<PAGE> 1
[NACO LOGO]
NACo
VARIABLE
ACCOUNT
[GRAPHIC]
ANNUAL REPORT
TO
PARTICIPANTS AND RETIRED PARTICIPANTS
DECEMBER 31, 1998
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO [Nationwide Logo]
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[Photo of Joseph J. Gasper]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 1998
annual report of the NACo Variable Account.
Equity markets again defied the odds in 1998 to tally a fourth straight
year of double-digit gains, as measured by the major indices. This surprise
came following the breathtaking correction during the third quarter that
gave us a broad double-digit retreat. Fixed income investments also
provided respectable returns in 1998, supported by the continued low
inflationary environment and favorable Federal Reserve actions.
The performance of the American economy continues strong into 1999.
However, we believe the persisting slump in Asia and recent difficulties in
Latin America will inevitably take their toll and dampen growth in the
United States. This moderation, we think, will be healthy for our economy
and get us back to a more sustainable growth level. We look for interest
rates to continue within the range of the recent past, and we expect
inflation to remain subdued. Moreover, we remain optimistic about long-term
prospects for U.S. business activity; holders of financial assets should
continue to profit from the anticipated favorable investment climate.
We are pleased you have chosen our Company to provide the investment
products and services to help you meet your retirement savings and
financial planning goals.
/s/ Joseph J. Gasper
--------------------
Joseph J. Gasper, President
February 16, 1999
3
<PAGE> 3
CONTENTS
HOW TO READ THE ANNUAL REPORT ......................................... 5
Explanation on how to read and understand
the various financial reports
FUND PERFORMANCES ..................................................... 6
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY .......... 10
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY ............................................ 13
NOTES TO FINANCIAL STATEMENTS ......................................... 27
INDEPENDENT AUDITORS' REPORT .......................................... 41
4
<PAGE> 4
HOW TO READ THE ANNUAL REPORT
This Annual Report is sent to all customers who own a Nationwide annuity with
all or some of the funds in the NACo Variable Account (the Account). The Account
is a separate account trust which offers investment options in fifty-three
mutual funds from twenty mutual fund houses.
The Annual Report has two major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, beginning on page 10, lists all the funds in the Account, the
number of shares owned, the amount paid for the shares (i.e., cost) and their
market value on December 31, 1998. The funds are presented in alphabetical
order. The market value of the assets change as the underlying mutual fund
shares change in value. As contract owners make exchanges between the funds, the
number of shares in each fund increases and decreases. When money is deposited
(withdrawn) by contract owners, shares of the mutual funds are bought (sold) by
the Account. The total market value of the funds is equal to the Total
investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares or reinvested dividend shares added to the contract owners'
accounts, but not yet added to Total investments. Total investments plus
Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 31.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 13, show the activity in the Account for the
periods stated herein.
The Investment activity section shows the changes in unrealized gain (loss) of
the mutual funds in the Account, realized gain (loss) as shares of the funds are
bought (sold), mortality, expense and administration charges and the variable
account fee which are assessed through the daily unit value calculations, and
dividends and capital gains earnings from the underlying mutual funds.
The Equity transactions section illustrates the receipt of purchase payments by
the Account as new contracts are sold, existing contract owners deposit
additional funds; and deductions from the Account when money is withdrawn,
contracts are canceled, annuity benefits are paid, and annual contract
maintenance charges and contingent deferred sales charges are assessed.
Net change in contract owners' equity equals Investment activity plus Equity
transactions.
The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
As you review the following pages of the Annual Report, the Notes to Financial
Statements, beginning on page 27, will also help explain and clarify the various
statements and schedules.
5
<PAGE> 5
FUND PERFORMANCES
Average Annual Total Return: Non-Standardized++
Percent Change in Net Assets with Capital Gains and Income Dividends Reinvested
Funds+
<TABLE>
<CAPTION>
Year Year 3 Years 5 Years 10 Years
1998 1997 1/1/96- 1/1/94- 1/1/89-
12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
LIFE DESIGN SERIES
Aggressive Portfolio N/A N/A N/A N/A N/A
Moderately Aggressive Portfolio N/A N/A N/A N/A N/A
Moderate Portfolio N/A N/A N/A N/A N/A
Moderately Conservative Portfolio N/A N/A N/A N/A N/A
Conservative Portfolio N/A N/A N/A N/A N/A
VERY HIGH
American Century: Twentieth Century Growth Fund* 35.48% 28.06% 25.49% 18.12% 17.61%
American Century:
Twentieth Century International Discovery Fund 16.76% N/A 20.92% N/A N/A
American Century: Twentieth Century Ultra Fund, Inc. 33.27% 21.97% 22.38% 19.00% 22.83%
INVESCO Dynamics Fund 22.47% N/A 20.18% 18.10% 18.92%
Mass. Investors Growth Stock Fund* 38.68% 46.75% 35.29% 23.80% 20.50%
NSAT Small Company Fund 0.05% N/A 12.26% N/A N/A
Prestige Small Capital Fund N/A N/A N/A N/A N/A
Putnam Voyager Fund 22.88% 24.79% 19.66% 18.80% 19.17%
Warburg Pincus Emerging Growth Fund 4.82% N/A 11.07% 14.15% 15.42%
HIGH
Dreyfus Appreciation Fund 29.61% N/A 26.90% 23.44% 17.37%
Dreyfus Third Century Fund 28.94% 28.15% 26.72% 20.20% 15.72%
Fidelity Advisor Growth Opportunities Fund 23.03% N/A N/A N/A N/A
Fidelity Contrafund* 30.28% 21.84% 24.23% 20.45% 22.88%
Fidelity Magellan(R) Fund* 32.36% 25.40% 22.45% 19.34% 18.76%
Fidelity OTC Portfolio 39.05% 8.87% 22.88% 19.61% 18.38%
MFS(R) Growth Opportunities Fund* 27.95% 22.12% 23.55% 18.99% 15.66%
Morgan Stanley Institutional Fund 17.66% N/A N/A N/A N/A
Nationwide(R) Growth Fund* 22.58% 25.04% 21.00% 17.82% 13.99%
Neuberger & Berman Partners Trust 5.14% N/A 18.97% 17.20% N/A
Oppenheimer Global Fund 11.35% N/A 15.66% 11.15% 12.65%
Prestige International Fund N/A N/A N/A N/A N/A
Prestige Large Capital Growth Fund N/A N/A N/A N/A N/A
Putnam Investors Fund 34.24% 33.22% 29.08% 22.95% 19.02%
Seligman Growth Fund, Inc. 33.96% 16.99% 23.43% 17.92% 16.29%
T. Rowe Price International Stock Fund(R) 15.04% 1.73% 10.37% 7.84% 9.41%
Templeton Foreign Fund -5.79% 5.64% 5.17% 4.95% 9.56%
</TABLE>
6
<PAGE> 6
FUND PERFORMANCES
Average Annual Total Return: Non-Standardized++
Percent Change in Net Assets with Capital Gains and Income Dividends Reinvested
Funds+
<TABLE>
<CAPTION>
Year Year 3 Years 5 Years 10 Years
1998 1997 1/1/96- 1/1/94- 1/1/89-
12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
MODERATE
American Century: Income & Growth Fund 26.49% N/A 27.48 22.57 N/A
Dreyfus Premier Midcap Stock Fund 7.61% N/A 21.88% N/A N/A
Evergreen Income and Growth Fund* -1.73% 24.40% 10.98% 9.23% 9.51%
Fidelity Equity-Income Fund* 11.46% 28.76% 19.82% 17.40% 14.60%
Nationwide(R) Fund 29.11% 38.31% 29.90% 22.97% 17.81%
Nationwide(R) S&P 500 Index Fund N/A N/A N/A N/A N/A
Neuberger & Berman Guardian Fund 1.38% 16.82% 11.41% 12.52% 13.79%
Prestige Large Capital Value Fund N/A N/A N/A N/A N/A
SEI Index Funds S&P 500 Index Portfolio 27.13% 31.82% 26.73% 22.60% 17.83%
LOW
Fidelity Advisor High Yield Fund -1.66% N/A 7.55% 7.24% 11.33%
Fidelity Capital & Income Fund* 3.76% 13.62% 9.16% 7.28% 10.11%
Fidelity Puritan(R) Fund 15.49% 21.19% 16.88% 14.14% 13.74%
INVESCO Total Return Fund 12.24% N/A 15.49% 14.54% 12.81%
Investment Company of America(R)** 21.77% 28.58% 22.78% 18.90% 16.20%
MFS(R) High Income Fund 0.07% 11.78% 7.64% 6.90% 8.50%
Prestige Balanced Fund N/A N/A N/A N/A N/A
VERY LOW
Bond Fund of America(SM), Inc.** 4.17% 8.20% 6.01% 5.59% 8.15%
Federated Bond Fund 4.62% N/A 6.27% 6.46% 8.83%
Federated U.S. Government Securities Fund 7.08% 6.12% 5.25% 4.97% 6.80%
MAS Funds - Fixed Income Portfolio 5.90% 8.57% 6.93% 6.19% 8.71%
STABLE VALUE
AIM STIT - Treasury Portfolio 4.46% 4.54% 4.47% 4.30% 4.70%
Nationwide(R) Money Market Fund 4.08% 4.12% 4.06% 3.89% 4.25%
S&P 500 *** 28.58% 33.36% 28.22% 24.05% 19.20%
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
*** The S & P 500 is a stock market index which assumes investment in the 500
largest available stocks. This unmanaged index is normally used as a
comparison or benchmark against equity mutual funds.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able to
maintain a stable net asset value of $1 per share.
++ SEC and NASD regulations require that any reporting of product performance
be accompanied by standardized data and the disclosures are on the
following page. Please review this information and a product prospectus
before investing.
NOTE: The above illustration represents past performance based on a $1,000
hypothetical Investment and reflects the deduction of an actuarial risk fee
which is equivalent to 0.95% on an annualized basis. The results shown represent
past performance and should not be considered a representation of performance or
investor experience of the funds in the future. Investment returns and principal
are not guaranteed under these variable options. The unit values at the time of
redemption may be worth more or less than their original cost.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
Sources: Nationwide Advisory Services
Computer Directions Advisors, Inc.
7
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FUND PERFORMANCES
Average Annual Total Return: Standardized
Percent Change in Net Assets with Capital Gains and Income Dividends Reinvested
<TABLE>
<CAPTION>
Year Year 3 Years 5 Years 10 Years
1998 1997 1/1/96- 1/1/94- 1/1/89-
Funds+ 12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
LIFE DESIGN SERIES
Aggressive Portfolio N/A N/A N/A N/A N/A
Moderately Aggressive Portfolio N/A N/A N/A N/A N/A
Moderate Portfolio N/A N/A N/A N/A N/A
Moderately Conservative Portfolio N/A N/A N/A N/A N/A
Conservative Portfolio N/A N/A N/A N/A N/A
VERY HIGH
American Century: Twentieth Century Growth Fund* 33.48% 24.06% 25.07% 17.91% N/A
American Century:
Twentieth Century International Discovery Fund N/A N/A N/A N/A N/A
American Century: Twentieth Century Ultra Fund, Inc. 31.27% 17.97% 21.94% N/A N/A
INVESCO Dynamics Fund N/A N/A N/A% N/A N/A
Mass. Investors Growth Stock Fund* 36.68% 42.75% 34.92% 23.63% N/A
NSAT Small Company Fund -1.95% N/A N/A N/A N/A
Prestige Small Capital Fund N/A N/A N/A N/A N/A
Putnam Voyager Fund 20.88% 20.79% 19.19% 18.60% N/A
Warburg Pincus Emerging Growth Fund N/A N/A N/A N/A N/A
HIGH
Dreyfus Appreciation Fund N/A N/A N/A N/A N/A
Dreyfus Third Century Fund 26.94% 24.15% 26.30% 20.01% N/A
Fidelity Advisor Growth Opportunities Fund N/A N/A N/A N/A N/A
Fidelity Contrafund* 28.28% 17.84% 23.79% N/A N/A
Fidelity Magellan(R) Fund* 30.36% 21.40% 22.01% N/A N/A
Fidelity OTC Portfolio 37.05% 4.87% 22.44% N/A N/A
MFS(R) Growth Opportunities Fund* 25.95% 18.12% 23.11% 18.79% N/A
Morgan Stanley Institutional Fund N/A N/A N/A N/A N/A
Nationwide(R) Growth Fund* 20.58% 21.04% 20.54% 17.61% N/A
Neuberger & Berman Partners Trust N/A N/A N/A N/A N/A
Oppenheimer Global Fund N/A N/A N/A N/A N/A
Prestige International Fund N/A N/A N/A N/A N/A
Prestige Large Capital Growth Fund N/A N/A N/A N/A N/A
Putnam Investors Fund 32.24% 29.22% 28.67% 22.78% N/A
Seligman Growth Fund, Inc. 31.96% 12.99% 22.99% 17.71% N/A
T. Rowe Price International Stock Fund(R) 13.04% -2.27% 9.82% N/A N/A
Templeton Foreign Fund -7.67% 1.64% 4.56% 4.62% N/A
</TABLE>
8
<PAGE> 8
Average Annual Total Return: Standardized
Percent Change in Net Assets with Capital Gains and Income Dividends Reinvested
<TABLE>
<CAPTION>
Year Year 3 Years 5 Years 10 Years
1998 1997 1/1/96- 1/1/94- 1/1/89-
Funds+ 12/31/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
MODERATE
American Century: Income & Growth Fund N/A N/A N/A N/A N/A
Dreyfus Premier Midcap Stock Fund N/A N/A N/A N/A N/A
Evergreen Income and Growth Fund* -3.70% 20.40% 10.44% 8.94% N/A
Fidelity Equity-Income Fund* 9.46% 24.76% 19.36% 17.19% N/A
Nationwide(R) Fund 27.11% 34.31% 29.51% 22.80% N/A
Nationwide(R) S&P 500 Index Fund N/A N/A N/A N/A N/A
Neuberger & Berman Guardian Fund -0.62% 12.82% 10.87% N/A N/A
Prestige Large Capital Value Fund N/A N/A N/A N/A N/A
SEI Index Funds S&P 500 Index Portfolio 25.13% 27.82% N/A N/A N/A
LOW
Fidelity Advisor High Yield Fund N/A N/A N/A N/A N/A
Fidelity Capital & Income Fund* 1.76% 9.62% 8.60% 6.98% N/A
Fidelity Puritan(R) Fund 13.49% 17.19% 16.39% N/A N/A
INVESCO Total Return Fund N/A N/A N/A N/A N/A
Investment Company of America(R)** 19.77% 24.58% 22.34% 18.70% N/A
MFS(R) High Income Fund -1.93% 7.78% 7.06% 6.59% N/A
Prestige Balanced Fund N/A N/A N/A N/A N/A
VERY LOW
Bond Fund of America(SM), Inc.** 2.17% 4.20% 5.41% 5.27% N/A
Federated Bond Fund N/A N/A N/A N/A N/A
Federated U.S. Government Securities Fund 5.08% 2.12% 4.64% 4.63% N/A
MAS Funds - Fixed Income Portfolio 3.90% 4.57% 6.34% N/A N/A
STABLE VALUE
AIM STIT - Treasury Portfolio 2.46% 0.54% 3.85% 3.96% N/A
Nationwide(R) Money Market Fund 2.08% 0.12% 3.44% 3.54% N/A
</TABLE>
* These funds are not open to new participation.
** These funds are closed to entities adopting the NACo Public Employees
Deferred Compensation Program on or after July 1, 1994.
+ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there can be no assurance that this fund will be able to
maintain a stable net asset value of $1 per share.
NOTE: The above illustration represents past fund performance based on a $1,000
hypothetical Investment. The performance figures reflect the deduction of a
0.95% annual asset fee and the maximum contingent deferred sales charge that
would apply only in the event that this Variable Annuity contract is terminated
by your employer.
Investment principal and investment returns are not guaranteed under these
variable options. Unit values at the time of redemption may be worth more or
less than their original cost. The results shown above should not be considered
a representation of performance or investor experience of the funds in the
future.
For complete information about the options available to you through your
deferred compensation program, including charges and expenses, consult your
prospectus(es) which are available from your local deferred compensation
representative. Please read the prospectus(es) carefully before investing or
sending money.
9
<PAGE> 9
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>
10
<PAGE> 10
<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)
11
<PAGE> 11
<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.
12
<PAGE> 12
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)
13
<PAGE> 13
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>
14
<PAGE> 14
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)
15
<PAGE> 15
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>
16
<PAGE> 16
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)
17
<PAGE> 17
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>
18
<PAGE> 18
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)
19
<PAGE> 19
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>
20
<PAGE> 20
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)
21
<PAGE> 21
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>
22
<PAGE> 22
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)
23
<PAGE> 23
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>
24
<PAGE> 24
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)
25
<PAGE> 25
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.
26
<PAGE> 26
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)
27
<PAGE> 27
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.
28
<PAGE> 28
(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.
29
<PAGE> 29
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.
30
<PAGE> 30
(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)
31
<PAGE> 31
<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>
32
<PAGE> 32
<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)
33
<PAGE> 33
<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>
34
<PAGE> 34
<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)
35
<PAGE> 35
<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>
36
<PAGE> 36
<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>
37
<PAGE> 37
(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>
38
<PAGE> 38
<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)
39
<PAGE> 39
<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>
40
<PAGE> 40
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
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42
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43
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NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Piqua, Ohio
Permit No. 444
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
