portfolio 1.837520 2.567467 3,023,192 1998
Fidelity Puritan(R)Fund 1.603211 1.860527 2,399,715 1998
INVESCO Dynamics Fund 1.000000 1.173045 278,971 1998
The Investment Company of 2.286799 2.798178 3,259,397 1998
America(SM), Inc.
MAS Funds Fixed Income 1.340756 1.426689 616,144 1998
Portfolio
MFS(R)Growth Opportunities 9.050357 11.635755 203,691 1998
Fund - Class A
MFS(R)High Income Fund - 6.194384 6.228913 451,743 1998
Class A
Massachusetts Investors 16.034807 22.343460 120,267 1998
Growth Stock Fund - Class A
Morgan Stanley 1.000000 1.107260 10,064 1998
Institutional Fund, Inc. -
Equity Growth Portfolio -
Class B
Nationwide(R)Fund - Class D 20.697282 26.748259 481,772 1998
Nationwide(R)Growth Fund - 3.870989 4.767838 255,124 1998
Class D
Nationwide(R)Money Market 3.016489 3.154895 2,708,726 1998
Fund*
Nationwide S&P 500(R)Index 1.000000 1.094125 19,071 1998
Fund - Class Y
</TABLE>
66
68 of 161
<PAGE> 67
<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 Separate Account 0.961784 0.966626 454,960 1998
Trust - Nationwide Small
Company Fund
Neuberger Berman Guardian 1.713248 1.745353 4,117,644 1998
Fund, Inc.
Putnam Investors Fund - 18.186106 24.531046 684,364 1998
Class A
Putnam Voyager Fund - 3.853154 4.757715 7,057,963 1998
Class A
SEI Index Funds - S&P 500 1.508098 1.926474 9,208,478 1998
Index Portfolio
Seligman Growth Fund, Inc. 12.594278 16.952971 145,547 1998
- - Class A
Short-Term Investments 1.227171 1.288178 763,114 1998
Trust - Treasury Portfolio
- - Institutional Class**
T. Rowe Price International 1.203968 1.391746 4,818,444 1998
Stock Fund(R)
Templeton Foreign Fund - 1.284158 1.210984 1,884,614 1998
Class A
Warburg Pincus Emerging 1.000000 1.140750 224 1998
Growth Fund - Common Class
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
**The 7-day yield on the Short-Term Investment Trust - Treasury Portfolio -
Institutional Class as of December 31, 1998 was 2.47%.
67
69 of 161
<PAGE> 68
Variable Account Annual Expense Fee of 0.30% of average net assets
<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: Growth 5.867425 7.988751 207,682 1998
American Century: Ultra 1.745098 2.337386 1,622,498 1998
Dreyfus Appreciation Fund, 1.000000 1.080842 116 1998
Inc.
The Dreyfus Third Century 3.532278 4.559545 132,409 1998
Fund, Inc.
Fidelity Advisor Growth 1.000000 1.090017 6 1998
Opportunities Fund - Class A
Morgan Stanley 1.000000 1.107406 6 1998
Institutional Fund, Inc. -
Equity Growth Portfolio -
Class B
Nationwide(R)Fund - Class D 20.697282 26.752871 163,349 1998
Nationwide(R)Growth Fund - 3.870989 4.768660 72,274 1998
Class D
Nationwide(R)Money Market 3.003821 3.131607 289,513 1998
Fund*
Nationwide S&P 500(R)Index 1.000000 1.094268 81 1998
Fund - Class Y
Nationwide Separate Account 0.931325 0.962923 19,582 1998
Trust - Nationwide Small
Company Fund
Putnam Investors Fund - 18.186106 24.535266 141,978 1998
Class A
Putnam Voyager Fund - 3.853154 4.758533 935,379 1998
Class A
</TABLE>
68
70 of 161
<PAGE> 69
<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>
Templeton Foreign Fund - 1.284158 1.211193 572,528 1998
Class A
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
69
71 of 161
<PAGE> 70
Variable Account Annual Expense Fee of 0.25% of average net assets
<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 Dreyfus Third Century 3.532278 4.559937 340,211 1998
Fund, Inc.
Fidelity Advisor Growth 1.000000 1.090088 1,714 1998
Opportunities Fund - Class A
LifeDesigns Series - The 1.000000 1.150978 144,398 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.109060 85,045 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.144675 17,475 1998
Moderate Portfolio
LifeDesigns Series - The 1.000000 1.142200 138,659 1998
Moderately Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.130626 104,938 1998
Moderately Conservative
Portfolio
Nationwide(R)Fund - Class D 20.697282 26.755178 104,524 1998
Nationwide(R)Money Market 3.003821 3.132003 662,386 1998
Fund*
Nationwide S&P 500(R)Index 1.000000 1.094340 76,493 1998
Fund - Class Y
Nationwide Separate Account 0.961325 0.963006 84,982 1998
Trust - Nationwide Small
Company Fund
Prestige Small Cap Fund - 1.000000 1.091029 3,784 1998
Class Y
</TABLE>
70
72 of 161
<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>
Templeton Foreign Fund - 1.284158 1.211297 599,440 1998
Class A
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
71
73 of 161
<PAGE> 72
Variable Account Annual Expense Fee of 0.15% of average net assets
<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 & 1.000000 1.098531 51,660 1998
Growth
American Century: 1.000000 1.085187 25,538 1998
International Discovery
Fund - Investor Class
Dreyfus Appreciation Fund, 1.000000 1.081055 86,357 1998
Inc.
Dreyfus Premier Midcap 1.000000 1.134248 4,299 1998
Stock Fund - Class A
The Dreyfus Third Century 3.547042 4.602327 2,316,305 1998
Fund, Inc.
Federated Bond Fund - 1.000000 1.019557 19,138 1998
Class F
Fidelity Advisor Growth 1.000000 1.090231 38,722 1998
Opportunities Fund - Class A
Fidelity Advisor High Yield 1.000000 1.065933 55,862 1998
Fund - Class T
INVESCO Dynamics Fund 1.000000 1.173429 2,672 1998
INVESCO Total Return Fund 1.000000 1.024544 12,945 1998
LifeDesigns Series - The 1.000000 1.151176 1,783 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.142397 3,674 1998
Moderately Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.130821 1,110 1998
Moderately Conservative
Portfolio
</TABLE>
72
74 of 161
<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>
Morgan Stanley 1.000000 1.107624 2,580 1998
Institutional Fund, Inc. -
Equity Growth Portfolio -
Class B
Nationwide(R)Fund - Class D 20.783760 27.003819 1,044,190 1998
Nationwide(R)Money Market 3.003821 3.132794 3,344,001 1998
Fund*
Nationwide S&P 500(R)Index 1.000000 1.094484 25,400 1998
Fund - Class Y
Nationwide Separate Account 0.961325 0.963171 313,865 1998
Trust - Nationwide Small
Company Fund
Neuberger Berman Partners 1.000000 1.042722 10 1998
Trust
Oppenheimer Global Fund - 1.000000 1.1007392 1,884 1998
Class A
Templeton Foreign Fund - 1.289527 1.222569 4,225,950 1998
Class A
Warburg Pincus Emerging 1.000000 1.141124 2,964 1998
Growth Fund - Common Class
</TABLE>
*The 7-day yield on the Nationwide(R) Money Market Fund as of December 31, 1998
was 3.74%.
73
75 of 161
<PAGE> 74
Variable Account Annual Expense Fee of 0.10% of average net assets
<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>
LifeDesigns Series - The 1.000000 1.151275 2,524 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.109347 4,359 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.144971 9,964 1998
Moderate Portfolio
LifeDesigns Series - The 1.000000 1.142495 19,416 1998
Moderately Aggressive
Portfolio
</TABLE>
74
76 of 161
<PAGE> 75
Variable Account Annual Expense Fee of 0.00% of average net assets
<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>
LifeDesigns Series - The 1.000000 1.157296 691,326 1998
Aggressive Portfolio
LifeDesigns Series - The 1.000000 1.115144 114,219 1998
Conservative Portfolio
LifeDesigns Series - The 1.000000 1.150956 257,772 1998
Moderate Portfolio
LifeDesigns Series - The 1.000000 1.148468 401,494 1998
Moderately Aggressive
Portfolio
LifeDesigns Series - The 1.000000 1.136829 112,759 1998
Moderately Conservative
Portfolio
Prestige Balanced Fund - 1.000000 1.061978 25 1998
Class Y
Prestige International Fund 1.000000 1.093071 70
- - Class Y
Prestige Large Cap Growth 1.000000 1.140610 2,886 1998
Fund - Class Y
Prestige Large Cap Value 1.000000 1.050394 3,334 1998
Fund - Class Y
Prestige Small Cap Fund - 1.000000 1.091387 6,727 1998
Class Y
</TABLE>
75
77 of 161
<PAGE> 76
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
Page
General Information and History............................................ 1
Services................................................................... 1
Purchase of Securities Being Offered ...................................... 2
Underwriters .............................................................. 2
Calculation of Performance ................................................ 2
Annuity Payments........................................................... 3
Financial Statements....................................................... 4
GENERAL INFORMATION AND HISTORY
The variable account is a separate investment account of Nationwide Life
Insurance Company ("Nationwide"). Nationwide is a member of the Nationwide
Insurance Enterprise and all of Nationwide'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 (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
SERVICES
Nationwide 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
Nationwide. 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. Nationwide will maintain a record of all
and redemption for shares of the underlying mutual fund held in each
sub-account.
Nationwide, or affiliates of Nationwide, 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
Nationwide or an affiliate of Nationwide and provide for an annual fee based on
the average aggregate net assets of the variable account (and other separate
accounts of Nationwide or life insurance company subsidiaries of Nationwide)
invested in particular underlying mutual funds. These fees in no way affect the
net asset value of the underlying mutual funds or fees paid by the contract
owner.
1
78 of 161
<PAGE> 77
The audited financial statements and schedules have been included herein in
reliance upon the reports of KPMG 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 Nationwide'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
Nationwide's 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, 1998, 1997, and 1996, 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, 1998, the
Nationwide Money Market Fund and the Short-Term Investments Trust Treasury
Portfolio Sub-Accounts seven-day current yield were 3.74% and 2.47%
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, 1998 were 3.80% and 2.50% 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.
Nationwide may, from time to time, advertise several types of historical
performance of the sub-accounts. Nationwide may advertise for the sub-accounts
standardized "average annual total return," calculated in a
2
79 of 161
<PAGE> 78
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.
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" located in the
prospectus.
3
80 of 161
<PAGE> 79
<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, 1998, 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, 1998, 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, 1998, 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 LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NACo VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
Investments at market value:
<S> <C>
American Century: Income & Growth Fund (ACIncGro)
7,666 shares (cost $222,257) ................................................ $ 224,234
American Century: Twentieth Century Growth Fund (ACTCGro)
4,819,085 shares (cost $103,585,733) ........................................ 130,886,358
American Century: Twentieth Century International Discovery Fund (ACTCIntDis)
72,017 shares (cost $682,512) ............................................... 689,202
American Century: Twentieth Century Ultra Fund, Inc. (ACTCUltra)
10,009,668 shares (cost $290,981,220) ....................................... 334,423,013
The Bond Fund of America(SM), Inc. (BdFdAm)
1,355,433 shares (cost $18,764,008) ......................................... 18,447,438
Dreyfus Appreciation Fund, Inc. (DryApp)
5,845 shares (cost $240,679) ................................................ 245,898
Dreyfus Premier Midcap Stock - Class A (DryPreMCap)
2,330 shares (cost $38,209) ................................................. 38,725
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
5,875,634 shares (cost $56,761,577) ......................................... 72,152,786
Evergreen Income and Growth Fund - Class Y (EvIncGro)
158,919 shares (cost $3,193,795) ............................................ 3,272,139
Federated Investment Series Fund, Inc. - Federated Bond Fund - Class F (FedBdFd)
27,476 shares (cost $271,043) ............................................... 272,841
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional shares (FedUSGvt)
974,902 shares (cost $10,599,390) ........................................... 10,636,176
Fidelity Advisor Growth Opportunities Fund - Class A (FAGrOppA)
1,759 shares (cost $86,209) ................................................. 87,632
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
5,519 shares (cost $63,228) ................................................. 62,525
Fidelity Capital & Income Fund (FidCapInc)
271,197 shares (cost $2,367,079) ............................................ 2,516,706
Fidelity Contrafund (FidContr)
8,040,659 shares (cost $339,396,771) ........................................ 456,629,015
Fidelity Equity-Income Fund (FidEqInc)
7,047,250 shares (cost $270,775,809) ........................................ 391,474,750
Fidelity Magellan(R) Fund (FidMgln)
1,457,696 shares (cost $123,917,232) ........................................ 176,118,792
Fidelity OTC Portfolio (FidOTC)
1,083,811 shares (cost $38,858,625) ......................................... 47,286,663
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Fidelity Puritan(R) Fund (FidPurtn)
2,183,809 shares (cost $39,512,564) ................................................ 43,829,055
INVESCO Dynamics Fund, Inc. (InvDynam)
24,493 shares (cost $368,761) ...................................................... 385,763
INVESCO Total Return Fund (InvTotRet)
850 shares (cost $26,286) .......................................................... 26,658
The Investment Company of America(R) (InvCoAm)
3,041,641 shares (cost $74,214,610) ................................................ 94,503,793
MAS Funds - Fixed Income Portfolio (MASFIP)
512,896 shares (cost $6,174,377) ................................................... 6,006,013
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
1,098,943 shares (cost $12,874,249) ................................................ 17,484,183
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,205,236 shares (cost $14,732,939) ................................................ 19,223,519
MFS(R) High Income Fund - Class A (MFSHiInc)
3,690,342 shares (cost $20,151,550) ................................................ 18,894,551
Morgan Stanley Institutional Fund, Inc. - Equity Growth Portfolio - Class B (MSIEqGroB)
1,428 shares (cost $26,801) ........................................................ 27,112
NAAT - The Aggressive Portfolio (NAATAggr)
212,293 shares (cost $2,322,871) ................................................... 2,500,817
NAAT - The Conservative Portfolio (NAATCons)
89,987 shares (cost $944,355) ...................................................... 989,862
NAAT - The Moderate Portfolio (NAATMod)
189,041 shares (cost $2,038,029) ................................................... 2,185,318
NAAT - The Moderately Aggressive Portfolio (NAATModAgg)
198,957 shares (cost $2,166,039) ................................................... 2,305,906
NAAT - The Moderately Conservative Portfolio (NAATModCon)
86,470 shares (cost $923,730) ...................................................... 979,707
Nationwide(R) Fund - Class D (NWFund)
5,996,353 shares (cost $150,636,369) ............................................... 194,341,785
Nationwide(R) Growth Fund - Class D (NWGroFd)
501,969 shares (cost $6,200,568) ................................................... 8,603,741
Nationwide(R) Money Market Fund (NWMyMkt)
60,181,075 shares (cost $60,181,075) ............................................... 60,181,075
Nationwide(R) S&P 500 Index Fund - Class Y (NWIndxFdY)
29,093 shares (cost $305,679) ...................................................... 314,493
Nationwide(R) Separate Account Trust - Small Company Fund (NSATSmCo)
198,714 shares (cost $2,910,136) ................................................... 3,181,414
Neuberger & Berman Equity Funds(R) - Guardian Fund (NBGuard)
1,741,804 shares (cost $45,465,620) ................................................ 39,051,248
Neuberger & Berman Equity Trust(R) - Partners Trust (NBPartTr)
2,750 shares (cost $49,999) ........................................................ 49,695
NIF III - Prestige Balanced Fund - Class Y (PrBalY)
6,714 shares (cost $70,279) ........................................................ 71,841
NIF III - Prestige International Fund - Class Y (PrIntY)
2,350 shares (cost $24,791) ........................................................ 24,842
NIF III - Prestige Large Cap Growth Fund - Class Y (PrLgCapGrY)
7,102 shares (cost $79,586) ........................................................ 82,384
</TABLE>
(Continued)
<PAGE> 4
<TABLE>
<S> <C>
NIF III - Prestige Large Cap Value Fund - Class Y (PrLgCpValY)
3,625 shares (cost $37,949) ................................................... 38,285
NIF III - Prestige Small Cap Fund - Class Y (PrSmCapY)
6,971 shares (cost $74,060) ................................................... 75,773
Oppenheimer Global Fund - Class A (OppGlob)
302 shares (cost $12,646) ..................................................... 12,886
Putnam Investors Fund - Class A (PutInvFd)
8,310,714 shares (cost $93,295,135) ........................................... 123,164,777
Putnam Voyager Fund - Class A (PutVoyFd)
12,701,165 shares (cost $210,181,657) ......................................... 278,409,532
SEI Index Funds - S&P 500 Index Portfolio (SEI500lx)
3,270,190 shares (cost $100,724,575) .......................................... 125,706,107
Seligman Growth Fund, Inc. - Class A (SelGroFd)
1,905,771 shares (cost $11,915,689) ........................................... 14,140,822
Short-Term Investments Trust - Treasury Portfolio - Institutional Class (AIMTreas)
6,223,753 shares (cost $6,223,753) ............................................ 6,223,753
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
2,230,977 shares (cost $31,650,471) ........................................... 33,442,349
Templeton Foreign Fund - Class I (TemForFd)
4,964,060 shares (cost $50,508,076) ........................................... 41,648,461
Warburg Pincus Emerging Growth Fund - Common Shares (WPEmGro)
540 shares (cost $20,435) ..................................................... 21,568
--------------
Total investments .......................................................... 2,783,593,981
Accounts receivable ................................................................. 1,401,853
--------------
Total assets ............................................................... 2,784,995,834
ACCOUNTS PAYABLE ....................................................................... 95,803
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) ....................................................... $2,784,900,031
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Total ACIncGro
----- --------
1998 1997 1998 1997
---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. $ 22,484,700 21,526,606 444 --
Mortality and expense charges (note 2) (3,554,254) (8,687,459) -- --
Administration charges (note 2):
Tier I .......................... (1,559,810) (3,835,645) -- --
Tier II ......................... (515,929) (1,270,800) -- --
Tier III ........................ (265,349) (639,538) -- --
Tier IV ......................... (97,218) (235,537) -- --
Tier V .......................... (147,275) (354,719) -- --
Variable account fee (notes 2 and 5) .. (13,305,516) -- (81) --
--------------- --------------- --------------- ---
Net investment activity ............. 3,039,349 6,502,908 363 --
Proceeds from mutual fund shares sold . 392,315,249 390,188,601 26,345 --
Cost of mutual fund shares sold ....... (333,148,949) (330,761,963) (27,018) --
--------------- --------------- --------------- ---
Realized gain (loss) on investments ... 59,166,300 59,426,638 (673) --
Change in unrealized gain (loss)
on investments ...................... 270,062,812 133,294,095 1,976 --
--------------- --------------- --------------- ---
Net gain (loss) on investments ...... 329,229,112 192,720,733 1,303 --
--------------- --------------- --------------- ---
Reinvested capital gains .............. 171,173,889 158,561,197 5,502 --
--------------- --------------- --------------- ---
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 503,442,350 357,784,838 7,168 --
--------------- --------------- --------------- ---
Equity transactions:
Purchase payments received from
contract owners ..................... 514,486,655 428,935,376 37,805 --
Transfers between funds ............... -- -- 180,005 --
Redemptions ........................... (203,846,704) (222,355,417) (708) --
Adjustments to maintain reserves ...... 23,483 (104,195) -- --
--------------- --------------- --------------- ---
Net equity transactions ........... 310,663,434 206,475,764 217,102 --
Net change in contract owners' equity . 814,105,784 564,260,602 224,270 --
Contract owners' equity beginning
of period ........................... 1,970,794,247 1,406,533,645 -- --
--------------- --------------- --------------- ---
Contract owners' equity end of period . $ 2,784,900,031 1,970,794,247 224,270 --
=============== =============== =============== ===
</TABLE>
<TABLE>
<CAPTION>
ACTCGro ACTCIntDis
------- ----------
1998 1997 1998 1997
---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. -- -- -- --
Mortality and expense charges (note 2) $ (179,957) (597,743) -- --
Administration charges (note 2):
Tier I .......................... (70,783) (241,160) -- --
Tier II ......................... (32,079) (106,219) -- --
Tier III ........................ (13,379) (42,450) -- --
Tier IV ......................... (6,026) (19,525) -- --
Tier V .......................... (7,154) (23,235) -- --
Variable account fee (notes 2 and 5) .. (641,402) -- (135) --
-------------- --------- --------------- ---
Net investment activity ............. (950,780) 1,030,332) (135) --
Proceeds from mutual fund shares sold . 9,205,534 6,437,716 2,273,724 --
Cost of mutual fund shares sold ....... (7,522,277) 7,270,118) (2,261,430) --
-------------- --------- --------------- ---
Realized gain (loss) on investments ... 1,683,257 (832,402) 12,294 --
Change in unrealized gain (loss)
on investments ...................... 12,866,693 3,050,693 6,690 --
-------------- --------- --------------- ---
Net gain (loss) on investments ...... 14,549,950 2,218,291 18,984 --
-------------- --------- --------------- ---
Reinvested capital gains .............. 21,486,036 5,163,270 3,509 --
-------------- --------- --------------- ---
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 35,085,206 6,351,229 22,358 --
-------------- --------- --------------- ---
Equity transactions:
Purchase payments received from
contract owners ..................... 5,994,480 9,656,125 2,225 --
Transfers between funds ............... (4,507,553) 7,825,676) 664,695 --
Redemptions ........................... (8,736,631) 5,764,285) -- --
Adjustments to maintain reserves ...... 13,926 1,467 (6) --
-------------- --------- --------------- ---
Net equity transactions ........... (7,235,778) 3,932,369) 666,914 --
Net change in contract owners' equity . 27,849,428 7,581,140) 689,272 --
Contract owners' equity beginning
of period ........................... 103,038,301 0,619,441 -- --
-------------- --------- --------------- ---
Contract owners' equity end of period . $ 130,887,729 3,038,301 689,272 --
============== ========= =============== ===
</TABLE>
(Continued)
<PAGE> 6
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
ACTCUltra BdFdAm
--------- ------
1998 1997 1998 1997
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. $ -- 83,084 1,142,666 1,010,649
Mortality and expense charges (note 2) (392,873) (953,698) (26,239) (71,217)
Administration charges (note 2):
Tier I .......................... (166,590) (405,576) (11,627) (32,333)
Tier II ......................... (57,840) (141,718) (4,000) (10,968)
Tier III ........................ (26,042) (62,578) (2,008) (5,391)
Tier IV ......................... (11,622) (28,453) (734) (1,857)
Tier V .......................... (18,904) (45,144) (941) (2,386)
Variable account fee (notes 2 and 5) .. (1,538,264) -- (97,237) --
------------ ------------ ------------ ------------
Net investment activity ............. (2,212,135) (1,554,083) 999,880 886,497
Proceeds from mutual fund shares sold . 28,751,606 30,918,833 6,087,628 6,105,619
Cost of mutual fund shares sold ....... (18,930,198) (20,795,085) (6,005,142) (5,779,601)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ... 9,821,408 10,123,748 82,486 326,018
Change in unrealized gain (loss)
on investments ...................... 41,854,943 (17,363,508) (569,892) (75,230)
------------ ------------ ------------ ------------
Net gain (loss) on investments ...... 51,676,351 (7,239,760) (487,406) 250,788
------------ ------------ ------------ ------------
Reinvested capital gains .............. 28,290,273 44,171,059 175,242 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 77,754,489 35,377,216 687,716 1,137,285
------------ ------------ ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ..................... 63,214,714 53,715,959 2,990,754 2,197,440
Transfers between funds ............... (3,939,620) 3,392,831 1,549,434 (571,835)
Redemptions ........................... (21,108,615) (23,610,763) (1,649,497) (1,874,029)
Adjustments to maintain reserves ...... 18,989 (32,791) (1,180) (934)
------------ ------------ ------------ ------------
Net equity transactions ........... 38,185,468 33,465,236 2,889,511 (249,358)
Net change in contract owners' equity . 115,939,957 68,842,452 3,577,227 887,927
Contract owners' equity beginning
of period ........................... 218,492,461 149,650,009 14,869,833 13,981,906
------------ ------------ ------------ ------------
Contract owners' equity end of period . $334,432,418 218,492,461 18,447,060 14,869,833
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DryApp DryPreMCap
------ ----------
1998 1997 1998 1997
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. $ 1,129 -- -- --
Mortality and expense charges (note 2) -- -- -- --
Administration charges (note 2):
Tier I .......................... -- -- -- --
Tier II ......................... -- -- -- --
Tier III ........................ -- -- -- --
Tier IV ......................... -- -- -- --
Tier V .......................... -- -- -- --
Variable account fee (notes 2 and 5) .. (82) -- (1) --
------------ -- ------------ ---
Net investment activity ............. 1,047 --- (1) --
Proceeds from mutual fund shares sold . 15,886 -- 629 --
Cost of mutual fund shares sold ....... (16,044) -- (624) --
------------ -- ------------ ---
Realized gain (loss) on investments ... (158) --- 5 --
Change in unrealized gain (loss)
on investments ...................... 5,218 -- 516 --
------------ --- ------------ ---
Net gain (loss) on investments ...... 5,060 -- 521 --
------------ -- ------------ ---
Reinvested capital gains .............. 333 -- -- --
------------ --- ------------ ---
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 6,440 -- 520 --
------------ --- ------------ ---
Equity transactions:
Purchase payments received from
contract owners ..................... 8,602 -- 4,062 --
Transfers between funds ............... 231,592 -- 34,143 --
Redemptions ........................... (712) -- -- --
Adjustments to maintain reserves ...... 62 -- -- --
------------ --- ------------ ---
Net equity transactions ........... 239,544 -- 38,205 --
Net change in contract owners' equity . 245,984 -- 38,725 --
Contract owners' equity beginning
of period ........................... -- -- -- --
------------ --- ------------ ---
Contract owners' equity end of period . $ 245,984 -- 38,725 --
============ === ============ ===
</TABLE>
<PAGE> 7
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Dry3dCen EvIncGro FedBdFd
-------- -------- -------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends .................. $ -- 91,287 155,447 195,572 351 --
Mortality and expense charges (note 2) (94,256) (221,903) (6,617) (21,028) -- --
Administration charges (note 2):
Tier I .......................... (40,950) (97,392) (2,761) (9,235) -- --
Tier II ......................... (14,527) (34,054) (830) (2,503) -- --
Tier III ........................ (5,212) (11,626) (380) (1,203) -- --
Tier IV ......................... (3,161) (7,396) (272) (764) -- --
Tier V .......................... (4,202) (9,978) (359) (1,117) -- --
Variable account fee (notes 2 and 5) .. (326,513) -- (18,456) -- (39) --
----------- ----------- ----------- ----------- ----------- ---
Net investment activity ............. (488,821) (291,062) 125,772 159,722 312 --
Proceeds from mutual fund shares sold . 4,950,188 4,764,654 881,407 1,435,669 2,020 --
Cost of mutual fund shares sold ....... (3,505,619) (3,479,290) (748,521) (1,298,478) (2,007) --
----------- ----------- ----------- ----------- ----------- ---
Realized gain (loss) on investments ... 1,444,569 1,285,364 132,886 137,191 13 --
Change in unrealized gain (loss)
on investments ...................... 7,872,216 5,489,938 (596,560) 361,146 1,798 --
----------- ----------- ----------- ----------- ----------- ---
Net gain (loss) on investments ...... 9,316,785 6,775,302 (463,674) 498,337 1,811 --
----------- ----------- ----------- ----------- ----------- ---
Reinvested capital gains .............. 7,036,470 4,107,891 306,142 250,452 -- --
----------- ----------- ----------- ----------- ----------- ---
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 15,864,434 10,592,131 (31,760) 908,511 2,123 --
----------- ----------- ----------- ----------- ----------- ---
Equity transactions:
Purchase payments received from
contract owners ..................... 11,631,807 9,531,871 148,998 219,542 2,112 --
Transfers between funds ............... (2,330,389) 6,920,263 (441,510) (890,063) 268,603 --
Redemptions ........................... (5,586,763) (4,743,489) (446,480) (615,031) -- --
Adjustments to maintain reserves ...... 2,387 (2,888) (8) (227) (1) --
----------- ----------- ----------- ----------- ----------- ---
Net equity transactions ........... 3,717,042 11,705,757 (739,000) (1,285,779) 270,714 --
Net change in contract owners' equity . 19,581,476 22,297,888 (770,760) (377,268) 272,837 --
Contract owners' equity beginning
of period ........................... 52,572,713 30,274,825 4,042,905 4,420,173 -- --
----------- ----------- ----------- ----------- ----------- ---
Contract owners' equity end of period . $72,154,189 52,572,713 3,272,145 4,042,905 272,837 --
=========== =========== =========== =========== =========== ===
</TABLE>
<TABLE>
<CAPTION>
FedUSGvt
--------
1998 1997
---- ----
Investment activity:
<S> <C> <C>
Reinvested dividends .................. $ 332,531 209,493
Mortality and expense charges (note 2) (7,646) (18,574)
Administration charges (note 2):
Tier I .......................... (3,257) (7,959)
Tier II ......................... (1,064) (2,671)
Tier III ........................ (399) (799)
Tier IV ......................... (291) (688)
Tier V .......................... (392) (1,002)
Variable account fee (notes 2 and 5) .. (40,914) --
----------- -----------
Net investment activity ............. 278,568 177,800
Proceeds from mutual fund shares sold . 8,151,240 3,311,692
Cost of mutual fund shares sold ....... (8,018,807) (3,290,687)
----------- -----------
Realized gain (loss) on investments ... 132,433 21,005
Change in unrealized gain (loss)
on investments ...................... 3,827 34,443
----------- -----------
Net gain (loss) on investments ...... 136,260 55,448
----------- -----------
Reinvested capital gains .............. -- --
----------- -----------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 414,828 233,248
----------- -----------
Equity transactions:
Purchase payments received from
contract owners ..................... 1,472,004 845,763
Transfers between funds ............... 4,957,619 373,832
Redemptions ........................... (506,258) (638,843)
Adjustments to maintain reserves ...... (132) (213)
----------- -----------
Net equity transactions ........... 5,923,233 580,539
Net change in contract owners' equity . 6,338,061 813,787
Contract owners' equity beginning
of period ........................... 4,297,707 3,483,920
----------- -----------
Contract owners' equity end of period . $10,635,768 4,297,707
=========== ===========
</TABLE>
(Continued)
<PAGE> 8
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
FAGrOppA FAHiYld FidCapInc
-------- ------- ---------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends .................. $ 359 -- 1,437 -- 246,552 200,858
Mortality and expense charges (note 2) -- -- -- -- (4,504) (14,160)
Administration charges (note 2):
Tier I .......................... -- -- -- -- (1,630) (5,604)
Tier II ......................... -- -- -- -- (466) (1,301)
Tier III ........................ -- -- -- -- (651) (1,998)
Tier IV ......................... -- -- -- -- (216) (614)
Tier V .......................... -- -- -- -- (146) (434)
Variable account fee (notes 2 and 5) .. (9) -- (4) -- (13,938) --
------------ --- ------------ --- ------------ ------------
Net investment activity ............. 350 -- 1,433 -- 225,001 176,747
Proceeds from mutual fund shares sold . 44 -- -- -- 270,209 708,617
Cost of mutual fund shares sold ....... (47) -- -- -- (184,125) (510,739)
------------ --- ------------ --- ------------ ------------
Realized gain (loss) on investments ... (3) -- -- -- 86,084 197,878
Change in unrealized gain (loss)
on investments ...................... 1,423 -- (703) -- (271,370) (9,038)
------------ --- ------------ --- ------------ ------------
Net gain (loss) on investments ...... 1,420 -- (703) -- (185,286) 188,840
------------ --- ------------ --- ------------ ------------
Reinvested capital gains .............. 1,268 -- -- -- 67,370 --
------------ --- ------------ --- ------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 3,038 -- 730 -- 107,085 365,587
------------ --- ------------ --- ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ..................... 35,636 -- 40,397 -- -- 13
Transfers between funds ............... 48,957 -- 21,397 -- (164,193) (236,823)
Redemptions ........................... -- -- -- -- (84,204) (447,420)
Adjustments to maintain reserves ...... 2 -- (10) -- (323) (261)
------------ --- ------------ --- ------------ ------------
Net equity transactions ........... 84,595 -- 61,784 -- (248,720) (684,491)
Net change in contract owners' equity . 87,633 -- 62,514 -- (141,635) (318,904)
Contract owners' equity beginning
of period ........................... -- -- -- -- 2,658,020 2,976,924
------------ --- ------------ --- ------------ ------------
Contract owners' equity end of period . $ 87,633 -- 62,514 -- 2,516,385 2,658,020
============ === ============ === ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidContr
--------
1998 1997
---- ----
Investment activity:
<S> <C> <C>
Reinvested dividends .................. $ 2,236,508 2,195,540
Mortality and expense charges (note 2) (567,716) (1,359,850)
Administration charges (note 2):
Tier I .......................... (257,062) (616,290)
Tier II ......................... (84,899) (203,894)
Tier III ........................ (40,425) (95,933)
Tier IV ......................... (16,521) (39,669)
Tier V .......................... (20,187) (48,345)
Variable account fee (notes 2 and 5) .. (2,165,720) --
------------ ------------
Net investment activity ............. (916,022) (168,441)
Proceeds from mutual fund shares sold . 15,434,546 21,045,430
Cost of mutual fund shares sold ....... (9,424,899) (13,726,446)
------------ ------------
Realized gain (loss) on investments ... 6,009,647 7,318,984
Change in unrealized gain (loss)
on investments ...................... 66,478,467 19,495,166
------------ ------------
Net gain (loss) on investments ...... 72,488,114 26,814,150
------------ ------------
Reinvested capital gains .............. 31,423,956 27,727,162
------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 102,996,048 54,372,871
------------ ------------
Equity transactions:
Purchase payments received from
contract owners ..................... 79,879,267 80,513,062
Transfers between funds ............... (17,451,214) 17,826,645
Redemptions ........................... (29,789,009) (33,838,679)
Adjustments to maintain reserves ...... 12,693 (25,668)
------------ ------------
Net equity transactions ........... 32,651,737 64,475,360
Net change in contract owners' equity . 135,647,785 118,848,231
Contract owners' equity beginning
of period ........................... 320,987,870 202,139,639
------------ ------------
Contract owners' equity end of period . $456,635,655 320,987,870
============ ============
</TABLE>
<PAGE> 9
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
FidEqInc FidMgIn
-------- -------
1998 1997 1998 1997
---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. $ 5,838,731 6,194,440 930,422 1,505,116
Mortality and expense charges (note 2) (623,980) (1,565,778) (222,583) (556,391)
Administration charges (note 2):
Tier I .......................... (255,098) (659,522) (105,291) (265,730)
Tier II ......................... (88,544) (215,189) (32,343) (82,339)
Tier III ........................ (58,706) (143,887) (16,644) (40,641)
Tier IV ......................... (13,364) (32,619) (5,847) (14,355)
Tier V .......................... (29,581) (72,789) (6,842) (16,376)
Variable account fee (notes 2 and 5) .. (2,091,065) -- (847,662) --
------------ ------------ ------------ ------------
Net investment activity ............. 2,678,393 3,504,656 (306,790) 529,284
Proceeds from mutual fund shares sold . 26,824,126 28,097,646 9,672,893 12,485,988
Cost of mutual fund shares sold ....... (11,951,004) (13,468,143) (6,581,476) (9,950,443)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ... 14,873,122 14,629,503 3,091,417 2,535,545
Change in unrealized gain (loss)
on investments ...................... 6,919,838 46,925,897 32,004,034 15,085,951
------------ ------------ ------------ ------------
Net gain (loss) on investments ...... 21,792,960 61,555,400 35,095,451 17,621,496
------------ ------------ ------------ ------------
Reinvested capital gains .............. 16,288,417 13,064,496 7,068,356 6,362,186
------------ ------------ ------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 40,759,770 78,124,552 41,857,017 24,512,966
------------ ------------ ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ..................... 52,962,098 50,674,836 25,865,178 25,481,895
Transfers between funds ............... (28,286,291) 11,399,955 (3,113,052) (7,601,758)
Redemptions ........................... (27,397,650) (39,688,848) (12,944,049) (13,965,007)
Adjustments to maintain reserves ...... 29,492 (5,107) (71,487) (3,444)
------------ ------------ ------------ ------------
Net equity transactions ........... (2,692,351) 22,380,836 9,736,590 3,911,686
Net change in contract owners' equity . 38,067,419 100,505,388 51,593,607 28,424,652
Contract owners' equity beginning
of period ........................... 353,408,823 252,903,435 124,447,078 96,022,426
------------ ------------ ------------ ------------
Contract owners' equity end of period . $391,476,242 353,408,823 176,040,685 124,447,078
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidOTC FidPurtn
------ --------
1998 1997 1998 1997
---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C>
Reinvested dividends .................. $ -- -- 1,252,746 1,002,542
Mortality and expense charges (note 2) (56,312) (130,795) (56,845) (137,123)
Administration charges (note 2):
Tier I .......................... (23,953) (56,929) (27,997) (66,667)
Tier II ......................... (7,847) (17,458) (8,254) (21,034)
Tier III ........................ (3,832) (8,619) (3,757) (8,864)
Tier IV ......................... (1,682) (3,645) (1,311) (3,289)
Tier V .......................... (2,788) (6,672) (1,765) (4,128)
Variable account fee (notes 2 and 5) .. (210,461) -- (221,557) --
------------ ------------ ------------ ------------
Net investment activity ............. (306,875) (224,118) 931,260 761,437
Proceeds from mutual fund shares sold . 15,450,608 7,535,213 2,131,440 3,662,742
Cost of mutual fund shares sold ....... (13,562,267) (6,716,721) (1,598,513) (2,886,331)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ... 1,888,341 818,492 532,927 776,411
Change in unrealized gain (loss)
on investments ...................... 8,846,107 (488,087) 1,030,514 2,156,757
------------ ------------ ------------ ------------
Net gain (loss) on investments ...... 10,734,448 330,405 1,563,441 2,933,168
------------ ------------ ------------ ------------
Reinvested capital gains .............. 2,313,154 2,202,654 2,946,910 1,480,106
------------ ------------ ------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 12,740,727 2,308,941 5,441,611 5,174,711
------------ ------------ ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ..................... 10,449,632 11,403,571 9,462,437 8,122,684
Transfers between funds ............... (3,408,227) 7,515,284 103,927 359,606
Redemptions ........................... (3,999,975) (3,842,544) (2,850,985) (3,573,534)
Adjustments to maintain reserves ...... 966 (3,592) (192) (346)
------------ ------------ ------------ ------------
Net equity transactions ........... 3,042,396 15,072,719 6,715,187 4,908,410
Net change in contract owners' equity . 15,783,123 17,381,660 12,156,798 10,083,121
Contract owners' equity beginning
of period ........................... 31,504,325 14,122,665 31,672,502 21,589,381
------------ ------------ ------------ ------------
Contract owners' equity end of period . $ 47,287,448 31,504,325 43,829,300 31,672,502
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 10
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
InvDynam InvTotRet InvCoAm
-------- --------- -------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends .................. $ -- -- 18 -- 1,361,576 1,117,268
Mortality and expense charges (note 2) -- -- -- -- (127,492) (310,471)
Administration charges (note 2):
Tier I .......................... -- -- -- -- (61,970) (147,489)
Tier II ......................... -- -- -- -- (20,869) (56,789)
Tier III ........................ -- -- -- -- (8,660) (20,464)
Tier IV ......................... -- -- -- -- (2,452) (5,858)
Tier V .......................... -- -- -- -- (3,596) (8,057)
Variable account fee (notes 2 and 5) .. (95) -- (6) -- (480,021) --
----------- --- ----------- --- ----------- -----------
Net investment activity ............. (95) -- 12 -- 656,516 568,140
Proceeds from mutual fund shares sold . 1,301,233 -- 902 -- 5,236,900 4,672,687
Cost of mutual fund shares sold ....... (1,266,821) -- (922) -- (3,162,290) (2,891,566)
----------- --- ----------- --- ----------- -----------
Realized gain (loss) on investments ... 34,412 -- (20) -- 2,074,610 1,781,121
Change in unrealized gain (loss)
on investments ...................... 17,001 -- 372 -- 5,634,104 6,778,676
----------- --- ----------- --- ----------- -----------
Net gain (loss) on investments ...... 51,413 -- 352 -- 7,708,714 8,559,797
----------- --- ----------- --- ----------- -----------
Reinvested capital gains .............. 2,534 -- 169 -- 8,097,523 6,012,594
----------- --- ----------- --- ----------- -----------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 53,852 -- 533 -- 16,462,753 15,140,531
----------- --- ----------- --- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ..................... 10,168 -- 7,759 -- 14,349,438 14,055,579
Transfers between funds ............... 327,335 -- 18,364 -- (404,166) 2,266,399
Redemptions ........................... (5,593) -- -- -- (8,056,668) (7,025,850)
Adjustments to maintain reserves ...... (2) -- 3 -- 1,469 (636)
----------- --- ----------- --- ----------- -----------
Net equity transactions ........... 331,908 -- 26,126 -- 5,890,073 9,295,492
Net change in contract owners' equity . 385,760 -- 26,659 -- 22,352,826 24,436,023
Contract owners' equity beginning
of period ........................... -- -- -- -- 72,152,047 47,716,024
----------- --- ----------- --- ----------- -----------
Contract owners' equity end of period . $ 385,760 -- 26,659 -- 94,504,873 72,152,047
=========== === =========== === =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MASFIP
------
1998 1997
---- ----
Investment activity:
<S> <C> <C>
Reinvested dividends .................. $ 271,659 138,468
Mortality and expense charges (note 2) (5,072) (10,147)
Administration charges (note 2):
Tier I .......................... (2,754) (5,562)
Tier II ......................... (559) (1,154)
Tier III ........................ (163) (317)
Tier IV ......................... (129) (281)
Tier V .......................... (216) (387)
Variable account fee (notes 2 and 5) .. (26,138) --
----------- -----------
Net investment activity ............. 236,628 120,620
Proceeds from mutual fund shares sold . 1,963,455 1,286,155
Cost of mutual fund shares sold ....... (1,950,478) (1,260,770)
----------- -----------
Realized gain (loss) on investments ... 12,977 25,385
Change in unrealized gain (loss)
on investments ...................... (162,941) (5,429)
----------- -----------
Net gain (loss) on investments ...... (149,964) 19,956
----------- -----------
Reinvested capital gains .............. 144,946 35,341
----------- -----------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... $ 231,610 175,917
----------- -----------
Equity transactions:
Purchase payments received from
contract owners ..................... 1,773,192 796,916
Transfers between funds ............... 1,608,708 552,003
Redemptions ........................... (303,932) (388,815)
Adjustments to maintain reserves ...... 644 122
----------- -----------
Net equity transactions ........... 3,078,612 960,226
Net change in contract owners' equity . 3,310,222 1,136,143
Contract owners' equity beginning
of period ........................... 2,695,678 1,559,535
----------- -----------
Contract owners' equity end of period . $ 6,005,900 2,695,678
=========== ===========
</TABLE>
<PAGE> 11
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
MFSGrStk MFSGrOpp MFSHiInc
-------- -------- --------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Investment activity:
<S> <C> <C> <C> <C> <C> <C>
Reinvested dividends .................. $ 5,594 5,750 -- -- 1,505,064 1,110,356
Mortality and expense charges (note 2) (23,366) (60,114) (28,712) (81,246) (27,020) (64,630)
Administration charges (note 2):
Tier I .......................... (9,627) (25,523) (12,308) (36,299) (11,010) (27,160)
Tier II ......................... (3,392) (8,400) (4,337) (11,776) (3,623) (8,510)
Tier III ........................ (2,067) (5,187) (2,562) (6,917) (2,066) (4,958)
Tier IV ......................... (592) (1,546) (769) (2,083) (722) (1,712)
Tier V .......................... (1,051) (2,624) (1,026) (2,838) (1,503) (3,381)
Variable account fee (notes 2 and 5) .. (83,926) -- (98,246) -- (98,576) --
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity ............. (118,427) (97,644) (147,960) (141,159) 1,360,544 1,000,005
Proceeds from mutual fund shares sold . 1,175,245 4,936,847 1,304,849 2,859,690 10,536,849 11,436,316
Cost of mutual fund shares sold ....... (920,701) (4,951,950) (897,706) (2,016,264) (10,475,518) (10,796,798)
----------- ----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ... 254,544 (15,103) 407,143 843,426 61,331 639,518
Change in unrealized gain (loss)
on investments ...................... 3,371,434 2,506,771 1,993,542 547,661 (1,449,403) (181,828)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments ...... 3,625,978 2,491,668 2,400,685 1,391,087 (1,388,072) 457,690
----------- ----------- ----------- ----------- ----------- -----------
Reinvested capital gains .............. 1,391,598 1,959,714 2,047,635 1,975,637 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 4,899,149 4,353,738 4,300,360 3,225,565 (27,528) 1,457,695
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ..................... 1,282,347 1,918,046 247,604 289,620 4,666,502 2,868,284
Transfers between funds ............... (398,976) (3,240,441) (265,357) (778,278) 1,600,902 346,011
Redemptions ........................... (1,113,949) (1,447,659) (1,018,457) (2,103,012) (1,732,097) (1,335,492)
Adjustments to maintain reserves ...... 331 1,016 152 (13,012) (6,328) 1,475
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ........... (230,247) (2,769,038) (1,036,058) (2,604,682) 4,528,979 1,880,278
Net change in contract owners' equity . 4,668,902 1,584,700 3,264,302 620,883 4,501,451 3,337,973
Contract owners' equity beginning
of period ........................... 12,815,513 11,230,813 15,959,245 15,338,362 14,387,298 11,049,325
----------- ----------- ----------- ----------- ----------- -----------
Contract owners' equity end of period . $17,484,415 12,815,513 19,223,547 15,959,245 18,888,749 14,387,298
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MSIEqGroB
---------
1998 1997
---- ----
Investment activity:
<S> <C> <C>
Reinvested dividends .................. $ 17 --
Mortality and expense charges (note 2) -- --
Administration charges (note 2):
Tier I .......................... -- --
Tier II ......................... -- --
Tier III ........................ -- --
Tier IV ......................... -- --
Tier V .......................... -- --
Variable account fee (notes 2 and 5) .. (6) --
----------- ---
Net investment activity ............. 11 --
Proceeds from mutual fund shares sold . 748 --
Cost of mutual fund shares sold ....... (742) --
----------- ---
Realized gain (loss) on investments ... 6 --
Change in unrealized gain (loss)
on investments ...................... 311 --
----------- ---
Net gain (loss) on investments ...... 317 --
----------- ---
Reinvested capital gains .............. 555 --
----------- ---
Net increase (decrease) in contract
owners' equity resulting from
operations ...................... 883 --
----------- ---
Equity transactions:
Purchase payments received from
contract owners ..................... 2,067 --
Transfers between funds ............... 24,165 --
Redemptions ........................... -- --
Adjustments to maintain reserves ...... 10 --
----------- ---
Net equity transactions ........... 26,242 --
Net change in contract owners' equity . 27,125 --
Contract owners' equity beginning
of period ........................... -- --
----------- ---
Contract owners' equity end of period . $ 27,125 --
=========== ===
</TABLE>
(Continued)
<PAGE> 12
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
NAATAggr NAATCons
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 205 - 2,928 -
Mortality and expense charges (note 2) ..................... (473) - (21) -
Administration charges (note 2):
Tier I ............................................... (175) - (2) -
Tier II .............................................. (97) - (1) -
Tier III ............................................. (7) - - -
Tier IV .............................................. (6) - - -
Tier V ............................................... (39) - (5) -
Variable account fee (notes 2 and 5) ....................... (7,076) - (1,737) -
---------- -------- ------- --------
Net investment activity .................................. (7,668) - 1,162 -
Proceeds from mutual fund shares sold ...................... 320,989 - 507,051 -
Cost of mutual fund shares sold ............................ (312,762) - (505,316) -
---------- -------- ------- --------
Realized gain (loss) on investments ........................ 8,227 - 1,735 -
Change in unrealized gain (loss)
on investments ........................................... 177,946 - 45,507 -
---------- -------- ------- --------
Net gain (loss) on investments ........................... 186,173 - 47,242 -
---------- -------- ------- --------
Reinvested capital gains ................................... - - - -
---------- -------- ------- --------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................... 178,505 - 48,404 -
---------- -------- ------- --------
Equity transactions:
Purchase payments received from
contract owners .......................................... 1,743,904 - 305,707 -
Transfers between funds .................................... 636,159 - 694,651 -
Redemptions ................................................ (61,114) - (58,899) -
Adjustments to maintain reserves ........................... 3,646 - (26) -
---------- -------- ------- --------
Net equity transactions ................................ 2,322,595 - 941,433 -
Net change in contract owners' equity ...................... 2,501,100 - 989,837 -
Contract owners' equity beginning
of period ................................................ - - - -
---------- -------- ------- --------
Contract owners' equity end of period ...................... $2,501,100 - 989,837 -
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
NAATMod NAATModAgg
------- ----------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 7,009 - 6,488 -
Mortality and expense charges (note 2) ..................... (144) - (519) -
Administration charges (note 2):
Tier I ............................................... (89) - (353) -
Tier II .............................................. (22) - (42) -
Tier III ............................................. (2) - (31) -
Tier IV .............................................. (1) - (1) -
Tier V ............................................... (3) - (6) -
Variable account fee (notes 2 and 5) ....................... (5,378) - (6,720) -
--------- -------- --------- --------
Net investment activity .................................. 1,370 - (1,184) -
Proceeds from mutual fund shares sold ...................... 223,358 - 269,868 -
Cost of mutual fund shares sold ............................ (231,762) - (272,261) -
--------- -------- --------- --------
Realized gain (loss) on investments ........................ (8,404) - (2,393) -
Change in unrealized gain (loss)
on investments ........................................... 147,289 - 139,867 -
--------- ---------
Net gain (loss) on investments ........................... 138,885 - 137,474 -
--------- -------- --------- --------
Reinvested capital gains ................................... - - - -
--------- -------- --------- --------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................... 140,255 - 136,290 -
--------- -------- --------- --------
Equity transactions:
Purchase payments received from
contract owners .......................................... 1,468,718 - 1,713,467 -
Transfers between funds .................................... 740,919 - 560,385 -
Redemptions ................................................ (164,560) - (104,241) -
Adjustments to maintain reserves ........................... 69 - 49 -
--------- -------- --------- --------
Net equity transactions ................................ 2,045,146 - 2,169,660 -
Net change in contract owners' equity ...................... 2,185,401 - 2,305,950 -
Contract owners' equity beginning
of period ................................................ - - - -
--------- -------- --------- --------
Contract owners' equity end of period ...................... $2,185,401 - 2,305,950 -
========= ======== ========= --------
</TABLE>
<PAGE> 13
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
NAATModCon NWFund
---------- ------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 6,383 - 1,347,907 858,226
Mortality and expense charges (note 2) ..................... (80) - (181,761) (330,998)
Administration charges (note 2):
Tier I ............................................... (32) - (81,359) (148,673)
Tier II .............................................. (22) - (24,501) (47,277)
Tier III ............................................. (7) - (13,841) (25,296)
Tier IV .............................................. - - (5,294) (9,148)
Tier V ............................................... (1) - (7,330) (12,503)
Variable account fee (notes 2 and 5) ....................... (3,025) - (809,923) -
---------- ------- ----------- ----------
Net investment activity .................................. 3,216 - 223,898 284,331
Proceeds from mutual fund shares sold ...................... 521,818 - 7,999,054 6,266,837
Cost of mutual fund shares sold ............................ (530,663) - (4,247,844) (3,680,205)
---------- ------- ----------- ----------
Realized gain (loss) on investments ........................ (8,845) - 3,751,210 2,586,632
Change in unrealized gain (loss)
on investments ........................................... 55,977 - 22,649,562 13,332,389
---------- ------- ----------- ----------
Net gain (loss) on investments ........................... 47,132 - 26,400,772 15,919,021
---------- ------- ----------- ----------
Reinvested capital gains ................................... - - 7,747,144 4,357,194
---------- ------- ----------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................... 50,348 - 34,371,814 20,560,546
---------- ------- ----------- ----------
Equity transactions:
Purchase payments received from
contract owners .......................................... 388,620 - 52,495,182 17,504,981
Transfers between funds .................................... 570,000 - 33,595,689 15,259,707
Redemptions ................................................ (29,257) - (15,086,070) (8,674,178)
Adjustments to maintain reserves ........................... 42 - 12,173 (2,327)
---------- ------- ----------- ----------
Net equity transactions ................................ 929,405 - 71,016,974 24,088,183
Net change in contract owners' equity ...................... 979,753 - 105,388,788 44,648,729
Contract owners' equity beginning
of period ................................................ - - 89,106,304 44,457,575
---------- ------- ----------- ----------
Contract owners' equity end of period ...................... $ 979,753 - 194,495,092 89,106,304
========== ======= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
NWGroFd NWMyMkt
------- -------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 10,180 60,952 2,595,204 2,538,526
Mortality and expense charges (note 2) ..................... (13,561) (38,660) (81,562) (254,376)
Administration charges (note 2):
Tier I ............................................... (5,900) (17,881) (30,154) (95,174)
Tier II .............................................. (2,556) (6,779) (9,901) (27,102)
Tier III ............................................. (869) (2,338) (5,455) (17,915)
Tier IV .............................................. (216) (622) (3,463) (10,690)
Tier V ............................................... (547) (1,460) (5,380) (17,451)
Variable account fee (notes 2 and 5) ....................... (45,450) - (276,482) -
--------- --------- ---------- ----------
Net investment activity .................................. (58,919) (6,788) 2,182,807 2,115,818
Proceeds from mutual fund shares sold ...................... 954,882 1,515,017 64,733,660 65,472,045
Cost of mutual fund shares sold ............................ (616,307) (992,381) (64,733,660) (65,472,045)
--------- --------- ---------- ----------
Realized gain (loss) on investments ........................ 338,575 522,636 - -
Change in unrealized gain (loss)
on investments ........................................... 942,443 283,755 - -
--------- --------- ---------- ----------
Net gain (loss) on investments ........................... 1,281,018 806,391 - -
--------- --------- ---------- ----------
Reinvested capital gains ................................... 443,703 928,742 - -
--------- --------- ---------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................... 1,665,802 1,728,345 2,182,807 2,115,818
--------- --------- ---------- ----------
Equity transactions:
Purchase payments received from
contract owners .......................................... 344,800 423,584 8,935,086 10,477,258
Transfers between funds .................................... (524,581) (580,789) 15,995,607 (10,384,252)
Redemptions ................................................ (551,408) (1,098,214) (10,347,103) (8,399,390)
Adjustments to maintain reserves ........................... 93 (35) 4,712 (686)
--------- --------- ---------- ----------
Net equity transactions ................................ (731,096) (1,255,454) 14,588,302 (8,307,070)
Net change in contract owners' equity ...................... 934,706 472,891 16,771,109 (6,191,252)
Contract owners' equity beginning
of period ................................................ 7,669,126 7,196,235 44,623,765 50,815,017
--------- --------- ---------- ----------
Contract owners' equity end of period ...................... $8,603,832 7,669,126 61,394,874 44,623,765
========= ========= ========== ==========
</TABLE>
(Continued)
<PAGE> 14
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
NWIndxFdY NSATSmCo
--------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ 775 - - -
Mortality and expense charges (note 2) .................... - - (1,123) -
Administration charges (note 2):
Tier I .............................................. - - (449) -
Tier II ............................................. - - (280) -
Tier III ............................................ - - (45) -
Tier IV ............................................. - - (26) -
Tier V .............................................. - - (41) -
Variable account fee (notes 2 and 5) ...................... (144) - (10,968) -
---------- ------- --------- -------
Net investment activity ................................. 631 - (12,932) -
Proceeds from mutual fund shares sold ..................... 203,591 - 4,312,495 -
Cost of mutual fund shares sold ........................... (200,931) - (4,520,280) -
---------- ------- --------- -------
Realized gain (loss) on investments ....................... 2,660 - (207,785) -
Change in unrealized gain (loss)
on investments .......................................... 8,813 - 271,278 -
---------- ------- --------- -------
Net gain (loss) on investments .......................... 11,473 - 63,493 -
---------- ------- --------- -------
Reinvested capital gains .................................. - - - -
---------- ------- --------- -------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 12,104 - 50,561 -
---------- ------- --------- -------
Equity transactions:
Purchase payments received from
contract owners ......................................... 20,822 - 1,991,575 -
Transfers between funds ................................... 281,573 - 1,247,455 -
Redemptions ............................................... (10) - (111,457) -
Adjustments to maintain reserves .......................... (1) - 762 -
---------- ------- --------- -------
Net equity transactions ............................... 302,384 - 3,128,335 -
Net change in contract owners' equity ..................... 314,488 - 3,178,896 -
Contract owners' equity beginning
of period ............................................... - - - -
---------- ------- --------- -------
Contract owners' equity end of period ..................... $ 314,488 - 3,178,896 -
========== ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
NBGuard NBPartTr
------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ 226,684 219,518 - -
Mortality and expense charges (note 2) .................... (71,447) (170,400) - -
Administration charges (note 2):
Tier I .............................................. (30,092) (72,318) - -
Tier II ............................................. (10,176) (24,787) - -
Tier III ............................................ (4,330) (10,868) - -
Tier IV ............................................. (2,006) (4,336) - -
Tier V .............................................. (3,918) (9,033) - -
Variable account fee (notes 2 and 5) ...................... (216,169) - (40) -
---------- ---------- ------ -------
Net investment activity ................................. (111,454) (72,224) (40) -
Proceeds from mutual fund shares sold ..................... 8,180,376 4,722,451 22,832 -
Cost of mutual fund shares sold ........................... (7,161,975) (3,617,011) (23,331) -
---------- ---------- ------ -------
Realized gain (loss) on investments ....................... 1,018,401 1,105,440 (499) -
Change in unrealized gain (loss)
on investments .......................................... (6,007,812) (1,847,382) (304) -
---------- ---------- ------ -------
Net gain (loss) on investments .......................... (4,989,411) (741,942) (803) -
---------- ---------- ------ -------
Reinvested capital gains .................................. 5,801,836 5,284,078 1,489 -
---------- ---------- ------ -------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 700,971 4,469,912 646 -
---------- ---------- ------ -------
Equity transactions:
Purchase payments received from
contract owners ......................................... 12,761,883 14,909,263 2,516 -
Transfers between funds ................................... (10,226,488) 3,648,156 46,543 -
Redemptions ............................................... (4,244,239) (4,870,821) (11) -
Adjustments to maintain reserves .......................... 586 (7,439) 34 -
---------- ---------- ------ -------
Net equity transactions ............................... (1,708,258) 13,679,159 49,082 -
Net change in contract owners' equity ..................... (1,007,287) 18,149,071 49,728 -
Contract owners' equity beginning
of period ............................................... 40,059,033 21,909,962 - -
---------- ---------- ------ -------
Contract owners' equity end of period ..................... $39,051,746 40,059,033 49,728 -
========== ========== ====== =======
</TABLE>
<PAGE> 15
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
PrBalY PrIntY
------ ------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ 237 - - -
Mortality and expense charges (note 2) .................... - - - -
Administration charges (note 2):
Tier I .............................................. - - - -
Tier II ............................................. - - - -
Tier III ............................................ - - - -
Tier IV ............................................. - - - -
Tier V .............................................. - - - -
Variable account fee (notes 2 and 5) ...................... (51) - (1) -
---------- ------- ------ ------
Net investment activity ................................. 186 - (1) -
Proceeds from mutual fund shares sold ..................... 1,152 - 5,631 -
Cost of mutual fund shares sold ........................... (1,165) - (5,607) -
---------- ------- ------ ------
Realized gain (loss) on investments ....................... (13) - 24 -
Change in unrealized gain (loss)
on investments .......................................... 1,562 - 51 -
---------- ------- ------ ------
Net gain (loss) on investments .......................... 1,549 - 75 -
---------- ------- ------ ------
Reinvested capital gains .................................. - - - -
---------- ------- ------ ------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 1,735 - 74 -
---------- ------- ------ ------
Equity transactions:
Purchase payments received from
contract owners ......................................... 1,222 - 1,775 -
Transfers between funds ................................... 68,896 - 23,003 -
Redemptions ............................................... - - (10) -
Adjustments to maintain reserves .......................... - - 8 -
---------- ------- ------ ------
Net equity transactions ............................... 70,118 - 24,776 -
Net change in contract owners' equity ..................... 71,853 - 24,850 -
Contract owners' equity beginning
of period ............................................... - - - -
---------- ------- ------ ------
Contract owners' equity end of period ..................... $ 71,853 - 24,850 -
========== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
PrLgCapGrY PrLgCpValY
---------- ----------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ - - 9 -
Mortality and expense charges (note 2) .................... - - - -
Administration charges (note 2):
Tier I .............................................. - - - -
Tier II ............................................. - - - -
Tier III ............................................ - - - -
Tier IV ............................................. - - - -
Tier V .............................................. - - - -
Variable account fee (notes 2 and 5) ...................... (20) - (1) -
------ ------ ------ ------
Net investment activity ................................. (20) - 8 -
Proceeds from mutual fund shares sold ..................... 791 - - -
Cost of mutual fund shares sold ........................... (780) - - -
------ ------ ------ ------
Realized gain (loss) on investments ....................... 11 - - -
Change in unrealized gain (loss)
on investments .......................................... 2,799 - 336 -
------ ------ ------ ------
Net gain (loss) on investments .......................... 2,810 - 336 -
------ ------ ------ ------
Reinvested capital gains .................................. - - - -
------ ------ ------ ------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 2,790 - 344 -
------ ------ ------ ------
Equity transactions:
Purchase payments received from
contract owners ......................................... 3,245 - 2,581 -
Transfers between funds ................................... 76,348 - 35,362 -
Redemptions ............................................... - - - -
Adjustments to maintain reserves .......................... 1 - (2) -
------ ------ ------ ------
Net equity transactions ............................... 79,594 - 37,941 -
Net change in contract owners' equity ..................... 82,384 - 38,285 -
Contract owners' equity beginning
of period ............................................... - - - -
------ ------ ------ ------
Contract owners' equity end of period ..................... $82,384 - 38,285 -
====== ====== ====== ======
</TABLE>
(Continued)
<PAGE> 16
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
PrSmCapY OppGlob
-------- -------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ 20 - 2 -
Mortality and expense charges (note 2) .................... - - - -
Administration charges (note 2):
Tier I .............................................. - - - -
Tier II ............................................. - - - -
Tier III ............................................ - - - -
Tier IV ............................................. - - - -
Tier V .............................................. - - - -
Variable account fee (notes 2 and 5) ...................... (8) - (5) -
---------- ------- ------ -------
Net investment activity ................................. 12 - (3) -
Proceeds from mutual fund shares sold ..................... 18,993 - 43,412 -
Cost of mutual fund shares sold ........................... (18,520) - (43,036) -
---------- ------- ------ -------
Realized gain (loss) on investments ....................... 473 - 376 -
Change in unrealized gain (loss)
on investments .......................................... 1,713 - 240 -
---------- ------- ------ -------
Net gain (loss) on investments .......................... 2,186 - 616 -
---------- ------- ------ -------
Reinvested capital gains .................................. - - 16 -
---------- ------- ------ -------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 2,198 - 629 -
---------- ------- ------ -------
Equity transactions:
Purchase payments received from
contract owners ......................................... 5,868 - 457 -
Transfers between funds ................................... 66,889 - 11,799 -
Redemptions ............................................... - - - -
Adjustments to maintain reserves .......................... 807 - - -
---------- ------- ------ -------
Net equity transactions ............................... 73,564 - 12,256 -
Net change in contract owners' equity ..................... 75,762 - 12,885 -
Contract owners' equity beginning
of period ............................................... - - - -
---------- ------- ------ -------
Contract owners' equity end of period ..................... $ 75,762 - 12,885 -
========== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
PutInvFd PutVoyFd
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................................... $ - 201,337 - -
Mortality and expense charges (note 2) .................... (115,931) (245,470) (360,379) (845,606)
Administration charges (note 2):
Tier I .............................................. (58,129) (128,526) (166,907) (392,409)
Tier II ............................................. (13,427) (26,541) (51,949) (122,438)
Tier III ............................................ (8,862) (18,768) (23,873) (56,223)
Tier IV ............................................. (2,260) (4,493) (10,379) (24,210)
Tier V .............................................. (4,242) (8,093) (13,276) (30,696)
Variable account fee (notes 2 and 5) ...................... (541,453) - (1,329,097) -
----------- ---------- ----------- -----------
Net investment activity ................................. (744,304) (230,554) (1,955,860) (1,471,582)
Proceeds from mutual fund shares sold ..................... 10,353,759 7,194,124 9,123,281 13,936,317
Cost of mutual fund shares sold ........................... (6,878,135) (5,511,306) (4,595,683) (7,581,337)
----------- ---------- ----------- -----------
Realized gain (loss) on investments ....................... 3,475,624 1,682,818 4,527,598 6,354,980
Change in unrealized gain (loss)
on investments .......................................... 20,401,849 7,106,597 28,840,575 21,628,132
----------- ---------- ----------- -----------
Net gain (loss) on investments .......................... 23,877,473 8,789,415 33,368,173 27,983,112
----------- ---------- ----------- -----------
Reinvested capital gains .................................. 3,061,748 5,186,816 18,635,623 11,805,197
----------- ---------- ----------- -----------
Net increase (decrease) in contract
owners' equity resulting from
operations .......................................... 26,194,917 13,745,677 50,047,936 38,316,727
----------- ---------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ......................................... 25,610,793 9,952,027 54,734,164 49,543,414
Transfers between funds ................................... 17,906,156 6,647,199 (9,047,899) (5,787,505)
Redemptions ............................................... (6,468,507) (6,224,509) (17,706,573) (18,823,850)
Adjustments to maintain reserves .......................... 2,712 (299) (5,847) (3,442)
----------- ---------- ----------- -----------
Net equity transactions ............................... 37,051,154 10,374,418 27,973,845 24,928,617
Net change in contract owners' equity ..................... 63,246,071 24,120,095 78,021,781 63,245,344
Contract owners' equity beginning
of period ............................................... 59,923,257 35,803,162 200,390,725 137,145,381
----------- ---------- ----------- -----------
Contract owners' equity end of period ..................... $123,169,328 59,923,257 278,412,506 200,390,725
=========== ========== =========== ===========
</TABLE>
<PAGE> 17
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
SEI500Ix SelGroFd
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ 1,115,872 496,400 19,069 -
Mortality and expense charges (note 2) .................. (118,601) (180,116) (17,703) (47,926)
Administration charges (note 2):
Tier I ............................................ (54,008) (81,570) (7,977) (22,236)
Tier II ........................................... (14,709) (23,893) (2,228) (5,696)
Tier III .......................................... (9,909) (14,809) (1,141) (2,991)
Tier IV ........................................... (3,207) (4,741) (500) (1,383)
Tier V ............................................ (4,702) (6,925) (871) (2,297)
Variable account fee (notes 2 and 5) .................... (559,451) - (65,691) -
------------ ---------- ---------- ---------
Net investment activity ............................... 351,285 184,346 (77,042) (82,529)
Proceeds from mutual fund shares sold ................... 8,951,655 6,510,687 2,458,366 2,225,057
Cost of mutual fund shares sold ......................... (6,238,921) (4,821,399) (1,726,231) (1,924,254)
------------ ---------- ---------- ---------
Realized gain (loss) on investments ..................... 2,712,734 1,689,288 732,135 300,803
Change in unrealized gain (loss)
on investments ........................................ 17,933,741 6,582,190 1,539,014 129,162
------------ ---------- ---------- ---------
Net gain (loss) on investments ........................ 20,646,475 8,271,478 2,271,149 429,965
------------ ---------- ---------- ---------
Reinvested capital gains ................................ 1,080,072 382,784 1,235,654 1,117,389
------------ ---------- ---------- ---------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................ 22,077,832 8,838,608 3,429,761 1,464,825
------------ ---------- ---------- ---------
Equity transactions:
Purchase payments received from
contract owners ....................................... 42,935,941 25,239,383 1,956,041 1,994,573
Transfers between funds ................................. 13,539,167 21,078,872 185,492 (842,537)
Redemptions ............................................. (10,807,421) (7,775,480) (1,137,875) (1,342,748)
Adjustments to maintain reserves ........................ 7,989 (8,585) 593 (659)
------------ ---------- ---------- ---------
Net equity transactions ............................. 45,675,676 38,534,190 1,004,251 (191,371)
Net change in contract owners' equity ................... 67,753,508 47,372,798 4,434,012 1,273,454
Contract owners' equity beginning
of period ............................................. 57,955,034 10,582,236 9,706,959 8,433,505
------------ ---------- ---------- ---------
Contract owners' equity end of period ................... $125,708,542 57,955,034 14,140,971 9,706,959
============ ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
AIMTreas TRIntStk
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ 262,395 217,515 473,012 404,000
Mortality and expense charges (note 2) .................. (7,334) (20,246) (49,478) (150,968)
Administration charges (note 2):
Tier I ............................................ (2,250) (6,730) (20,181) (63,120)
Tier II ........................................... (591) (1,889) (6,757) (21,402)
Tier III .......................................... (618) (1,303) (3,664) (11,121)
Tier IV ........................................... (880) (2,261) (1,371) (3,996)
Tier V ............................................ (260) (776) (2,722) (7,667)
Variable account fee (notes 2 and 5) .................... (27,489) - (167,284) -
--------- --------- ---------- ----------
Net investment activity ............................... 222,973 184,310 221,555 145,726
Proceeds from mutual fund shares sold ................... 46,105,295 22,350,432 62,175,381 29,556,434
Cost of mutual fund shares sold ......................... (46,105,295) (22,350,432) (62,694,538) (26,380,399)
--------- --------- ---------- ----------
Realized gain (loss) on investments ..................... - - (519,157) 3,176,035
Change in unrealized gain (loss)
on investments ........................................ - - 4,166,469 (3,819,017)
--------- --------- ---------- ----------
Net gain (loss) on investments ........................ - - 3,647,312 (642,982)
--------- --------- ---------- ----------
Reinvested capital gains ................................ - - 752,519 1,111,001
--------- --------- ---------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................ 222,973 184,310 4,621,386 613,745
--------- --------- ---------- ----------
Equity transactions:
Purchase payments received from
contract owners ....................................... 969,868 976,012 7,432,534 10,320,079
Transfers between funds ................................. 4,082,704 1,160,637 (4,653,084) (2,910,875)
Redemptions ............................................. (3,214,916) (847,759) (2,634,045) (4,778,319)
Adjustments to maintain reserves ........................ (977) 2,892 (2,418) 3,678
--------- --------- ---------- ----------
Net equity transactions ............................. 1,836,679 1,291,782 142,987 2,634,563
Net change in contract owners' equity ................... 2,059,652 1,476,092 4,764,373 3,248,308
Contract owners' equity beginning
of period ............................................. 4,162,607 2,686,515 28,674,990 25,426,682
--------- --------- ---------- ----------
Contract owners' equity end of period ................... $6,222,259 4,162,607 33,439,363 28,674,990
========= ========= ========== ==========
</TABLE>
(Continued)
<PAGE> 18
NACo VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
TemForFd WPEmGro
-------- -------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ 1,127,070 1,469,709 - -
Mortality and expense charges (note 2) .................. (82,947) (227,825) - -
Administration charges (note 2):
Tier I ............................................ (37,085) (100,578) - -
Tier II ........................................... (13,197) (37,019) - -
Tier III .......................................... (5,742) (16,074) - -
Tier IV ........................................... (1,897) (5,303) - -
Tier V ............................................ (3,279) (8,925) - -
Variable account fee (notes 2 and 5) .................... (231,294) - (5) -
------------ ---------- ------ ------
Net investment activity ............................... 751,629 1,073,985 (5) -
Proceeds from mutual fund shares sold ................... 13,169,841 8,737,686 7,464 -
Cost of mutual fund shares sold ......................... (12,461,664) (7,341,764) (7,086) -
------------ ---------- ------ ------
Realized gain (loss) on investments ..................... 708,177 1,395,922 378 -
Change in unrealized gain (loss)
on investments ........................................ (7,117,392) (4,411,710) 1,134 -
------------ ---------- ------ ------
Net gain (loss) on investments ........................ (6,409,215) (3,015,788) 1,512 -
------------ ---------- ------ ------
Reinvested capital gains ................................ 3,316,187 3,875,434 - -
------------ ---------- ------ ------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................................ (2,341,399) 1,933,631 1,507 -
------------ ---------- ------ ------
Equity transactions:
Purchase payments received from
contract owners ....................................... 12,117,782 15,303,596 819 -
Transfers between funds ................................. (12,861,305) 2,903,432 19,262 -
Redemptions ............................................. (3,786,740) (4,616,849) (16) -
Adjustments to maintain reserves ........................ (2,974) (2,254) (5) -
------------ ---------- ------ ------
Net equity transactions ............................. (4,533,237) 13,587,925 20,060 -
Net change in contract owners' equity ................... (6,874,636) 15,521,556 21,567 -
Contract owners' equity beginning
of period ............................................. 48,520,128 32,998,572 - -
------------ ---------- ------ ------
Contract owners' equity end of period ................... $ 41,645,492 48,520,128 21,567 -
============ ========== ====== ======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 19
NACo VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(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: Income & Growth Fund (ACIncGro)
American Century: Twentieth Century Growth Fund (ACTCGro)
(not available for contracts issued on or after May 1, 1997)
American Century: Twentieth Century International Discovery Fund
(ACTCIntDis)
American Century: Twentieth Century Ultra Fund, Inc. (ACTCUltra)
The Bond Fund of America(SM), Inc. (BdFdAm)
(only available for certain contracts issued beginning July 1,
1994)
Dreyfus Appreciation Fund, Inc. (DryApp)
Dreyfus Premier Midcap Stock - Class A (DryPreMCap)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
Evergreen Income and Growth Fund - Class Y (EvIncGro)
(formerly The Evergreen Total Return Fund)
(not available for contracts issued on or after October 1, 1993)
Federated Investment Series Fund, Inc. - Federated Bond Fund -
Class F (FedBdFd)
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares (FedUSGvt)
Fidelity Advisor Growth Opportunities Fund - Class A (FAGrOppA)
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
Fidelity Capital & Income Fund (FidCapInc)
(formerly Fidelity High Income Fund)
(not available for contracts issued on or after January 1, 1987)
Fidelity Contrafund (FidContr) (not available for contracts issued
on or after June 30, 1998)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln) (not available for contracts
issued on or after October 1, 1997)
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan(R) Fund (FidPurtn)
INVESCO Dynamics Fund, Inc. (InvDynam)
INVESCO Total Return Fund (InvTotRet)
The Investment Company of America(R) (InvCoAm)
(only available for certain contracts issued beginning July 1,
1994)
<PAGE> 20
MAS Funds - Fixed Income Portfolio (MASFIP)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
(not available for contracts issued on or after May 1, 1997)
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)
Morgan Stanley Institutional Fund, Inc. - Equity Growth Portfolio
- Class B (MSIEqGroB)
Portfolios of the Nationwide Asset Allocation Trust (NAAT)
(managed for a fee by an affiliated investment advisor)
NAAT - The Aggressive Portfolio (NAATAggr)
NAAT - The Conservative Portfolio (NAATCons)
NAAT - The Moderate Portfolio (NAATMod)
NAAT - The Moderately Aggressive Portfolio (NAATModAgg)
NAAT - The Moderately Conservative Portfolio (NAATModCon)
Funds of the Nationwide Investing Foundation II
(managed for a fee by an affiliated investment advisor)
Nationwide(R) Fund - Class D (NWFund)
Nationwide(R) Growth Fund - Class D (NWGroFd)
(not available for contracts issued on or after October 1,
1993)
Nationwide(R) Money Market Fund (NWMyMkt)
Nationwide(R) S&P 500 Index Fund - Class Y (NWIndxFdY)
Nationwide(R) Separate Account Trust - Small Company Fund
(NSATSmCo) (managed for a fee by an affiliated investment
advisor)
Funds of the Nationwide Investing Foundation III (NIFIII)
(managed for a fee by an affiliated investment advisor)
NIF III - Prestige Balanced Fund - Class Y (PrBalY)
NIF III - Prestige International Fund - Class Y (PrIntY)
NIF III - Prestige Large Cap Growth Fund - Class Y
(PrLgCapGrY)
NIF III - Prestige Large Cap Value Fund - Class Y (PrLgCpValY)
NIF III - Prestige Small Cap Fund - Class Y (PrSmCapY)
Neuberger & Berman Equity Funds(R) - Guardian Fund (NBGuard)
Neuberger & Berman Equity Trust(R) - Partners Trust (NBPartTr)
Oppenheimer Global Fund - Class A (OppGlob)
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)
Warburg Pincus Emerging Growth Fund - Common Shares (WPEmGro)
All of the above funds were being utilized as of December 31, 1998.
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.
<PAGE> 21
(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, 1998. 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.
(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.
Prior to May 1, 1998 the following charges were 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.
Beginning May 1, 1998 under the terms of the Contracts, the Company assumes
various risks and incurs administrative expenses associated with the
issuance of the Contracts. For the Company's contractual promise to accept
these risks and expenses, the Contracts provide for the deduction of a
Variable Account Fee, which is calculated as a percentage of assets and is
deducted on each valuation date from amounts held in the Account. On an
annual basis, the maximum Variable Account Fee is 0.95% of the average
account value.
<PAGE> 22
As with all other charges, this fee is subject to negotiation and may vary
from one contract to another reflecting the unique characteristics of
different contracts when considered as a whole. In negotiating the amount
of the fee, the Company may consider factors which may reduce expenses
incurred by the Company. These factors might include, but are not limited
to: (1) the size of the contract; (2) the number of eligible employees; (3)
the number of contract participants; (4) demographics of contract
participants; (5) general economic conditions; (6) the varying costs
associated with the inclusion of underlying mutual fund options; (7) the
type of contract issued (for example, whether the contract is issued as an
allocated contract or unallocated contract); (8) costs associated with
distribution of the contract; and (9) any other factors which the Company
deems relevant. (See summary of variable account fees at Note 5)
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> 23
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------ ----- ---------- ------
<S> <C> <C> <C> <C>
American Century: Income & Growth Fund ................. 0.80% 76,300 $ 1.097595 $ 83,746
0.70% 36,320 1.097739 39,870
0.55% 39,351 1.097955 43,206
0.40% 636 1.098171 698
0.15% 51,660 1.098531 56,750
American Century:
Twentieth Century Growth Fund ....................... 0.95% 6,270,208 7.915964 49,634,741
0.90% 3,210,215 7.926529 25,445,862
0.80% 2,832,513 7.947702 22,511,969
0.65% 1,377,500 7.975584 10,986,367
0.50% 359,828 7.922098 2,850,593
0.40% 2,228,401 7.987376 17,799,077
0.30% 207,682 7.988751 1,659,120
American Century: Twentieth Century
International Discovery Fund ........................ 0.80% 103,189 1.084264 111,884
0.70% 43,124 1.084406 46,764
0.55% 7,164 1.084619 7,770
0.40% 456,421 1.084832 495,140
0.15% 25,538 1.085187 27,714
American Century:
Twentieth Century Ultra Fund ........................ 0.95% 59,827,396 2.316089 138,565,574
0.90% 25,526,505 2.319181 59,200,585
0.80% 20,465,127 2.325375 47,589,095
0.65% 9,983,888 2.333533 23,297,732
0.50% 3,364,116 2.317883 7,797,627
0.40% 23,187,750 2.336984 54,189,401
0.30% 1,622,498 2.337386 3,792,404
The Bond Fund of America(SM), Inc. ..................... 0.95% 3,149,438 2.429862 7,652,700
0.90% 1,615,501 2.433154 3,930,763
0.80% 954,957 2.439748 2,329,854
0.65% 722,007 2.448428 1,767,782
0.50% 268,515 2.431945 653,014
0.40% 861,657 2.452190 2,112,947
Dreyfus Appreciation Fund, Inc. ........................ 0.80% 60,330 1.080133 65,164
0.70% 52,910 1.080275 57,157
0.55% 20,457 1.080487 22,104
0.40% 7,474 1.080700 8,077
0.30% 116 1.080842 125
0.15% 86,357 1.081055 93,357
Dreyfus Premier Midcap Stock - Class A ................. 0.80% 6,837 1.133283 7,748
0.70% 23,028 1.133431 26,101
0.15% 4,299 1.134248 4,876
</TABLE>
(Continued)
<PAGE> 24
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------ ----- ---------- ------
<S> <C> <C> <C> <C>
The Dreyfus Third Century Fund, Inc. ................... 0.95% 172 4.554448 783
0.80% 6,657,158 4.572707 30,441,233
0.70% 3,080,222 4.584920 14,122,571
0.55% 2,140,647 4.557584 9,756,179
0.40% 1,100,730 4.558760 5,017,964
0.30% 132,409 4.559545 603,725
0.25% 340,211 4.559937 1,551,341
0.15% 2,316,305 4.602327 10,660,393
Evergreen Income and Growth Fund - Class Y ............. 0.95% 569,094 2.380651 1,354,814
0.90% 288,461 2.383829 687,642
0.80% 111,941 2.390198 267,561
0.65% 125,423 2.398586 300,838
0.50% 32,633 2.382498 77,748
0.40% 242,926 2.402138 583,542
Federated Investments Series Funds, Inc. -
Federated Bond Fund - Class F ....................... 0.80% 77,098 1.018687 78,539
0.70% 1,037 1.018821 1,057
0.40% 170,453 1.019222 173,729
0.15% 19,138 1.019557 19,512
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares .................... 0.95% 3,088,503 1.394078 4,305,614
0.90% 1,498,243 1.395957 2,091,483
0.80% 1,061,815 1.399720 1,486,244
0.65% 558,667 1.404671 784,743
0.50% 281,752 1.395671 393,233
0.40% 1,119,202 1.406762 1,574,451
Fidelity Advisor Growth Opportunities
Fund - Class A ...................................... 0.80% 32,561 1.089301 35,469
0.70% 1,223 1.089444 1,332
0.55% 5,256 1.089659 5,727
0.40% 930 1.089873 1,014
0.30% 6 1.090017 7
0.25% 1,714 1.090088 1,868
0.15% 38,722 1.090231 42,216
Fidelity Advisor High Yield Fund - Class T ............. 0.80% 395 1.064751 421
0.70% 116 1.064934 124
0.55% 2,276 1.065207 2,424
0.15% 55,862 1.065933 59,545
Fidelity Capital & Income Fund ......................... 0.95% 187,924 4.829318 907,545
0.90% 59,194 4.835829 286,252
0.80% 60,278 4.848865 292,280
0.65% 142,236 4.866016 692,123
0.50% 15,722 4.834839 76,013
0.40% 53,798 4.873259 262,172
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------ ----- ---------- ------
<S> <C> <C> <C> <C>
Fidelity Contrafund ................................... 0.95% 79,731,135 2.522162 201,094,839
0.90% 34,985,707 2.525528 88,357,383
0.80% 26,018,143 2.532274 65,885,067
0.65% 11,832,023 2.541159 30,067,052
0.50% 6,920,209 2.524114 17,467,396
0.40% 21,126,009 2.544916 53,763,918
Fidelity Equity-Income Fund ........................... 0.95% 20,055,246 7.691828 154,261,503
0.90% 10,047,811 7.702094 77,389,185
0.80% 6,525,557 7.722666 50,394,697
0.65% 4,532,595 7.749762 35,126,532
0.50% 2,032,139 7.697797 15,642,993
0.40% 7,558,249 7.761233 58,661,332
Fidelity Magellan(R) Fund ............................. 0.95% 33,527,719 2.389171 80,103,454
0.90% 13,728,148 2.392359 32,842,658
0.80% 11,284,101 2.398748 27,067,715
0.65% 5,041,523 2.407162 12,135,763
0.50% 2,481,152 2.391021 5,932,487
0.40% 7,449,476 2.410721 17,958,608
Fidelity OTC Portfolio ................................ 0.95% 7,583,243 2.544511 19,295,645
0.90% 3,156,471 2.547908 8,042,398
0.80% 2,759,385 2.554714 7,049,439
0.65% 1,453,622 2.563678 3,726,619
0.50% 554,256 2.546479 1,411,401
0.40% 3,023,192 2.567467 7,761,946
Fidelity Puritan(R) Fund .............................. 0.95% 10,568,994 1.843889 19,488,052
0.90% 5,207,051 1.846350 9,614,039
0.80% 3,223,535 1.851282 5,967,672
0.65% 1,260,820 1.857778 2,342,324
0.50% 1,058,070 1.845320 1,952,478
0.40% 2,399,715 1.860527 4,464,735
INVESCO Dynamics Fund, Inc. ........................... 0.80% 38,248 1.172431 44,843
0.70% 3,535 1.172584 4,145
0.55% 5,449 1.172815 6,391
0.40% 278,971 1.173045 327,246
0.15% 2,672 1.173429 3,135
INVESCO Total Return Fund ............................. 0.80% 9,067 1.023668 9,282
0.70% 1,276 1.023803 1,306
0.55% 2,742 1.024005 2,808
0.15% 12,945 1.024544 13,263
The Investment Company of America(R) .................. 0.95% 15,826,712 2.773161 43,890,020
0.90% 6,890,273 2.776862 19,133,337
0.80% 4,926,029 2.784278 13,715,434
0.65% 1,858,205 2.794045 5,191,908
0.50% 1,244,473 2.775312 3,453,801
0.40% 3,259,397 2.798178 9,120,373
</TABLE>
(Continued)
<PAGE> 26
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------ ----- ---------- ------
<S> <C> <C> <C> <C>
MAS Funds - Fixed Income Portfolio .................... 0.95% 1,989,011 1.413926 2,812,314
0.90% 991,972 1.415813 1,404,447
0.80% 261,209 1.419597 370,812
0.65% 278,580 1.424580 396,859
0.50% 100,650 1.415024 142,422
0.40% 616,144 1.426689 879,046
Massachusetts Investors Growth
Stock Fund - Class A ............................... 0.95% 310,155 22.143725 6,867,987
0.90% 143,669 22.173275 3,185,612
0.80% 125,998 22.232493 2,801,250
0.65% 64,922 22.310477 1,448,441
0.50% 22,289 22.160876 493,944
0.40% 120,267 22.343460 2,687,181
MFS(R) Growth Opportunities Fund - Class A ............ 0.95% 657,789 11.531693 7,585,421
0.90% 366,180 11.547088 4,228,313
0.80% 190,471 11.577941 2,205,262
0.65% 180,839 11.618570 2,101,091
0.50% 63,546 11.540626 733,361
0.40% 203,691 11.635755 2,370,099
MFS(R) High Income Fund - Class A ..................... 0.95% 1,376,013 6.172749 8,493,783
0.90% 516,943 6.181070 3,195,261
0.80% 346,946 6.197734 2,150,279
0.65% 253,885 6.219656 1,579,077
0.50% 106,230 6.179806 656,481
0.40% 451,743 6.228913 2,813,868
Morgan Stanley Institutional Fund, Inc. -
Equity Growth Portfolio - Class B .................. 0.80% 11,853 1.106680 13,117
0.40% 10,064 1.107260 11,143
0.30% 6 1.107406 7
0.15% 2,580 1.107624 2,858
NAAT - The Aggressive Portfolio ....................... 0.70% 819,842 1.152311 944,713
0.60% 296,908 1.150285 341,529
0.45% 211,746 1.150582 243,631
0.25% 144,398 1.150978 166,199
0.15% 1,783 1.151176 2,053
0.10% 2,524 1.151275 2,906
0.00% 691,326 1.157296 800,069
NAAT - The Conservative Portfolio ..................... 0.70% 382,730 1.110341 424,961
0.60% 97,738 1.108390 108,332
0.45% 207,470 1.108677 230,017
0.25% 85,045 1.109060 94,320
0.10% 4,359 1.109347 4,836
0.00% 114,219 1.115144 127,371
NAAT - The Moderate Portfolio ......................... 0.70% 1,312,884 1.145999 1,504,564
0.60% 193,617 1.143985 221,495
0.45% 114,698 1.144281 131,247
0.25% 17,475 1.144675 20,003
0.10% 9,964 1.144971 11,408
0.00% 257,772 1.150956 296,684
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------- ------ ---------- ------
<S> <C> <C> <C> <C>
NAAT - The Moderately Aggressive Portfolio ............ 0.70% 1,127,941 1.143522 1,289,825
0.60% 169,925 1.141512 193,971
0.45% 154,400 1.141807 176,295
0.25% 138,659 1.142200 158,376
0.15% 3,674 1.142397 4,197
0.10% 19,416 1.142495 22,183
0.00% 401,494 1.148468 461,103
NAAT - The Moderately Conservative Portfolio .......... 0.70% 455,658 1.131933 515,774
0.60% 135,133 1.129944 152,693
0.45% 55,915 1.130236 63,197
0.25% 104,938 1.130626 118,646
0.15% 1,110 1.130821 1,255
0.00% 112,759 1.136829 128,188
Nationwide(R) Fund - Class D .......................... 0.95% 36 26.722904 962
0.80% 3,247,615 26.830004 87,133,523
0.70% 1,298,643 26.901646 34,935,634
0.55% 904,019 26.741341 24,174,680
0.40% 481,772 26.748259 12,886,562
0.30% 163,349 26.752871 4,370,055
0.25% 104,524 26.755178 2,796,558
0.15% 1,044,190 27.003819 28,197,118
Nationwide(R) Growth Fund - Class D ................... 0.95% 679,189 4.725203 3,209,306
0.90% 408,603 4.731510 1,933,309
0.80% 280,426 4.744149 1,330,383
0.65% 88,677 4.760794 422,173
0.50% 31,217 4.728868 147,621
0.40% 255,124 4.767838 1,216,390
0.30% 72,274 4.768660 344,650
Nationwide(R) Money Market Fund ....................... 0.80% 6,949,105 3.139103 21,813,956
0.70% 3,320,018 3.147557 10,449,946
0.55% 2,277,564 3.129626 7,127,924
0.40% 2,708,726 3.154895 8,545,746
0.30% 289,513 3.131607 906,641
0.25% 662,386 3.132003 2,074,595
0.15% 3,344,001 3.132794 10,476,066
Nationwide(R) S&P 500 Index Fund - Class Y ............ 0.80% 64,039 1.093550 70,030
0.70% 97,706 1.093694 106,860
0.55% 4,693 1.093909 5,134
0.40% 19,071 1.094125 20,866
0.30% 81 1.094268 89
0.25% 76,493 1.094340 83,709
0.15% 25,400 1.094484 27,800
Nationwide(R) SAT - Small Company Fund ................ 0.80% 1,340,017 0.963521 1,291,135
0.70% 589,435 0.964638 568,591
0.55% 494,950 0.962509 476,394
0.40% 454,960 0.966626 439,776
0.30% 19,582 0.962923 18,856
0.25% 84,982 0.963006 81,838
0.15% 313,865 0.963171 302,306
</TABLE>
(Continued)
<PAGE> 28
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------ ----- ---------- ------
<S> <C> <C> <C> <C>
Neuberger & Berman Equity Funds(R) -
Guardian Fund ........................................ 0.95% 9,040,807 1.729738 15,638,227
0.90% 4,341,380 1.732048 7,519,479
0.80% 2,886,123 1.736676 5,012,261
0.65% 1,466,182 1.742771 2,555,219
0.50% 658,443 1.731080 1,139,818
0.40% 4,117,644 1.745353 7,186,742
Neuberger & Berman Equity Trust(R) -
Partners Trust ....................................... 0.80% 6 1.041831 6
0.70% 46,617 1.041968 48,573
0.55% 1,093 1.042174 1,139
0.15% 10 1.042722 10
NIF III - Prestige Balanced Fund - Class Y .............. 0.70% 67,659 1.061002 71,786
0.60% 38 1.061142 40
0.00% 25 1.061978 27
NIF III - Prestige International Fund - Class Y ......... 0.70% 2,686 1.092070 2,933
0.60% 19,996 1.092213 21,840
0.00% 70 1.093071 77
NIF III - Prestige Large Cap Growth Fund - Class Y ...... 0.70% 39,909 1.139564 45,479
0.60% 22,783 1.139713 25,966
0.45% 6,708 1.139937 7,647
0.00% 2,886 1.140610 3,292
NIF III - Prestige Large Cap Value Fund - Class Y ....... 0.70% 858 1.049429 900
0.60% 24,426 1.049566 25,637
0.45% 7,855 1.049773 8,246
0.00% 3,334 1.050394 3,502
NIF III - Prestige Small Cap Fund - Class Y ............. 0.70% 7,654 1.090386 8,346
0.60% 33,702 1.090529 36,753
0.45% 17,596 1.090743 19,193
0.25% 3,784 1.091029 4,128
0.00% 6,727 1.091387 7,342
Oppenheimer Global Fund - Class A ....................... 0.80% 2,237 1.106449 2,475
0.70% 942 1.106594 1,042
0.55% 6,579 1.106811 7,282
0.15% 1,884 1.107392 2,086
Putnam Investors Fund - Class A ......................... 0.95% 2,421,935 24.311753 58,881,486
0.90% 897,593 24.344197 21,851,181
0.80% 549,318 24.409212 13,408,420
0.65% 297,345 24.494833 7,283,416
0.50% 60,549 24.330583 1,473,192
0.40% 684,364 24.531046 16,788,165
0.30% 141,978 24.535266 3,483,468
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
ASSET
CHARGE UNITS UNIT VALUE AMOUNT
------- ----- ---------- ------
<S> <C> <C> <C> <C>
Putnam Voyager Fund - Class A 0.95% 27,161,675 4.715165 128,071,779
0.90% 10,644,754 4.721461 50,258,791
0.80% 7,755,689 4.734076 36,716,021
0.65% 4,199,459 4.750689 19,950,324
0.50% 1,141,130 4.718816 5,384,783
0.40% 7,057,963 4.757715 33,579,776
0.30% 935,379 4.758533 4,451,032
SEI Index Funds - S&P 500 Index Portfolio 0.95% 28,576,205 1.909266 54,559,577
0.90% 12,293,095 1.911811 23,502,074
0.80% 8,439,537 1.916911 16,177,841
0.65% 5,122,867 1.923629 9,854,496
0.50% 2,027,825 1.910747 3,874,661
0.40% 9,208,478 1.926474 17,739,893
Seligman Growth Fund, Inc. - Class A. 0.95% 352,047 16.801408 5,914,885
0.90% 174,614 16.823830 2,937,676
0.80% 90,887 16.868765 1,533,151
0.65% 52,182 16.927940 883,334
0.50% 24,055 16.814429 404,471
0.40% 145,547 16.952971 2,467,454
Short-Term Investments Trust -
Treasury Portfolio - Institutional Class 0.95% 1,766,084 1.276562 2,254,516
0.90% 1,030,158 1.278283 1,316,833
0.80% 320,548 1.281729 410,856
0.65% 891,584 1.286263 1,146,812
0.50% 86,239 1.278022 110,215
0.40% 763,114 1.288178 983,027
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) 0.95% 9,434,812 1.379298 13,013,417
0.90% 3,948,203 1.381139 5,453,017
0.80% 3,133,125 1.384829 4,338,842
0.65% 1,610,019 1.389689 2,237,426
0.50% 1,224,755 1.380367 1,690,611
0.40% 4,818,444 1.391746 6,706,050
Templeton Foreign Fund - Class I 0.80% 13,917,762 1.214689 16,905,752
0.70% 7,746,564 1.217936 9,434,819
0.55% 5,316,578 1.210671 6,436,627
0.40% 1,884,614 1.210984 2,282,237
0.30% 572,528 1.211193 693,442
0.25% 599,440 1.211297 726,100
0.15% 4,225,950 1.222569 5,166,515
Warburg Pincus Emerging Growth Fund -
Common Shares 0.80% 5,986 1.140152 6,825
0.70% 882 1.140301 1,006
0.55% 8,854 1.140526 10,098
0.40% 224 1.140750 256
0.15% 2,964 1.141124 3,382
========== ========= ---------------
Total Contract Owners' Equity $ 2,784,900,031
===============
</TABLE>
<PAGE> 30
(5) Variable Account Fees
The following is a summary of variable account fees for the period May
1, 1998 to December 31, 1998.
<TABLE>
<CAPTION>
Percentage TOTAL ACIncGro ACTCGro ACTCIntDis ACTCUltra BdFdAm DryApp
---------- ----- -------- ------- ---------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
0.95% ................ $ 6,585,520 - 291,751 - 759,586 48,961 -
0.90% ................ 2,627,146 - 140,063 - 302,906 23,071 -
0.80% ................ 1,994,050 39 108,208 59 218,855 10,944 30
0.70% ................ 692,150 26 35,014 25 72,777 4,882 32
0.65% ................ 961,637 - 45,760 - 124,179 6,454 -
0.60% ................ 763 - - - - - -
0.55% ................ 37,994 14 - 1 4,718 - 9
0.50% ................ 41,007 - 1,755 - - 423 -
0.45% ................ 54,298 - - - 53,860 - -
0.40% ................ 282,706 - 18,239 47 - 2,502 2
0.30% ................ 7,558 - 612 - 1,383 - -
0.25% ................ 2,468 - - - - - -
0.20% ................ 18,215 2 - 3 - - 9
0.15% ................ 4 - - - - - -
------------ -- ------- --- --------- ------ --
Total variable account fees ... $ 13,305,516 81 641,402 135 1,538,264 97,237 82
============ == ======= === ========= ====== ==
</TABLE>
<TABLE>
<CAPTION>
Percentage DryPreMCap Dry3dCen EvIncGro
---------- ---------- -------- --------
<S> <C> <C> <C>
0.95% ................ $ - 140,954 9,437
0.90% ................ - 57,233 4,039
0.80% ................ 1 63,645 1,495
0.70% ................ - 28,547 1,025
0.65% ................ - 22,436 1,793
0.60% ................ - - -
0.55% ................ - 6,650 -
0.50% ................ - - 50
0.45% ................ - - -
0.40% ................ - 2,530 617
0.30% ................ - 215 -
0.25% ................ - 472 -
0.20% ................ - 3,831 -
0.15% ................ - - -
- ------- ------
Total variable account fees ... $ 1 326,513 18,456
= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Percentage FedBdFd FedUSGvt FAGrOppA FAHiYld FidCapInc FidContr
---------- ------- -------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
0.95% ..................... $ - 19,714 - - 6,051 1,125,435
0.90% ..................... - 8,478 - - 1,794 444,624
0.80% ..................... 23 5,953 3 - 2,081 298,523
0.70% ..................... 1 1,704 - - 2,390 102,142
0.65% ..................... - 3,102 - - 1,369 129,942
0.60% ..................... - - - - - -
0.55% ..................... - - 2 1 - -
0.50% ..................... - 240 - - 50 10,615
0.45% ..................... - - - - - -
0.40% ..................... 13 1,723 - - 203 54,439
0.30% ..................... - - - - - -
0.25% ..................... - - - - - -
0.20% ..................... 2 - 4 3 - -
0.15% ..................... - - - - - -
------- ------ - - ------ ---------
Total variable account fees ........ $ 39 40,914 9 4 13,938 2,165,720
======= ====== = = ====== =========
</TABLE>
<TABLE>
<CAPTION>
Percentage FidEqInc FidMgIn FidOTC FidPurtn
---------- -------- ------- ------ --------
<S> <C> <C> <C> <C>
0.95% ..................... $ 978,414 451,976 103,690 113,951
0.90% ..................... 425,805 162,898 39,859 51,253
0.80% ..................... 312,268 129,279 30,080 30,852
0.70% ..................... 122,006 34,728 10,397 8,562
0.65% ..................... 187,833 48,548 19,507 10,664
0.60% ..................... - - - -
0.55% ..................... - - - -
0.50% ..................... 10,019 3,626 867 1,237
0.45% ..................... - - - -
0.40% ..................... 54,720 16,607 6,061 5,038
0.30% ..................... - - - -
0.25% ..................... - - - -
0.20% ..................... - - - -
0.15% ..................... - - - -
--------- ------- ------- -------
Total variable account fees ........ $2,091,065 847,662 210,461 221,557
========= ======= ======= =======
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Percentage InvDynam InvTotRet InvCoAm MASFIP MFSGrStk MFSGrOpp MFSHiInc MSIEqGroB
---------- -------- --------- ------- ------ -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.95% ................ $ - - 261,313 14,823 39,089 45,624 50,190 -
0.90% ................ - - 102,917 5,931 17,056 23,186 19,064 -
0.80% ................ 15 3 64,000 2,164 14,382 14,053 12,776 2
0.70% ................ 3 1 17,363 678 2,997 4,916 3,950 -
0.65% ................ - - 22,042 1,540 8,276 8,810 9,234 -
0.60% ................ - - - - - - - -
0.55% ................ 3 1 - - - - - -
0.50% ................ - - 2,190 93 305 451 411 -
0.45% ................ - - - - - - - -
0.40% ................ 74 - 10,196 909 1,821 1,206 2,951 4
0.30% ................ - - - - - - - -
0.25% ................ - - - - - - - -
0.20% ................ - 1 - - - - - -
0.15% ................ - - - - - - - -
------- - ------- ------ ------ ------ ------ -
Total variable account fees ... $ 95 6 480,021 26,138 83,926 98,246 98,576 6
======= = ======= ====== ====== ====== ====== =
</TABLE>
<TABLE>
<CAPTION>
Percentage NAATAggr NAATCons
---------- -------- --------
<S> <C> <C>
0.95% ................ $2,542 709
0.90% ................ 1,134 224
0.80% ................ 565 74
0.70% ................ 913 416
0.65% ................ 1,495 107
0.60% ................ 244 83
0.55% ................ - -
0.50% ................ - -
0.45% ................ 132 93
0.40% ................ - -
0.30% ................ - -
0.25% ................ 51 -
0.20% ................ - 31
0.15% ................ - -
----- -----
Total variable account fees ... $7,076 1,737
===== =====
</TABLE>
<TABLE>
<CAPTION>
Percentage NAATMod NAATModAgg NAATModCon NWFund NWGroFd NWMyMkt
---------- ------- ---------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
0.95% ........................... $ 2,960 3,575 1,364 352,279 20,220 99,303
0.90% ........................... 458 536 310 133,584 11,298 49,646
0.80% ........................... 317 623 613 175,591 6,348 50,606
0.70% ........................... 1,163 1,052 375 63,159 3,461 24,629
0.65% ........................... 210 654 176 49,597 2,479 34,448
0.60% ........................... 190 128 112 - - -
0.55% ........................... - - - 16,710 - 4,921
0.50% ........................... - - - - 92 -
0.45% ........................... 73 101 37 - - -
0.40% ........................... - - - 6,433 1,423 9,983
0.30% ........................... - - - 1,673 129 363
0.25% ........................... 6 47 38 922 - 658
0.20% ........................... - 1 - 9,975 - 1,925
0.15% ........................... 1 3 - - - -
-------- ----- ----- ------- ------ -------
Total variable account fees .............. $ 5,378 6,720 3,025 809,923 45,450 276,482
======== ===== ===== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Percentage NWIndxFdY NSATSmCo NBGuard NBPartTr
---------- --------- -------- ------- --------
<S> <C> <C> <C> <C>
0.95% ........................... $ - 3,959 105,386 -
0.90% ........................... - 2,442 42,598 -
0.80% ........................... 68 2,154 30,545 -
0.70% ........................... 58 1,044 8,382 36
0.65% ........................... - 636 20,994 -
0.60% ........................... - - - -
0.55% ........................... - 309 - 1
0.50% ........................... - - 772 -
0.45% ........................... - - - -
0.40% ........................... 7 347 7,492 3
0.30% ........................... - 7 - -
0.25% ........................... 8 25 - -
0.20% ........................... 3 45 - -
0.15% ........................... - - - -
--- ------ ------- --
Total variable account fees .............. $144 10,968 216,169 40
=== ====== ======= ==
</TABLE>
(Continued)
<PAGE> 32
<TABLE>
<CAPTION>
Percentage PrBalY PrIntY PrLgCapGrY PrLgCpValY PrSmCapY OppGlob PutInvFd
---------- ------ ------ ---------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
0.95% ................ $ - - - - - - 299,060
0.90% ................ - - - - - - 99,102
0.80% ................ - - - - - 5 70,035
0.70% ................ 51 1 19 - 1 - 18,059
0.65% ................ - - - - - - 38,689
0.60% ................ - - - - 6 - -
0.55% ................ - - - - - - -
0.50% ................ - - - - - - 895
0.45% ................ - - 1 1 - - -
0.40% ................ - - - - - - 14,344
0.30% ................ - - - - - - 1,269
0.25% ................ - - - - 1 - -
0.20% ................ - - - - - - -
0.15% ................ - - - - - - -
--------- - -- - - - -------
Total variable account fees ... $ 51 1 20 1 8 5 541,453
========= = == = = = =======
</TABLE>
<TABLE>
<CAPTION>
Percentage PutVoyFd SEI500Ix SelGroFd
---------- -------- -------- --------
<S> <C> <C> <C>
0.95% ................ $ 715,316 291,873 32,833
0.90% ................ 254,919 108,987 14,122
0.80% ................ 173,289 80,858 8,033
0.70% ................ 60,859 21,698 2,478
0.65% ................ 87,003 34,323 5,845
0.60% ................ - - -
0.55% ................ - - -
0.50% ................ 3,233 2,270 249
0.45% ................ - - -
0.40% ................ 32,851 19,442 2,131
0.30% ................ 1,627 - -
0.25% ................ - - -
0.20% ................ - - -
0.15% ................ - - -
--------- ------- ------
Total variable account fees ... $1,329,097 559,451 65,691
========= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Percentage AIMTreas TRIntStk TemForFd WPEmGro
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
0.95% $ 12,180 80,016 100,986 -
0.90% 5,583 30,625 41,401 -
0.80% 2,162 23,257 49,172 2
0.70% 3,559 8,452 18,118 1
0.65% 2,505 18,120 12,867 -
0.60% - - - -
0.55% - - 4,652 2
0.50% 81 1,083 - -
0.45% - - - -
0.40% 1,419 5,731 1,198 -
0.30% - - 280 -
0.25% - - 240 -
0.20% - - 2,380 -
0.15% - - - -
----------- ------- ------- -
Total variable account fees $ 27,489 167,284 231,294 5
=========== ======= ======= =
</TABLE>
<PAGE> 80
<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, 1998 and
1997, 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,
1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
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 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</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, 1998, 1997 and 1996
(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 10 and 14. 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, including variable annuities, fixed annuities and life
insurance.
(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. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "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, 1998 or 1997.
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 deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned 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. 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. 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).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 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. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and 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.
<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 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) 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 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
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, 1998 and
1997 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, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
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
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
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 $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
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.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
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) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</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, 1998, 1997 and 1996.
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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(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.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
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 is net of 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> 17
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 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
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>
1998 1997
------------------------- --------------------------
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 $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
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.
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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced 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.
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 $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
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 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: 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 $187.9 million and $220.2 million as of December 31,
1998 and 1997, 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.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
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. 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. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
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 the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
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 postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) 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.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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.
(10) 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, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 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 $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, 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 $31.9 million and $20.5 million as of
December 31, 1998 and 1997, 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 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(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, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $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 $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
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, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) 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. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports 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 independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
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.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) 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.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 10 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, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 81
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 NA
(2) Financial statements included in Part B:
Those financial statements required by Item 23 to be included NA
in Part B have been incorporated therein by reference to the
Prospectus (Part A).
NACo Variable Account:
Independent Auditors' Report. 81
Statement of Assets, Liabilities and Contract Owners' Equity 83
as of December 31, 1998.
Statement of Operations and Changes in Contract Owners' 85
Equity for the years ended December 31, 1998 and 1997.
Notes to Financial Statements. 87
Nationwide Life Insurance Company and Subsidiaries:
Independent Auditors' Report. 101
Consolidated Balance Sheets as of December 31, 1998 and 1997. 102
Consolidated Statements of Income for the years ended 103
December 31, 1998, 1997 and 1996.
Consolidated Statements of Shareholder's Equity for the years 104
ended December 31, 1998,1997 and 1996.
Consolidated Statements of Cash Flows for the years ended 105
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements. 106
</TABLE>
[/R]
140 of 161
<PAGE> 82
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 UnderwriterFiled 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.
141 of 161
<PAGE> 83
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
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
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
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 and Director
Columbus, OH 43215
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
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
142 of 161
<PAGE> 84
<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
1733A Westwood Avenue
Alliance, OH 44601
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Donna A James Senior Vice President - Human
One Nationwide Plaza Resources
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
</TABLE>
143 of 161
<PAGE> 85
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Douglas C. Robinette Senior Vice President-
One Nationwide Plaza Marketing and Product
Columbus, OH 43215 Management Nationwide
Financial Services of the
Nationwide Insurance Enterprise
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Vice President - Enterprise
One Nationwide Plaza Controller
Columbus, OH 43215
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Product
Columbus, OH 43215 and Market Compliance
Mark Thresher Vice President - Finance and
One Nationwide Plaza Treasurer
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
144 of 161
<PAGE> 86
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
The 401K Companies, Inc. Texas Holding Company
The 401(K) Company Texas Third-party administrator for 401(k)
plans
401K Investment Advisors, Inc. Texas Investment Advisor registered with the
SEC
401K Investments Services, Inc. Texas NASD registered Broker-Dealer
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
AID Finance Services, Inc. Iowa Holding Company
ALLIED General Agency Company Iowa Managing General Agent and Surplus
Lines Broker (P&C)
ALLIED Group, Inc. Iowa Holding Company
ALLIED Group Insurance Marketing Iowa Direct Marketer (P&C)
Company
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
ALLIED Group Mortgage Company Iowa Mortgage Lender
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
ALLIED Life Financial Corporation Iowa Holding Company
ALLIED Life Insurance Company Iowa Insurance Company
ALLIED Property and Casualty Iowa Underwrites General P&C Insurance
Insurance Company
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
AMCO Insurance Company Iowa Underwrites General P&C Insurance
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
CalFarm Insurance Company California Stock Corporation
Caliber Funding Corporation Delaware Stock Corporation
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
</TABLE>
145 of 161
<PAGE> 87
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance Agency
Depositors Insurance Company Iowa Underwrites P&C insurance
*Employers Life Insurance Company Wisconsin Life Insurance Company
of Wausau
Excaliber Funding Corporation Delaware Limited purpose corporation
F&B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Insurance Agency
Agency of Texas, Inc.
*Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker-Dealer
Corporation
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Cost Control
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
York, Inc. administration
MedPro Solutions, Inc. Massachusetts Third-party administration services
for workers' compensation, automobile
injury and disability claims
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Ohio Insurance Agency
Inc.
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
</TABLE>
146 of 161
<PAGE> 88
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Midwest Printing Services, Inc. Iowa General Printing Services
Morley & Associates Oregon Insurance Broker
Morley Capital Management, Inc. Oregon Investment Adviser and stable value
money management
Morley Financial Services, Inc. Oregon Holding Company
Morley Research Associates, Ltd. Delaware Credit research consulting
**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 Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
**National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
**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 Special purpose real estate corporation
Redevelopment Corporation
Nationwide Corporation Ohio Holding Company
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Bermuda Life Insurance Company
(Bermuda) Ltd.
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust II
</TABLE>
147 of 161
<PAGE> 89
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
*Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Company of California Underwriter
America
Nationwide Insurance Company of Ohio Insurance Company
Florida
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Services Company, LCC Ohio Shared services functions
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide International Underwriters California Underwriting Manager
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment
*Nationwide Investing Foundation II Massachusetts Common Law Trust
Nationwide Investment Services Oklahoma Registered Broker-Dealer in deferred
Corporation compensation market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
**Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Property Insurance
Nationwide Management Systems, Inc. Ohio Preferred provider organization,
products and related services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Funds Ohio Investment Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
</TABLE>
148 of 161
<PAGE> 90
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
Nationwide Retirement Solutions, Alabama Market and administer deferred
Inc. of Alabama compensation plans for public employees
Nationwide Retirement Solutions, Arizona Market and administer deferred
Inc. of Arizona compensation plans for public employees
Nationwide Retirement Solutions, Arkansas Market and administer deferred
Inc. of Arkansas compensation plans for public employees
Nationwide Retirement Solutions, Montana Market and administer deferred
Inc. of Montana compensation plans for public employees
Nationwide Retirement Solutions, Nevada Market and administer deferred
Inc. of Nevada compensation plans for public employees
Nationwide Retirement Solutions, New Mexico Market and administer deferred
Inc. of New Mexico compensation plans for public employees
Nationwide Retirement Solutions, Ohio Market variable annuity contracts to
Inc. of Ohio members of the National Education
Association in the state of Ohio
Nationwide Retirement Solutions, Oklahoma Market variable annuity contracts to
Inc. of Oklahoma members of the National Education
Association in the state of Oklahoma
Nationwide Retirement Solutions, South Dakota Market and administer deferred
Inc. of South Dakota compensation plans for public employees
Nationwide Retirement Solutions, Texas Market and administer deferred
Inc. of Texas compensation plans for public employees
Nationwide Retirement Solutions, Wyoming Market variable annuity contracts to
Inc. of Wyoming members of the National Education
Association in the state of Wyoming
</TABLE>
149 of 161
<PAGE> 91
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
*Nationwide Separate Account Trust Massachusetts Investment Company
Nationwide Trust Company, FSB United States of America Federal Savings Bank
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing services
NFS Distributors, Inc. Delaware Holding Company
NWE, Inc. Ohio Special Investments
PanEuroLife Luxembourg Life Insurance
Pension Associates, Inc. Wisconsin Pension plan administration
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
Premier Agency, Inc. Iowa Insurance Agency
Riverview Agency, Inc. Texas Stock Corporation
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
Union Bond and Trust Company Oregon Oregon state bank with trust powers
Villanova Capital, Inc. Delaware Holding Company
</TABLE>
150 of 161
<PAGE> 92
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Villanova Mutual Fund Capital Trust Delaware Business Trust
Villanova SA Capital Trust Delaware Business Trust
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Western Heritage Insurance Company Arizona Excess and Surplus Lines Insurance
Company
</TABLE>
151 of 161
<PAGE> 93
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-6 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-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
</TABLE>
152 of 161
<PAGE> 94
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
<S> <C> <C> <C>
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
Nationwide VL Separate Account -D Ohio Nationwide Life and Annuity 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>
153 of 161
<PAGE> 95
<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> 96
<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> 97
<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> 98
<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> 99
<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> 100
<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> 101
Item 27. Number of Contract Owners
The number of contract owners as of January 31, 1999 was 3,448.
Item 28. Indemnification
Provision is made in Nationwide's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by Nationwide 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 Nationwide, 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 Nationwide pursuant to the foregoing provisions, Nationwide
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.
156 of 161
<PAGE> 102
(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 and Director
One Nationwide Plaza
Columbus, Ohio 43215
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, Ohio 43215
Dimon R. McFerson Chairman and Chief Executive Officer - Nationwide
One Nationwide Plaza Insurance Enterprise and Director
Columbus, Ohio 43215
Timothy E. Murphy President
One Nationwide Plaza
Columbus, Ohio 43215
Robert A. Oakley Executive Vice President - Chief Financial Officer
One Nationwide Plaza
Columbus, Ohio 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment Officer
One Nationwide Plaza
Columbus, Ohio 43215
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, Ohio 43215
Joseph P. Rath 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
Duane M. Campbell 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>
157 of 161
3
<PAGE> 103
<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
Nationwide.
158 of 161
<PAGE> 104
PROSPECTUS
- --------------------------------------------------------------------------------
[LOGO] NACo National Association of Counties
Counties Care for America
Group
Flexible Fund
Retirement
Contracts
offered by
NATIONWIDE
Life Insurance
Company
through its NACo Variable Account
- --------------------------------------------------------------------------------
MAY 1, 1999
- --------------------------------------------------------------------------------
155 of 161
<PAGE> 105
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of NACo Variable Account:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG LLP
Columbus, Ohio
April 29, 1999
160 of 161
<PAGE> 106
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, NACo VARIABLE ACCOUNT, certifies that the requirements of
the Securities Act Rule 485(b) for effectiveness of the Post-Effective Amendment
and has caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 29th
day of April, 1999.
NACo VARIABLE ACCOUNT
---------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
---------------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 29th day
of April, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ---------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ---------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ---------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
- --------------------------------------- Officer and Director
Joseph J. Gasper
DIMON R. MCFERSON Chairman and Chief Executive
- --------------------------------------- Officer and Director
Dimon R. McFerson
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 and Chief
- --------------------------------------- Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- ---------------------------------------
Ralph M. Paige
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
</TABLE>
161 of 161
